How Does TikTok Make Money?

How does TikTok make money? How does an app, which is free, make millions of dollars every year?

TikTok is an immensely popular video-sharing application that has over 700 million daily active users. The company was founded in 2017 and is headquartered in Beijing, China. The app is used by a wide audience, all across the world.

TikTok is a house for a range of videos, from pranks, and safety, to creating videos and content. There are dozens of hilarious videos on TikTok, but there are also tons of helpful videos.

Some creators produce content that teaches people how to cook, others create videos on legal advice, and so forth. TikTok is great for small businesses, as it allows them to advertise their business through small, short videos. This means that the business owners can reach a wider audience, and ultimately get more sales.

However, one question that seems to puzzle a lot of people, is how TikTok creates revenue. Where does TikTok make money, and how does TikTok make a profit?

In this article, we discuss how TikTok makes its money, and how they create a profit.

How TikTok Makes Money: Advertisements

One of the leading factors in TikTok’s financial success is the use of advertisements on its apps. Just like YouTube, TikTok has advertisements on its app. TikTok is a huge platform that is used globally, by millions of people.

The amount of audience that TikTok can reach is insane. Brands are very aware of this. Therefore, brands realize that if they pay TikTok money, they can advertise their business to millions of people across the globe.

This means that the brand will potentially have thousands, if not millions, of new customers, which means a huge profit for that brand. There are a few ways that TikTok creates advertisements for brands:

1. In-Feed Video Advertisements

In-feed video advertisements are a very obvious, and reliable way, for brands to advertise their business.

On TikTok, the brand’s advertisement will occur in a user’s feed, as the user scrolls through the ‘For You’ page. This means that these ads are very targeted.

As the brands will be targeted towards a consumer that will likely resonate with the brand, it means the consumer is likely to become a customer of the brand. This enhances sales for the brand, and on a global scale, and causes a huge profit.

2. Brand Takeover Advertisements

Brand Takeovers are a lesser-known form of advertisement. On TikTok, brand takeovers will appear immediately. When the user opens the app, they will immediately see an advertisement from the brand.

This type of advertisement is effective, because it allows the brand to target the customer immediately, and before the consumer gets too engaged in the content on TikTok.

3. Top-View Advertisements

Top-view advertisements are a little different. Most people have encountered a top-view advertisement on an app before.

A top-view advertisement is when an app will appear on the screen, as a user is using the app. The only difference is, the user will usually not be able to click off the advertisement until the ad is covered. This could be for twenty seconds, but it could also be for sixty seconds.

4. Branded Hashtag Challenges

If you’re not familiar with a hashtag challenge, it’s pretty simple. All it means is that there is a certain challenge that is going viral, and people complete the challenge and include hashtags.

The hashtags will get more people to discover the video, but it’ll also mean the more people who discover the videos, the more people that use the app to create their version of the challenge, and so forth.

With a branded hashtag challenge, brands will create their hashtag and their challenge. The brands will pay TikTok for the advertisement, to ensure that the challenge appears on the user’s discovery page.

TikTok’s users will then participate in the challenge, using the hashtag. The purpose of a branded challenge is to create brand awareness. By creating brand awareness, millions of people become aware of the brand or reminded of the brand. This may mean that people start following the brand, and it’s very likely that the brand will make sales.

5. Branded Effects

Branded effects are another method that brands use to create brand awareness.

Brands will pay TikTok money to create a filter, which advertises the brand. Most brand effects will only be live for a certain amount of time, usually up to 10 days.

It’s an effective method because many people do not realize that they’re being advertised to. This makes them use the filter, and they will often end up clicking on the brand’s website, or social media, to find out more about the company.

6. In-App Purchases

Another method that TikTok uses to create a profit is in-app purchases.

On TikTok, users can pay money for virtual coins. These coins are used as a currency on TikTok and are used as gifts to other TikTok content creators. The price ranges from 99c for 100 coins, to $9.99 for 10,000 coins.

The coins are frequently used by millions of people a day. This helps TikTok to create tons of profits.

Frequently Asked Questions

How much money did TikTok make last year?

In 2021, TikTok generated a revenue of $4.6 million.

What types of videos are popular on TikTok?

There is a range of videos that are popular on TikTok. This could be from art, cookery, music, and meme videos.

Can TikTokers make money?

Yes, TikTokers can make a lot of money by creating videos on TikTok. We have an article discussing how TikTokers earn money.

Summary

TikTok is a global platform, with millions of global users. TikTok makes most of its profit through advertisements and in-app purchases. It’s a very successful business method, making it one of the most used apps on the market.

You can read additional TikTok articles here.