Decoding the TikTok Business and Revenue Model
Heading towards the digitization, can we imagine our lives without a smartphone? No, right? We have Amazon Prime for live streaming, we have Spotify for live music, and we have Instagram for photo-sharing. However, TikTok has emerged as one of the most popular social media apps that have gained immense popularity in a short time.
TikTok saw huge growth over the coming years, especially amid the coronavirus pandemic. Ending as the most popular social media networking app across the globe. However, the most curious issue about the TikTok business model lies precisely in the fact that it offers a free service and, even more surprisingly, allows creators to make videos with advanced features. But then! the question remains: how does TikTok make money? What business model does it operate?
TikTok, with its stunning visual content and huge user base globally, has emerged as a key player in the social media landscape. To truly understand the success of this popular app, it is essential to delve into its business and revenue model.
A Brief History of TikTok
TikTok is the most downloaded app globally in the year 2020, with the highest social media engagement rate per video. Operated in more than 150 countries, the app now boasts more than 1.1 billion users globally, surpassing all social media apps like Instagram, Facebook, LinkedIn, and more.
Indeed, TikTok has taken its place globally and has surely changed how people engage with content. With its remarkable authenticity and integration of engaging features, this short video creation app has made the young generation go gaga over the platform.
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Some Interesting Facts About TikTok
- Launched in: 2016
- Parent company: ByteDance
- Available in: 40 languages
- Headquarter: Shanghai, China
- CEO: Shou Zi Chew
- Operating system: iOS 11 or later, Android, AndroidTV
- Type: Video sharing
- Website: Tiktok.com
- Market Cap:$300 billion (2024)
Jaw-dropping Statistics About TikTok
As said earlier, TikTok has been showing the highest level of engagement rate and also earned an impressive user base in no time. It took Facebook and Instagram almost a decade to get a huge user base; it seems like TikTok has ace the social media game and made its name in just a couple of years.
Source: Thinkimpact.com
- TikTok has more than one billion monthly active users.
- More than 5.3 billion people are using the Internet daily; out of them, 23.02% are active on TikTok.
- TikTok was launched in 2016, and if we talk about its popularity, then the app ranks 6th most used social media app and surpassed Twitter, Reddit, Pinterest, and other notable apps.
- More than 150 million people across the USA are now using TikTok, its equal to half of the population of America.
- Every minute, there are 167 million videos are being watched globally.
- During the first 9 months of 2023, the was downloaded 769.9 million times. Isn’t it shocking?
TikTok is already making waves in the social media app landscape. As we mentioned before, the app has been the fastest-growing app globally and become a powerful marketing weapon for brands to reach the maximum customers.
Now, before jumping to the business model, let’s have a look at the brief timeline of TikTok:
The above timeline clearly shows how TikTok has been growing without any barriers and making its place in the digital entertainment world. Now, without any ado, let’s have a look at the business model of TikTok.
Understanding the Basics of TikTok’s Business Model
The real currency of content-sharing platforms is not billions or millions but eyeballs. Yes, maximum engagement and app downloading ratio are what make TikTok profitable. But what business model does TikTok follow? What are its customer segments, value propositions, and customer relationships?
Hold on; you will find answers to these questions in this section.
Customer Segments
- TikTok caters to a huge use base, including video creators and content creators who are primarily young individuals aged between 16-24 looking for entertainment.
- Celebrities, social media influencers, and content creators also leverage the social TikTok application to connect with their followers, offering a glimpse into their routine and other tasks.
- Moreover, TikTok offers brands a notable platform to reach a wider user base, advertise products, boost brand visibility, and engage with new followers.
Value Proposition
- Users: Offers users an engaging and captivating entertainment experience by offering a wide range of short videos in different genres, including dance, trends, challenges, and how-to guides. Users can explore and enjoy video content based on their preferences, allowing them endless entertainment.
- Celebrities and Social Media Influencers: Allow celebrities to share original and relatable video content, allowing them to share original content with their fans. This helps celebrities build a stronger connection with their audience and grow their user base.
- Brands: Enable brands to advertise their products and services by engagingly showcasing their offerings. Moreover, brands can collaborate with influencers and celebrities to amplify their sales and customer engagement.
Channels
- Mobile App Stores: TikTok reaches its users through the Apple Store and Play Store. Users can install the Android and iOS apps from the stores and explore content. These app stores serve as the primary channels for user acquisition and retention and app distribution.
- Influencer Collaboration: TikTok partners with celebrities and popular influencers who have gained an optimum user base. This collaboration helps TikTok tap into its existing influencers and boost its visibility among its followers, growing user engagement.
- Website and How-to Guides: TikTok also has an official website where users can get all the information related to video posting, privacy settings, resources, other guidelines, FAQs, and much more.
- Social Media Platforms: TikTok leverages its social media platforms, such as Instagram, Facebook, and Twitter, to promote its content, engage with users, and attract new users. Through attractive video filters, stickers, and sharing options, TikTok has been expanding its reach beyond the limit.
Customer Relationships
The TikTok business model customer relationships include:
- Interactive features: Likes, shares, and comments
- Community guidelines: Safe and inclusive environment
- Creator support: Resources and monetization strategy
- Customer service: Resolve user’s query and offer them dedicated support
Key Activities
The TikTok business model supports various activities that allow users to innovate and explore interesting content based on their preferences. The key activities for TikTok consist of:
- Ensuring a safe and secure environment
- Keep working on its algorithm to offer user content based on their preferences
- Keep introducing new features to compete with the other popular social media apps
- Offering valuable resources and monetization opportunities
- Generate revenue through brand promotion and collaboration
Cost Structure
Indeed, TikTok’s revenue is skyrocketing, but running and maintaining a platform requires an optimum fund and deal with various costs such as:
- Infrastructure: Servers, bandwidth, and data storage
- Employee Salaries: Wages and other benefits to staff
- Marketing and promotional expenses
- Payments to music labels and creators
TikTok’s business model focuses on social media and the entertainment sector and gives tough competition to other social media platforms such as Instagram, Facebook, and Snapchat. TikTok’s unique selling proposition holds in its capabilities to make content creating and posting accessible to everyone and its unique capacity to keep users hooked through its unique algorithms.
How Does TikTok Make Money? Revenue Model of TikTok
In order to streamline its operations and continue offering free services to users, TikTok relies on multiple revenue sources. Let’s explore various revenue streams in detail:
Advertising
TikTok makes the majority of its revenue through advertising. This feature won’t only allow content creators to reach a broad audience but also enable the company to make decent revenue.
TikTok Ads
In June 2020, TikTok launched “TikTok for Business,” a new and interesting feature that allowed brands to promote their offerings on the platform through in-feed videos, hashtag challenges, and branded effects.
In-app Purchases
TikTok gives users the option to give other users monetary gifts in exchange for their admiration of their work. TikTok coins are sold to do this. Users can buy these coins in different denominations and give them as gifts. TikTok takes a specific percentage as a commission and gives the users the remaining money.
Branded Effects
Many of TikTok’s sponsors can also avail themselves of distinctive branded effects. Custom stickers and augmented reality filters are a couple of these. This is something that users may include in their videos to help them produce viral content. The marketing of films and other television programs is the main usage for these branded effects.
Branded Hashtag Challenges
One of the most profitable revenue streams for TikTok is the branded hashtag challenge.
Brands make their hashtag challenges in these advertisements, then pay TikTok to have their tag show up on users’ discovery sites. These challenges now take the visitor to the main page of the challenge, where the comprehensive instructions are displayed.
A hashtag challenge on TikTok costs $150,000 for the first six days, plus an additional cost of between $100,000 and $200,000 to promote the challenge (UGC). This is a significant amount of money for such an advertisement.
TikTok has been put a zip on its mouth about the money it makes. The company never reveals too much about the profit it makes. Also, since it is based in China, the information supplied for regulatory purposes is likewise unknown, and there is even greater opacity. Nonetheless, according to some estimates, China accounts for the majority of TikTok’s revenue.
According to estimates, China accounts for 80% of the company’s income. The business is currently attempting to diversify into the international market, nevertheless. Due to restrictions in multiple countries stemming from concerns that it might be providing user-generated data to the Chinese government, the corporation is facing a formidable obstacle.
What Can We Expect from TikTok in the Near Future?
Well, the future of TikTok seems bright but there are many other aspects to consider.
In just less than five years of its official launch, the app has taken the world by storm.
With emerging technologies, trends, and challenges, what can we anticipate to experience in the years to come? Let’s have a look at some valid points that help you understand the future of this popular video sharing app.
Since its launch, TikTok has been making headlines, and because of its rapid popularity, Facebook also launched a short-video feature to compete with them in 2018, but it failed to capture huge mass. Well, TikTok leverages this and keeps updating its app with exciting features.
Now, even though the future of TikTok seems promising, the platform has always been facing many challanges and stays in discussion.
- The platform lost millions of dollars during some lawsuits and was outlawed in others. Because most of its data centers are in China, worries have grown, and many countries like India have banned the app.
- TikTok’s CEO, Zhang Yiming, seeks to reassure governments that the app is secure and has tried everything to clean their name from such allegations.
- For instance, they opened a Transparency Centre for Moderation and Data Practices, wherein experts can examine their moderation policies.
Hence, the overall future of TikTok is bright, but there are many challenges to overcome. It’s understandable why so many people adore the app, given its special fusion of community, creativity, and entertainment. In the upcoming years, we can anticipate seeing even more fascinating and cutting-edge features from TikTok as it continues to develop and adjust to new trends and technology.
How White Label Fox Help You Build an App Like TikTok?
In today’s digital world, TikTok remains perhaps the most popular social media app that makes quality content viral and keeps users engaged for a long time. TikTok has become a phenomenon, and since it has captured the interest of different age groups and different cultures, it has drastically changed the way people consume content.
From lip-syncing videos to dancing to performances to news to lifestyle videos, TikTok has taken millions for a spin, making it a unique market field for any business domain or entrepreneur to consider.
Hence, this is a promising era of social media that can prove a game changer if you want to invest in the TikTok clone app. Nevertheless, building an application from scratch requires an immense level of research and experience on the ground. This is where White Label Fox comes in. Our pre-built TikTok clone script saves development costs and time while helping you enter the market without investing any hefty amount of money.
The team that is behind White Label Fox knows all the technological aspects and also knows what new features to include to make the entire app unique from the crowd. Right from requirement gathering to design to development and testing, we offer an end-to-end solutions that helps you quickly gain traction in today’s competitive world.
Summary
In a nutshell, TikTok has changed the social media industry and become the epitome of a viable business model in digital times. Evaluating the opportunities and threats of this sector, newcomers will also be able to place themselves within this lucrative market type strategically.
Whether you are impressed with TikTok’s unique business model, concept, or coverage across the world, we are here to assist you. Our experienced team of developers and designers is committed to building top-notch products that help you face the fierce competition in the world of social media apps.
