TikTok Business Model – How Does TikTok Make Money?

If you’re a teen or internet-savvy, then you’ve heard of “TikTok”. For sure you might have downloaded the application on your mobile phone. Many teens are having fun and entertaining by creating and sharing short videos on TikTok. Within a short period, people are creating their own videos and becoming more and more popular.

The application blows up the internet. Millions of people are spending time on this application. Also, they’re creating a short video and sharing with their friends. Did you know that there are few schools in the United States of America that have TikTok Clubs? Yes!!! Teachers are using the application for better student engagement. Also, businesses are making use of this platform and promoting their products and services effectively.

What is TikTok?

TikTok is rewriting the world!!!

Is there anybody who has never heard of “TikTok”? Of Course nobody right. TikTok is a popular and leading application available on the internet. It is an amazing video-sharing application that enables users to create or share 15-second videos with the world. The social network is used by almost everyone. The teen at the street or women at work, everyone will get the freedom to express and get noticed on this platform.

Currently, the application is the fastest-growing application with more than 2 billion downloads. TikTok has more than 800 million active users worldwide. The application is available on Google Play and the App Store for free. According to an analysis, users spend almost 52 minutes on TikTok every day. The majority of the users are 14 to 30 age groups. Users are making the application powerful for learning and education.

Let’s discuss the origin of TikTok and how the company is making a good income.

Origin of TikTok

Alex Zhu and Luyu Yang are the best friends. At initial days, they’ve planned to launch a learning application for children. With the app, students can easily gain knowledge which popular universities cannot provide. The other motivation was, people can teach to students without any educational qualification or interview. This way, Alex Zhu and Luyu Yang decided to make money through the app.

Eventually, they both spent 6 months developing the application with lots of hard work and dedication. When they launched the application, the result was the opposite. Initially, they’ve planned to create an application for educational purposes but all the traffic is generated through entertainment. They’ve decided to shift the application from learning to entertainment application.

At those days, there was no application that provided entertainment through watching, creating and sharing short videos. Finally, the application was launched in 2014. They named the application as Musical.ly. The application became more popular in China and America. In 2016, Musical.ly had more than 70 million downloads and 10 million videos were uploaded everyday. On 9 November 2017, Musical.ly was acquired by ByteDance for 1 billion dollars. The company has merged Musical.ly and Douyin application and designed TikTok.

TikTok Business Model

TikTok is the leading and creative social media application available on the internet. The Chinese app is primarily driven by video content i.e short (15 seconds). People can create or watch infinite short videos. TikTok is generating good income through advertising and in-app purchases. According to TikTok reports, the company has earned more than $5.6 billion in Q1 of 2020. 

How does TikTok make money?

Many people know TikTok as an entertainment and fun application. But few people know how TikTok is earning billions of dollars every day. If you’re curious about how TikTok is making money, continue reading…

In-app Purchases

This could be the best source of income for TikTok. In-app purchases are probably the most effective way to generate money. Whenever you purchase a mobile there will be few in-build applications available. Though these applications are available on Google play store and Appstore. TikTok is making good revenue through in-app purchases. But how? TikTok is promoting other applications on its platform. Since there are millions of users on the platform, users can easily subscribe, download or buy the product or service.

TikTok is playing its game wisely by offering coins to its users for in-app purchases. Here the coins might be ranging from 100-10000. Whenever users get enough coins they can present it to their favourite creators. Also, users can buy these coins and get digital gifts. As per the analysis, TikTok has earned more profits through in-app purchases.

Advertisement

Popular companies such as Google and Facebook are earning good income through advertising. Even TikTok has implemented an advertising strategy to make revenue. The business strategy was introduced in 2019. Startups and large businesses are promoting their products and services on TikTok. As there are millions of users available on the platform, businesses are earning a good income by promotion on TikTok. Here the advertisement doesn’t affect the user experience. Therefore TikTok displays the ads in between the short videos.

On the other hand, TikTok is presenting brand takeovers. Sounds excellent right!!! The platform is presenting various payment models such as cost per view, cost per clock, cost per action and more. However, businesses need to pay more and more money to run their ads on TikTok to enjoy better user engagement.

TikTok has not yet developed any advertising strategy. But leading companies have already become successful by promoting their products or services. Sponsored hashtag on TikTok is the best way to get their message. Many people are showing interest in ads displayed on TikTok due to its popularity.

TikTok’s Revenue

The numbers are wandering. TikTok has earned $176.9 million in 2019. Currently, TikTok has earned over $5.6 billion in 2020. However, before the advertisement strategy, the platform has earned money through in-app purchases. The app has over $3.5 million around the globe in 2018, this is represented as an increase over revenue when compared in 2017.

Funding

It’s no surprise that ByteDance is the bigger investor of TikTok. The Soft Bank has invested more than $3 billion in Oct 2018. After a year, ByteDance provided a loan of around 1.3 billion dollars in April 2019. For big leading organizations such as TikTok funding is the best source as the platform will help them to improve their application.

Conclusion

TikTok application is the talk of the day. As you already know TikTok is popular for creating and sharing short videos. People can create dancing, lip-syncing, comedy, educational videos and upload them on TikTok. Whenever people watch and like your videos, they start following you. Ultimately, when you get a good number of followers, you will become a celebrity. TikTok has more than 2 billion downloads across the world in 2020. The company is earning revenue through two ways such as in-app purchases and advertisements. TikTok has in-app purchases of coins. These are ranging from 100 to 10,000. Users can collect or purchase the coins and give them to their favourite creator. These creators can exchange coins for gifts. Businesses are advertising their products or services in between the video. This way TikTok is making a major source of income through advertisements. Looking at the users and revenue digits, TikTok will sustain as the smart revenue model in the upcoming years.

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