How does tik tok earn money?

Tik Tok Business Model: How Does Tik Tok Company Earn Money ?

Tik Tok is currently the talk of the day. It is a video sharing app that allows its users to create and share 15 seconds-long videos. After its launch by ByteDance, the mobile application spread like wildfire, attracting over 500 million users hardly three years later.
The attention that Tik Tok has brought to its owners is amazing. Yes, ByteDance was recently recognized as the most valuable startup in the world. Undoubtedly, this was due to the impressive success of Tik Tok application.
Many are still wondering how the Tik Tok company generates money from the application. This is what we want to feature today. In any case, the app was bought by ByteDance for about $1 billion. Thus, it is quite natural for us to want to know how they are going to generate money out of it. That is what we are going to talk about in this article; the Tik Tok Business Model. You also will learn a lot more about this application people just cannot stop talking about.

Before we even go deeper, let’s have a glimpse of Tik Tok operation:

Tik Tok Business Dissected :-

ByteDance a while ago closed funding deals with SoftBank and some other powerful investors. In total, the funding was a staggering $3 billion. This ended up making the ByteDance company value to hit $75 billion. CB Insights considers this company the current-times most successful Unicorn.

Tik Tok presents itself as a destination where creativity is nurtured and celebrated. It is a destination where the world’s creativity, all the treasured moments and knowledge thrives. It makes all this just with a mobile phone application with no complications with its use. Everyone who likes can be a creator on Tik Tok.

They bring a platform where you can transform your ideas and passions into interesting videos, just on a few clicks. It is a place for entertainment as well. And we expect it to be the next application to command the world of social media marketing.

Indeed it is quite natural for you to wonder why on earth such a simple tool of video creation and sharing could shake the world of social media. You might wonder why such a seemingly ordinary mobile application could attract the attention of established and successful names like Facebook.

And that is the case just as it is. Tik Tok caught a better section of the population into talking about it.
And what about the company behind this application?

Who Owns Tik Tok ?

ByteDance is the company behind Tik Tok. It is based in China and headed by Yiming Zhang. He is a lifelong entrepreneur who founded a number of ventures before climaxing at ByteDance. He is also the brain behind the real estate search portal in China. While at college, Yiming Zhang is reported to have been troubleshooting computer issues to earn some extra cash. So technology is certainly in his blood.

Yiming Zhang ever worked with Kuxun as the Director for Technology, managing over 40 engineers in this travel search engine in China. This business was later on bought by TripAdvisor. From a trusted source in Forbes, just this year January, Yiming Zhang had a net worth of $6.8 billion. Much of this dramatic rise is credited to the success of ByteDance.

And so how does the application generate money?

How Does Tik Tok Make Money ?

                                 "If you're not paying for the product you are the product"

In-app purchase

Apps in every category on the Google Play Store and App Store can be an in-app purchase. Simply put, in-app purchase which prompt users to buy a product or subscribe or play a game. TikTok is making money through in-house purchase. This application provides in-app purchases of coins. These coins are starting at 100 to 10,000. Users can gift these coins to their friends or favourite creators. Also, these coins can be exchanged into digital gifts. TikTok users spent more than 3.5 million dollars on in-app purchases in October 2018.

TikTok ads

Have you ever heard about TikTok Ads? Of course many times!!!
Similar to YouTube, TikTok is providing an advertisement to promote brands. Small and large brands are using TikTok to promote their products or services through in-feed video ads. These videos are displayed in between user-generated content. Also, TikTok is offering brand takeover ads for their users. These ads help users to display their brand whenever they turn on TikTok.
There are various pricing models available in TikTok such as,

• Cost Per Click: It charges the merchant or advertiser on TikTok whenever the user clicks on the specific ad. Users are not expected to purchase or subscribe to the newsletter.

• Cost Per View: CPV is also called Cost Per Mile. TikTok charges advertise for 1000 impressions of their advertisement.

• Cost Per Action: It’s an important pricing model for business. The advertiser pays to TikTok when a specific action is performed through the ad. The action can be app installation, purchasing, form submission, subscribing newsletter, etc.

Paid subscription plans

TikTok earns money through subscription model as well.
Everybody knows TikTok is a successful platform for news media. Now, TikTok is planning to launch a music streaming service. These service offers paid music subscription plans like Apple Music and Spotify. Users can create and share their videos at any time and anywhere. This subscription music plan helps TikTok to reach a diverse audience across the globe.

Fundraising

Is your project is at the initial stage? If yes!!! Fundraising is the best choice for you. Keeping it simple, fundraising is the process of collecting money by requesting donations from business, individuals or charity foundations. Even TikTok, fundraising one of the approaches to make money. According to research, more than 3 billion dollars have been funded by high-class

CrunchBase reports that the application generates up to a million dollars every year. While is it true that Tik Tok is currently focusing on popularity and growth, monetizing it influences its long-term success. As at now, Tik Tok gets money through the in-app purchases mostly in terms of coins. This starts from 100 for $0.99 reaching 10,000 for $99.99.

Advertising avenues that generate targeted ads. This, in turn, generates revenues. YouTube earn from this strategy and its working for them. Tik Tok could implement the same and we know it is going to work for them as well.

Content creators can monetize their contents and earn from it. In the long run, the platform can deduct some percentage out of it. This is the one critical step for the future penetration of the app among its users. It will be a win-win strategy where both the owner and the users will have something to take home.

The other way of generating money is by the subscription model for the original. The platform could assemble the best of the short video contents for this.

Tik Tok Growth Plan

The growth of Tik Tok has been quite impressive that Facebook recognized it. By 2018, hardly 2 years after its official launch, the application already had a whopping 500 million users. The rise has led Facebook into thinking of developing a similar application, Lasso to counter the massive growth and penetration.
The current penetration of Tik Tok makes it quite natural for us to think that it is unstoppable. Even if Facebook will develop a similar application and take it off the ground, it will not challenge Tik Tok. Of course, the application will be taken in some quotas but will not become an equal replacement for Tik Tok.
Tik Tok is hugely popular among the youth. They are the type that churns out creative short videos and shares among their peers. What we have noted is that Tik Tok is focusing on winning more youth into using the application. They seem to target their ads on youth in different channels on the web. They do so on YouTube, Facebook, and even Google.
As you might have noted, Tik Tok is more determined on penetration and growth than on making money out of the application, as at now. This is quite logical for them. In a world where social media is dominated by a few players, penetrating though it could be a painstaking experience.
Thus, they want to establish their place at the top before they face any substantial attack from the respected influencers. The fact that Facebook has come out clearly to challenge them certainly has spiced up their dedication to commanding a bigger section of the population before things get out of hand.
What keeps Tik Tok ahead of the rest in the niche is their coveted research lab which is duped AI Lab. They claim to be experts in a number of current developments in technology. They seem to get along well with Natural Language Processing (NLP), Machine Learning and even Computer Vision. 

ByteDance Now Ahead of Uber

Bloomberg reports that ByteDance generated a revenue of $2.5 billion in 2017 alone. As a whole, CB Insights has it that the company is valued at $75 billion. This is above what Uber is valued at. When Tik Tok will eventually implement a solid money generation strategy, we expect it to grow even bigger. It has great potential considering their user penetration.

TikTok Revenue and Usage Statistics (2020)

TikTok, known as Douyin in its home market, was launched in China in September 2016. It was pushed out globally as TikTok the following year.
The TikTok app allows users to create 15 second videos, soundtracked by music clips. Sounds simple enough, but it’s a wildly popular concept. Depending on who you ask, the app is the world’ second-most or fourth-most downloaded non-gaming app of 2019-2020 (only behind various Facebook entities in either case).
TikTok/Douyin parent company ByteDance also owns hugely popular Chinese AI-powered news aggregation platform Toutiao, created by CEO Zhang Yiming at the age of 29 in 2012. Notably, he was not backed by either Alibaba or Tencent. TikTok has succeeded where the latter failed with WeChat – success beyond China.
This was a strategic triumph. In November 2017 ByteDance acquired the popular (also China-based) would-be rival app Musical.ly app for a reported $1 billion. TikTok was merged with Musical.ly in August 2018, with app users’ accounts migrated to their TikTok accounts. This was seen as a way for the Chinese app to enter the US market – with Musical.ly already boasting a considerable American audience.
TikTok/Douyin (and formerly Musical.ly) users use the app largely to create, share, and view content based around lip syncing, dancing, comedy skits, and other physical activities. Clearly, this is something that appeals to young people (and quite a few older ones) around the world, with app snowballing in popularity over 2018 and 2019. Despite only being released in 2016, it was one of the most-downloaded app of the 2018s.
As of 2020, TikTok is one of the world’s best-loved apps (for those under a certain age at least), its success powered by some of the world's most sophisticated AI.

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That said, it has not been without its controversies. In 2019, it was briefly banned in India for “morality issues”, with pornographic content and predatory behaviour a concern. It has been accused of not adequately safeguarding young users' data. It is also being investigated in the US over national security concerns. ByteDance has released a transparency report to deal with these accusations, and has moved to ringfence TikTok from the rest o its operations.
Nonetheless, as of early 2020, TikTok seems like the app to beat. Scroll on to read our collection of TikTok stats from around the web.

Key TikTok Statistics :-

• TikTok MAUs estimated at 800 million
• TikTok downloaded 738 million times in 2019,
• Total TikTok downloads over 1.5 billion – making it the seventh-most downloaded app of the 2010s
• It is estimated that 57% of the TikTok/Douyin userbase is based in China
• India top market for TikTok downloads in 2019 (if we exclude Chinese Android downloads), with 323 million
• 46 million US TikTok downloads in 2019
• Only 9% of US internet users have used TikTok, with 5% more interested in using it; this rises to 49% for teenage users
• ByteDance reports 400 DAU of Douyin in China, and claim 68% of Chinese social media users/59% of smartphone users are Douyin users
• Musical.ly counted 100 million users at time of August 2018 merger with TikTok
• Singer Loren Gray is the most-followed person on TikTok, with close to 40 million followers
• On Douyin, the most-followed account belongs to actor, model, and singer Dilraba Dilmurat, with around 55 million followers
• Android TikTok users spent 68 billion hours using the app in 2019
• China accounts for eight out of every 10 minutes viewed on TikTok
• Average daily time on TikTok estimated at 45 minutes
• US users open TikTok an average of eight times a day, with sessions averaging just under 5 minutes
• Indian users spend 38 minutes daily using TikTok
• TikTok one-week retention rate stands at 26%
• A late 2018 Global Web Index study found 55% of TikTok users uploaded a video in the last month, compared to 68% who had watched one
• TikTok 2019 revenue came to $176.9 million (excluding non-iOS Chinese revenue)
• ByteDance controls 23% of the Chinese digital app market
• ByteDance became the world’s most highly-valued private startup, with a valuation of $78 billion after a SoftBank-led $3 billion investment round

Conclusion

Building an app is one thing, sustaining it is quite another. We know of powerful names like Facebook which climbed themselves to the top and established themselves a home there, never to be shaken. We are also aware of the one-time powerful names such as Snapchat that we no longer talk about.

So the point is, Tik Tok indeed has gotten themselves at the top of the social media. If there is ever the most critical stage for them, it got to be now. They need to have a strategy to ensure a fulfilling interaction among their users and for them to generate money. This will ensure a long-term existence in the world of social media. Yes, as at now, it is undoubtedly the most celebrated global application created in China.


Note that :  This post is created for  education purpose only.