PROCUREMENT

The reality of TikTok’s revenue

Jul 14, 2022

Industry Trends

The reality of TikTok’s revenue

At this point, it’s impossible to deny the massive impact TikTok has had on the world today. As the most downloaded app of the past three years, with a user base of over 1 billion—expected to reach 1.8 billion by the end of 2022—and the most addictive algorithm of all social platforms, it’s no surprise that TikTok is a phenomenal competitor (and concern) to all other social platforms, but primarily Meta and Google.

In 2021, TikTok users spent an average of 22.8 hours a month on the platform; this has already risen to 28.2 in the first half of 2022. The time spent on TikTok completely overshadows the time spent on other platforms, with Facebook being the closest competitor with an average of 15.5 hours a month on the platform in 2022—although this is a decrease from time spent on the platform in 2021.

TikTok ad revenue

TikTok has only been accepting ads on the platform for the past three years. In 2021, it ranked nearly $4 billion USD in revenue, mainly from advertising, and this is set to hit $12 billion in 2022. This would make it bigger than Twitter Inc. and Snap Inc. combined. Safe to say, TikTok is a force to be reckoned with.

Meta and Alphabet (Google’s parent company) have ruled online advertising for the past two decades. But now, TikTok’s growing share of the media budget is starting to pose a threat to the chokehold Meta and Alphabet have had over us.

As the time users spend on TikTok (and the general number of users) continues to rise, the platform is able to continue developing its addictive algorithm—which has often been described as online opium—which will keep people on the app more, stealing time away from other platforms. Meaning? TikTok has people’s attention in a chokehold and can charge as much as $2.6 million for a one-day run of a TopView ad. To put that into perspective, a 30-second Super Bowl ad runs about $6.5 million.

However, TikTok’s revenue model doesn’t just stop at advertising placements. It’s diversifying into music distribution, game publishing, and Twitch-style subscriptions, but most importantly, social commerce.

TikTok Shop

TikTok launched TikTok Shop in mid-2021. Its first expansion outside of Asia was in the UK, and allows brands and influencers to sell products through QVC-style livestreams.

TikTok Shop Expansions

Following the initial success of TikTok Shop in the UK, TikTok is considering opening UK-based warehouses. Currently, shipments from China to the UK can take up to 15 days—opening local store rooms will shorten this period to 3-5 days.

In June, TikTok’s daily sales for TikTok Shop products reached $300,000 USD. A shorter delivery time could entice UK users to make more purchases, further increasing TikTok’s revenue.

TikTok Shop Issues

While TikTok Shop was initially a success, it hasn’t all been rainbows and sunshine. One of TikTok’s ongoing issues is creator monetisation. Essentially, TikTok doesn’t pay its creators what they’re owed—you can take this as both TikTok doesn’t pay enough, and that it, quite literally, does not pay creators.

An unfortunate butterfly effect of this, is that some UK creators have pulled out of the UK TikTok Shop programme. Some influencers have spoken out against the platform, saying the products sold were low-quality and they were experiencing low or no payments from the platform.

Creators backing out are reportedly those whose content tiptoes the community guidelines—not entirely against them, but not entirely following. TikTok firmed up its community guidelines earlier this year, which has heavily impacted these creators.

In addition to this, TikTok has pulled out of expanding TikTok Shop into the US and parts of Europe. The expansion was reportedly abandoned after influencers dropped out of the project in the U.K. and the venture struggled to gain traction with users. The reluctant uptake from users could partially be due to the lack of reach many TikTok Shop creators faced due to the previously mentioned issue of community guidelines.

TikTok hasn’t yet confirmed whether the expansion into the US and Europe has been vetoed completely, but it has said it will be turning its efforts to making TikTok Shop a success in the UK.

TikTok’s future

While TikTok undoubtedly has some fundamental issues to smooth out (paying creators…), its future is bright.

Although TikTok is still currently smaller than Meta owned Facebook and Instagram, its growth suggests that it won’t be for long. By 2024, TikTok’s ad revenue is set to be on par with YouTube’s—around $24 billion USD.

The platform’s exceptional growth has been a massive concern for Meta—it (allegedly) hired political consultants to run smear campaigns against TikTok in the US. Meta is desperately trying to learn from TikTok’s success in hopes of reviving its own growth with a younger audience. Instagram has slowly been shifting into a copy-cat TikTok and has been aggressively pushing Reels and promoting them in feeds, even if users haven’t chosen to engage with such content.

Not only has TikTok completely shaken up the social media world, but it’s now competing with TV. TikTok is the TV of the new generation. As attention spans continue to dwindle, consumers are spending less time watching long-form content from or about people they don’t relate to.

Should TikTok finally get to grips with paying its creators, and creating a seamless and engaging shopping experience with TikTok shop, it will really become an unstoppable tech titan.

Our Influencer marketing agency and Social agency are located worldwide, with our agency network based in the USA, UK, UAE and China.

If you want to receive our industry insights, visit our Influencer Marketing & Social Media blog.

@ Socially Powerful

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Author

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James Hacking

Writer

Socially Powerful, founded in 2017, stood as pioneers of the influencer marketing industry. Today we are a global social marketing agency and technology company.

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