TIKTOK INCOME:
Pay on TikTok is horrendous. Now, before you go to comments section and leave angry
remarks, let me explain. TikTok only pays about $0.02 to $0.04 per 1,000 views, so even if you get
a ridiculous amount of views, you’re not making much. Take Khaby Lame for example. He’s the most
followed TikToker on the planet with a whopping 159 million followers and nearly 18 billion
views. But, in terms of ad revenue from TikTok, those 18 billion views only translates to
$540,000. That’s not a bad amount by any means, but keep in mind, we’re talking about the most
followed TikToker in the world. For perspective, if you got that same number of views on YouTube,
your total earnings would be closer to $54 million assuming a $3 RPM. Now of course, these TikTokers
don’t just rely on TikTok adsense. They also do brand deals and sponsorships and affiliate
marketing and all that stuff which pulls in a whole lot of money. But, the disparity
between TikTok adsense and YouTube adsense is still staggering. I mean, we’re talking about
a 100X difference. And it’s not just creators who are feeling the pain. TikTok is also very
much feeling the pain having lost $7 billion last year and it’s only getting worse. Vine
was facing this same challenge 10 years ago and this is the main reasons that they eventually
shut down. All of their most popular Viners would translate their audiences over to YouTube.
This includes Drew Gooden, David Dobrik, Danny Gonzales, Cody Ko, and of course Logan
Paul and Jake Paul.. We’re starting to see the exact same thing happen with TikTokers as
well. Notable examples are Charli D’Amelio, Bella Poarch, Addison Rae, and KallMeKris.
Fun fact, some of these creators have already earned substantially more on YouTube than TikTok.
KallMeKris for example has earned around $350,000 on TikTok but she’s already earned millions on
YouTube. This is not a great sign for TikTok as this is hard evidence that people are simply
using TikTok as a springboard for YouTube or to jumpstart their music career while the platform
is burning billions trying to stay afloat. So, here’s TikTok’s monetization crisis and
the uncertain future of the platform. HESITANT ADVERTISERS: By far the largest shortcoming of TikTok
is advertisers. Advertisers simply do not want to advertise on TikTok. It’s easy to
blame the medium for this reluctance. Most advertisers simply aren’t used to making short
form ads in portrait mode. And this is true to a certain degree but it’s not the main reason.
I mean companies like Apple and Coca Cola have marketing budgets in the hundreds of millions
if not billions. And they have hundreds if not thousands of employees who’s full time job is
to simply figure this out. So, the reason that companies are reluctant to advertise on TikTok is
not because they don’t know how or can’t figure it out, it’s because they don’t want to. Why you ask?
Well, for one, it’s not a very lucrative audience. 41% of TikTok users are between the ages of 16
and 24 which means that most of them don’t have any money. For perspective, this is how YouTube’s
audience demographic looks like. As you can see, it’s a lot more evenly dispersed. This in itself
is a big turn off for advertisers but the issue goes much deeper than just demographics. Likely
the biggest concern for most advertisers is brand optics. It’s no secret that the content on TikTok
is how should I say it “edgy”. You’ve got thirst traps, a bunch of cursing, and all this other
stuff that YouTube tells you not to include. This is actually what has made TikTok so popular in
the first place but there’s a reason that YouTube doesn’t lean into this content. Advertisers
simply do not want to be associated with this type of content. I mean, if you were Apple,
would you really want your ad to play after this? I’m gonna guess no. And this makes a far larger
difference than you might think. At this point, I think we can agree that TikTok is very much
a worldwide platform. In 2021, it was literally the world’s most popular domain for crying out
loud. So, clearly, it’s extremely popular across the globe but guess what? 80% of TikTok’s revenue
still comes from China. And if you didn’t know, the TikTok that we use is actually banned in
China. You see, the CCP decided that mainstream TikTok is simply too vulgar and unproductive
for the youth. So, instead, they have a healthy version of TikTok called Douyin. Fundamentally
speaking, it’s the same app. The difference is the type of content that is posted and promoted on
the platform. Douyin primarily promotes science, educational, and historical content instead
of lip syncs and dancing. Furthermore, younger generations are limited to just 40 minutes of
Douyin per day, so no hours of mindless scrolling. Douyin is extremely popular in China but it
doesn’t quite stack up to TikTok. Douyin boasts 730 million monhtly active users while TikTok
boasts 1.05 billion monthly active users. So, TikTok is not only more popular but people tend to
spend far more time on TikTok. But despite this, China is able account for 80% of TikTok’s revenue
because advertisers are actually interested in appearing next to Douyin videos. So, until
TikTok is able to address advertiser hesitation, TikTok will continue to face major monetization
issues leading to more creators migrating away. SHORT FORM HELL: Advertisers no doubt play a massive role
in how much is paid out to creators, but they’re not the only issue plaguing TikTok.
You see, short form is simply fundamentally harder to monetize because views are worth
substantially less. On TikTok, for example, the average video is only 36 to 42 seconds
depending on the size of the account. Even if we assume that these videos have 75% audience
retention on average, each view only translates to about 30 seconds of watch time. Now, compare
that to what we see on YouTube. Using myself as an example, my average video gets just under 7
minutes of average watch time, which by the way thank you. This means that the average view on my
channel is worth about 14 views on TikTok. Why do I bring this up? Well, monetization has more to
do with watch time than views. I tend to put an ad break once every 3 minutes which means that
the average view translates 3 ad impressions. For simplicity, let’s say that TikTok shows an ad
once every 3 minutes as well. Since each video is only watched for 30 seconds at best, a viewer
would have to scroll through 6 TikToks before reaching an ad and that’s the best case scenario.
More likely, they’ll have to scroll through 10 or 15 TikToks before seeing an ad but we’ll call it 6
to give them the benefit of the doubt. This means that each view on TikTok only translates to 1/6th
of an ad impression. Putting this next to YouTube, we’ll see that each YouTube view translates to
18 times more ad impressions. So, if we want to really create an accurate comparison between how
much advertisers pay on YouTube vs how much they pay on TikTok, we can’t compare views to revenue,
we have to compare ad impressions to revenue. YouTube generally pays about $3 to $5 per thousand
views in most niches. And as we previously touched on, TikTok pays 2 to 4 cents per thousand views.
But, if we normalize based on ad impressions, we’ll see that TikTok is actually paying 36 to 72
cents for the same number of ad impressions that you would get from 1000 YouTube views. Still about
7-8 times worse than YouTube but also 18 times better than what the upfront numbers suggested.
The only way to work around this obstacle is move towards longer form content which is exactly
what TikTok and its creators have been doing. What started at a maximum video length of 7 seconds has
grown all the way to 10 minutes. TikTok has also been testing with landscape mode, but increasing
the average view duration isn’t as easy as just getting creators to post longer videos. The
algorithm highly values audience retention, so if TikTokers want their long form videos to
perform well, they have to increase video length without sacrificing audience retention. Also, we
see all those articles about our ever decreasing attention spans. And if that’s true anywhere, it’s
true on TikTok. So, TikTok is very much fighting an uphill battle when it comes to monetization
due to the fundamental nature of their content. GIVING UP:
Hearing all this, you might be saying that this isn’t just an issue on TikTok. Instagram
and YouTube have also been promoting short form content. So, they should be facing the same issues
right? Well, you’re right, YouTube and Instagram are indeed facing the same issues. With YouTube
shorts, for example, you can expect to earn 5 cents per thousand views. But, here’s the thing,
YouTube and Instagram are not tied down by short form content. Short form content is not their
golden goose. It’s simply an expansion effort. And they’re already starting to decide that this
expansion effort isn’t worth it. You see, platform monetization is a two sided coin. If creators
aren’t earning much money from ads, neither is the platform. At least, the creators can go out
and get brand deals and sponsors and affiliates and all that. For these platforms, their only
revenue is ad revenue. So, if that’s garbage, the entire revenue from the whole effort is garbage,
and that’s what seems to be playing out. In fact, according to Mark Zuckerberg, revenue from Reels
is so garbage that Meta is losing $500 million per quarter because of users watching Reels instead
of scrolling through pictures. Yeah, I don’t think you’d be surprised to hear that Meta has
stopped offering Reels bonuses to creators. So, while Instagram and YouTube are very much in the
same position as TikTok with shorts, they’re also not. They have the luxury of pulling back and
focusing on what they were already doing. The same cannot be said about TikTok. But then what
is the solution? Well, unfortunately for TikTok, there is no clear solution to their monetization
problem. Again, this is literally why Vine shut down. What TikTok really needs is time. They need
time for brands to become more open with the idea of advertising on TikTok. In the meantime, their
best bet is to tinker with the algorithm to push longer form content that’s more advertiser
friendly. But, this is also a pretty big gamble. This can lead to a sort ad apocalypse like we saw
with YouTube back in 2017. More edgy creators got pushed off the platform as family friendly content
got pushed to the top. But, the thing to note is that YouTube always had a good mix edgy and family
friendly content, so the shift towards family friendly content was more natural. With TikTok on
the other hand, we’re primarily dealing with edgy content so the shift is a lot more jarring, and
it’s not clear how many viewers TikTok would push off the platform by making such a change. But,
with their peers already dropping out and pulling back, this might be the hail mary that TikTok
needs to make to stay relevant over the long term. THE STATE OF TIKTOK: As you can see, TikTok is very much facing a
monetization crisis and there is no easy solution, but there is a silver lining for TikTok. Unlike
Vine which was backed by Twitter which was in itself not a profitable company, TikTok is
backed by Bytedance which has been posting record profits. In fact, they made $25 billion
last year. So, losses from TikTok are definitely something that they can sustain even over the long
term. Also, even if Bytedance can’t pull it off on their own, they’ve got the backing of the CCP.
You can bet that as long as TikTok is popular, the CCP won’t let them go under as
TikTok is literally a goldmine for them. So, from a financial perspective, they very much
have time on their side. But they may not be able to say the same thing about their creators or
viewers. Their creators are naturally pivoting towards YouTube to build stronger businesses
with more revenue. And as for viewers, TikTok faces the risk of their viewers growing up, kind
of like what SnapChat is dealing with right now. So while TikTok may not be on the clock for
financial reasons, they’re very much on the clock due to trends amongst their viewers and creators.
Will they be able to beat the clock? Only time will tell. While all of this madness has been
going on with short form content, podcasts have actually been doing better than ever on YouTube.
If you wanna learn why, check out this video.
