How does TikTok make enough money to pay creators?
Before we dive into TikTok’s specific business model, you should be aware of one simple fact: If something is being offered to you for free, that means that you are the product. For better or for worse (and mostly for worse), money makes the world go ‘round. There’s no such thing as a free lunch, and there’s no such thing as a free, no-strings-attached app, either.
Sure, you can download TikTok without paying a cent. You can also enjoy everything the app has to offer without putting any of your own real-life money into it. That’s because TikTok’s main value is in its gargantuan user base. In April of 2020, TechCrunch reported that TikTok had been downloaded by more than 2 billion users. Needless to say, that’s a lot of eyeballs — which could in turn mean a lot of money.
One obvious way TikTok makes money is by running ads.
In June of 2020, the popular video-sharing app launched TikTok for Business as a way for brands to run their own ads within the app. There are several types of TikTok ads, including In-Feed ads, Brand Takeovers, and Branded Hashtag Challenges.
In-Feed ads appear between videos while users scroll through their For Your Pages (similar to the way ads appear in Instagram Stories). If you’ve ever been greeted by an ad right when you open the app, that’s a Brand Takeover ad. Branded Hashtag Challenges allow brands to create their own hashtag and challenge, then pay to have the tag show up in people’s Discover feeds.
Of course, in order to run an ad on TikTok, you have to pay a chunk of change to TikTok itself. Now that TikTok has an established ad program, that’s one of the main ways it makes money (and a lot of it).