Photo Courtesy of Olivier Bergeron via Unsplash
With everyone stuck indoors due to the pandemic, many turn to social media to cure their boredom. One app in particular has been dominating the social media industry—TikTok. As of December 2020, the app has surpassed over 2.6 billion downloads worldwide.
In the first quarter of 2020 alone, the app saw 315 million downloads, which is thought to be the largest number of downloads for a social media platform in a single quarter, ever. This tremendous growth and popularity can be explained by the content, accessibility and friendly nature of the app.
The content on TikTok is fun, interesting and relatable, making it popular to use during lockdown. Everything on the app is formatted in short videos, with genres like dance, comedy, cooking, education and more. The platform is rather straightforward in terms of accessibility, so people of all ages can watch and make their own videos. In fact, more millennials and older generations have been using the app. In the United States, 67.5% of TikTok users are over the age of 19.
Besides the app itself, creators on TikTok can also make money. Users can receive sponsorships, donations, or sell their own merchandise through the app. Another way they can receive money is through the Creator’s Fund, a $200 million fund intended to compensate creators. However, many have criticized the program for being underfunded, claiming that they only earn a few dollars a day, even if their videos rack up hundreds of thousands of views. The lack of transparency around this program has led some to speculate that TikTok was intentionally limiting the amount that creators could earn. This controversy behind the Creator’s Fund has caused some creators to opt out of the program entirely.
As for TikTok, they can earn money through advertisements. In June 2020, the app launched TikTok for Business, which allows brands to run their own ads within the app. On TikTok, there are In-Feeds ads, Brand Takeovers, and Branded Hashtags.
In-Feed ads show up on users’ For You pages, which appear as short videos. In fact, some companies create ads that are similar to regular TikTok videos so that users stay and watch, attracting more customers. Another type of ad is the Brand Takeover, which is an ad that greets the user right when they open the app. Branded Hashtags, or Branded Hashtag Challenges, are when brands create their own hashtag and challenge, and then pay for the tag to show up in people’s feeds.
Of course, if companies want to advertise their products on TikTok, a portion of the money goes to TikTok. Besides advertising, the platform also earns money through its own in-app currency: TikTok coins. Users can purchase coins, which then allows them to buy gifts with those coins. Fans can give creators gifts, which become diamonds in a creator’s ledger. Finally, creators can withdraw the diamonds into USD through PayPal. TikTok receives a portion of the money being transferred, making it another way the app earns profit.
According to Sensor Tower, TikTok saw $5 million in revenue in December 2020. The app did so well that Ad Age named TikTok the No. 1 Marketer of the Year in 2020, surpassing companies like McDonald’s and Lego. As of January 2021, TikTok has about 1 billion monthly active users. With this enormous audience, the company is bound to continue seeing big numbers.