Unless you have been totally disconnected from social media for the past few years, you’ve most likely heard of TikTok. This app is one of the biggest social media platforms out there and has enjoyed enormous growth since its launch in 2016.
Millions of people use TikTok every day, either to post or watch short-form content. But how does TikTok make money?
If you’re curious to find out how TikTok makes enough money to continue to operate and keep up with the other social media giants, we’ve got the answers for you. Read on to find out TikTok’s money-making secrets…
TikTok’s Revenue: The Statistics
In case you were wondering how much revenue TikTok actually makes per year, let’s take a look at the statistics from 2021.
Back in 2021, there were 1 billion active users on TikTok per month. Not only that, but over the course of 2021, TikTok’s revenue totaled an enormous $4.6 billion.
So, it’s clear that TikTok makes a lot of money. But where does that money actually come from? While TikTok has been fairly tight-lipped about its money-making strategies, here’s what we know about where the platform’s revenue comes from:
Where TikTok Gets Its Money From
Advertisements
The single biggest contributor to TikTok’s revenue is advertising. You’ll find many different kinds of ads within the TikTok app, and when users engage with these ads, the platform is able to make money.
Plus, TikTok makes money just from agreeing to run ads on its platform in the first place. Any brand that wants to run an ad on TikTok (remember, this is one of the biggest social media platforms in the world) will need to pay a lot of money to the platform.
TikTok is able to maximize ad engagement on the platform using its impressive algorithm, which tracks users’ favorite types of content as well as the kind of content they typically avoid.
The app can then show certain users tailored ads that are more likely to pique their interest and motivate them to engage.
The most common type of ad you’ll find on TikTok is the in-feed ad. This type of advertisement takes the form of short-form video content.
On your TikTok feed, you’ll see content that has been recommended for you, and these videos will be interspersed with TikTok ads.
You may also have come across top view adverts and brand takeover advertisements in your TikTok feed (see also “How To Get More Views On TikTok“).
Top view ads take up the whole screen and appear about 3 seconds into the first post on your feed. They play automatically and can last for anywhere up to a minute.
Similarly, the brand takeover adverts you’ll see on TikTok will appear as full-screen videos, the difference being that they pop up immediately when you open the app (see also “How To Delete A TikTok Video“).
Both this type of ad and the top view ads are designed to push sales and make users aware of the brand.
Branded effect ads are a clever form of advertising that TikTok uses to encourage brand interaction. By clicking on a branded effect ad, users can get access to filters, lenses, and stickers to put in their own TikTok content for a maximum of 10 days.
Finally, you have the hashtag ads, which are also branded ads. These ads encourage users to make content using a pacific hashtag. Again, the goal is to raise awareness, but it’s done in a fun and engaging way.
Ecommerce Partnerships
Ecommerce is a major money-making strategy for many social media platforms, and TikTok is no exception. TikTok started testing out ecommerce partnerships in 2019, incorporating links in clips on the app.
Since then, more ecommerce tools have been integrated into the platform, and users can now come across shopping events being live-streamed on the platform as well as product advertisements through.
While TikTok has not yet been open about how these sales partnerships translate into revenue, it’s fair to assume that a certain percentage of the profit from these sales come back to the app, so it’s essentially a form of affiliate marketing.
Of course, a lot of social media platforms and websites engage in affiliate marketing, but the difference here is that TikTok doesn’t redirect users to other web pages.
Instead, it allows users to make purchases from within the app without ever having to click out, which makes a world of difference to the user experience.
TikTok Coin Purchases
If you don’t use TikTok yourself, you might not be familiar with the concept of TikTok coins, but this is one of the main ways in which TikTok makes money.
TikTok coins are a form of virtual currency that users can buy within the TikTok app and spend on other users’ content.
Once a user reaches the 1,000-follower milestone on TikTok, they gain the ability to get gifts through live videos. If a fellow user is enjoying the content, they can give a tip in the form of virtual gifts that they have purchased using TikTok coins.
TikTok coins are not necessarily expensive. You can get 100 coins for just $1. Then, the coins can be used to purchase gifts, which are worth different amounts of coins.
For example, to give someone the Drama Queen gift, you’d need to spend 5,000 TikTok coins, whereas you’d only need to spend 5 coins to give someone the Panda gift.
When your gift reaches the recipient, they will get TikTok diamonds. A single diamond on TikTok is equal to half of a coin. Why half a coin, you ask? That’s where the money-making strategy comes in.
TikTok takes a commission of 50% from all purchased gifts. As you can imagine, this adds up quickly. If someone’s TikTok creation gets $250 in diamonds, TikTok makes roughly $125 just from that one TikTok.
Frequently Asked Questions
Is TikTok Free To Use?
Yes, TikTok is a free app in the sense that you don’t need to pay anything to use the platform, which is why so many people are curious about how TikTok is able to make so much money.
However, as we’ve established, TikTok makes money in a variety of ways, ranging from running ads to offering ecommerce options within the app.
How Much Does TikTok Revenue Increase Per Year?
Since 2016, TikTok’s yearly revenue has increased significantly each year.
As the platform has grown and accumulated more monthly users, more strategies have been implemented to keep money coming in, such as the ecommerce partnerships and in-app sales.
For context, in 2019, TikTok made a total of $350 million. In 2020, however, that number went up to $1.9 billion. That means that in the space of a year, TikTok’s revenue increased by a massive 457%.
From there, in 2021 and 2022, TikTok’s revenue has continued to grow.
How Has TikTok Grown So Much?
If you’re wondering how TikTok managed to grow so much as a platform within a short space of time, it all comes down to smart marketing decisions.
For example, when TikTok started to gain popularity in 2017, it was in direct competition with Musical.ly.
However, ByteDance (the parent company of TikTok) purchased Musical.ly and merged the two platforms in 2018, eliminating competition and allowing TikTok to become the app with the most downloads ever in the United States.
Additionally, as the platform has grown, TikTok has devised more ways to make money, encouraging further growth.
For example, the implementation of the TikTok coin system, sales partnerships, and more forms of advertising have increased awareness and engagement with the app.
Do TikTok Creators Receive Payment?
TikTok does not pay its creators directly, but creators on the platform are still able to make money through the Creator Fund (see also “Will TikTok Pay You For Views?“).
The Creator Fund is a fund set up by TikTok to reward creators for using the app in the form of monetary payment. It’s not an ad revenue sharing program, and it doesn’t work like a grant, either.
All eligible TikTok creators can join the fund, and the amount of funding that each creator receives will be calculated according to a number of factors, including engagement, views, and the subject matter of created content.
TikTok has put over $284 million into the fund to last for 3 years, and there’s no limit to how much a single creator can make from the fund.
Final Thoughts
TikTok makes its money in a variety of ways, the most well-understood of which is advertising. The social media platform runs a wide range of adverts which are tailored to users by the TikTok algorithm, encouraging engagement and raising brand awareness.
Additionally, TikTok’s coin system and ecommerce options are allowing the platform to make even more money.
TikTok takes a commission from virtual gifts purchased in the app, and doesn’t redirect its users elsewhere for sales, so both of these methods have been successful in raising the app’s revenue.
As of 2021, TikTok’s annual revenue was $4.6 billion, which was up by several hundred percent on the previous year, and the platform is continuing to grow.
Hi, I’m Matt Johnson, and I work as a Digital Marketer. I started out as a PR assistant for a publishing company, and I quickly learned how important digital platforms are for marketing in the modern world.
This is why I started EngageDigital.com, to offer you a behind the scenes look at all of the most popular sites, applications and platforms, from Amazon to Snapchat, Venmo accounts, Instagram, NFTs, to Omegle and Tik Tok.
If you are looking for informative guides about using social media platforms, troubleshooting your devices, gaming, online shopping, and more, I hope to provide all of the answers you need here at EngageDigital.com!
