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How Does TikTok Make Money How TikTok Makes Money? TikTok Business Model | TikTok Income

Introduction

TikTok is a popular video-sharing app that has taken the social media world by storm, particularly among younger generations. Launched in China under the name Douyin, the app was later rebranded to TikTok in 2017. Developed by the Chinese company ByteDance, TikTok allows users to create and share short-form videos, engaging millions in an interactive experience. However, many are left wondering: how does this platform generate revenue?

The Origins of TikTok

Originally launched as Douyin in China, TikTok aimed to capture the Chinese market. ByteDance, the developer of TikTok, was founded in 2012 by CEO Zhang Yiming, a former Microsoft engineer. The app quickly gained popularity, with over 500 million active users and ranking as one of the top four mobile apps globally by 2018. TikTok’s growth is reminiscent of another app, Musical.ly, which allowed users to create lip-sync videos. ByteDance acquired Musical.ly in 2017, and by 2018, the two platforms merged, cementing TikTok's position in the U.S. market with over 1 billion downloads.

How TikTok Makes Money

TikTok employs various revenue streams to monetize its platform effectively.

1. TikTok Ads

Launched in June 2020, TikTok for Business provides brands with the opportunity to advertise through several paid features:

  • In-Feed Video Ads: Short videos that appear in users’ feeds while they scroll through the For You page, similar to Instagram Stories.

  • Brand Takeover Ads: Ads that show up as soon as users open the app, delivering a message immediately.

  • Top View Ads: These ads appear after the user is already engaging with the app and can last up to 60 seconds.

  • Branded Hashtag Challenges: Brands create unique challenges accompanied by specific hashtags, promoting user participation and brand visibility.

  • Branded Effects: Offers custom stickers and augmented reality features that users can apply to their videos, allowing for brand interaction.

2. TikTok Coins

TikTok also utilizes a virtual currency system known as TikTok Coins. Users can earn virtual gifts when they reach 1,000 followers, received during live video streams. These gifts convert into diamonds, where each diamond is worth 50 cents. TikTok takes a 50% commission on the earnings from diamonds, providing another revenue source.

3. Shoppable Ads

In November 2019, TikTok began beta testing shoppable ads, allowing creators to link their products directly in their posts for users to buy. This model is still under testing with no further updates available yet.

Financial Performance

TikTok has seen significant revenue growth, generating approximately $ 965 million by December 2020. The app was the highest-grossing non-gaming app worldwide in February 2021, with user spending exceeding $ 110 million—1.9 times its revenue from February 2020. The majority of TikTok's revenue comes from China, with about 79% of its earnings, while only 8% is from the U.S.

Investors and Valuation

In 2018, SoftBank Group Corporation led a funding round that raised $ 3 billion for TikTok, increasing ByteDance's valuation to $ 75 billion. Subsequent investments pushed the valuation further, with reports indicating it could be as high as $ 100 billion by mid-2020.

Keywords

  • TikTok
  • Business model
  • Revenue
  • Advertising
  • Virtual currency
  • Shoppable ads
  • ByteDance
  • Investors
  • Valuation

FAQ

1. What type of advertising does TikTok utilize?
TikTok uses in-feed video ads, brand takeover ads, top view ads, branded hashtag challenges, and branded effects as its advertising options.

2. How do TikTok coins work?
TikTok coins are a virtual currency that users can earn as gifts during live streams, which convert into diamonds. TikTok takes a percentage of these earnings.

3. When did TikTok start generating significant revenue?
By December 2020, TikTok had generated approximately $ 965 million, with significant growth observed since its rise in popularity.

4. Who founded TikTok?
TikTok was developed by ByteDance, which was founded in 2012 by Zhang Yiming, a former Microsoft engineer.

5. Does TikTok have any shopping features?
Yes, TikTok began testing shoppable ads in 2019, allowing creators to link products directly within their posts for users to purchase.

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