Cash. An essential to life. How many times have you logged onto TikTok today? How about Snapchat? YouTube? Have you ever noticed that TikTok has countless ads on Snapchat and YouTube, yet TikTok itself doesn't host any "commercial breaks"?
For other social media platforms such as Snapchat and YouTube, paid advertisements are the main ways to make money. Often, TikTok does show some sponsored content, yet most of them seem like regular videos rather than advertisements. So how is this growing company making any money?
One word holds the answer: Coins. Coins are essentially to pay your favourite creator to thank them for producing content. Users pay real money to buy these Coins, which will allow them to buy virtual gifts. These gifts include virtual diamonds and emojis that each have a different value. For example, currently users can buy 65 Coins for $0.99. These Coins can buy emojis like a Panda or an "Italian Hand" for 5 Coins, or a "Drama Queen" for 5000 Coins. Once these emojis are purchased, they're ready to be given out. They can be given out to other people while they have livestreams. Whatever emojis you purchased with your Coins, you can virtually give to the person going live. Much like a real gift, if you decide to give an emoji to someone, you now have one less of it. The best part of this gift exchange is that the receiver can cash out these gifts. For example, 80,000 diamonds can be worth $250.
According to chinabrands.com, users globally spend up to $3.5 million on Coins, per month. Though not completely clear on how TikTok makes money off of this, there are two theories:
1. There are only certain "gifts" that can be cashed out. For instance, diamonds may be able to be exchanged for cash, but emojis may not. In this case, TikTok would gain any and all money users spent to purchase Coins that were used for anything other than diamonds. This would undeniably bring about a large cash flow.
2. All "gifts" can be cashed out, but TikTok takes a small amount off the Coin purchase. What this means is that, for example, cash paid for 65 Coins does not equate what can be cashed out of gifts worth 65 Coins. Though 65 Coins was $0.99, if a gift receiver received 13 Pandas each worth 5 Coins, they may be only be cashed out for $0.9. Of course, this is not a real example 13 Pandas may be cashed out for more or less than $0.9. It seems like a "tax" that the users pay to TikTok.
Either way, what is most interesting about TikTok is that it has its own changing currency rate. Much like any foreign money exchange, the ratio of a Coin to a dollar fluctuates frequently. It is as though TikTok is a country of its own, with its own economy and money value.
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This was an interesting post. I never thought about TikTok's revenue model but it's so interesting that it has it's own currency and operates kind of like a country.
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