TikTok has exploded in popularity, becoming one of the most widely used social media platforms with over 1 billion monthly active users. However, despite its massive user base, TikTok has faced ongoing criticism for providing minimal compensation to the creators fueling the app’s success.
In fact, based on reported payouts, top TikTok creators earn an average of just $0.02 to $0.04 per 1,000 views from TikTok’s Creator Fund. This means that even at 1 million views, creators are often making less than $50 from TikTok’s primary monetization program.
With mounting backlash from creators, TikTok will likely need to re-evaluate its compensation structure. But for now, the platform is drawing in users while paying little for the captivating content they consume.
TikTok’s Revenue Model
TikTok generates the majority of its revenue from advertising. Brands can purchase various ad formats like in-feed video ads, branded lenses and filters, and branded hashtags to promote their products and services to TikTok’s user base [1]. Unlike other social platforms like YouTube, TikTok does not offer any subscription services for users. There have been some experiments with tipping creators, but that revenue stream is still very small compared to advertising [2].
Advertising makes up the bulk of revenue because of TikTok’s massive user base and ability to target ads based on user data and interests. Brands are willing to pay to reach TikTok’s highly engaged younger demographics. While TikTok has tested subscription features like TikTok Premium, advertising remains the dominant money maker for now.
TikTok’s User Base
TikTok’s user base is predominantly made up of young users under the age of 30. According to statistics from Backlinko, as of October 2023, 32.5% of TikTok users were aged between 10-19 years old. Another 19.5% were aged 20-29 years old[1]. This means over 50% of TikTok’s users are under 30 years old.
Exploding Topics found that 52.8% of TikTok creators are aged 18-24 years old, while 27.5% are under 18 years old[2].
The Social Shepherd also reported that TikTok’s user base skews young, with 60% of users aged between 16-24 years old[3]. So the majority of TikTok’s users and creators are young people under the age of 30.
Compensation Structure
TikTok offers a limited compensation model that only pays high-tier creators with millions of followers. The company launched the Creator Fund in 2020 to pay creators based on video views and engagement. However, to qualify, you need at least 10,000 followers and 100,000 video views in the last 30 days.
Payments range from $0.02 to $0.04 per 1,000 video views for creators in the U.S., according to top creators like MrBeast. While that may sound lucrative for viral videos, it doesn’t account for the millions of smaller creators helping drive TikTok’s growth. YouTubers with similarly sized audiences report earning 3-5 times more from YouTube’s Partner Program.
TikTok also takes a 50% cut of gifts sent during livestreams. Compared to platforms like Twitch that only take a small service fee, TikTok’s revenue share further limits earnings for creators.
Ad Revenue Share
TikTok launched its TikTok Pulse ad revenue sharing program in 2022, promising creators they could earn 50% of ad revenue from their content that hits the app’s top 4% for views. However, early reports show creators are getting only a tiny fraction of the promised 50% cut (1).
One source found that a video with over 2.5 million views generated only $77 from TikTok’s ad share program. With an average CPM (cost per thousand views) of $5 on TikTok, that same video should have generated around $12,500 in ad revenue. The creator’s 50% share should have been $6,250, yet they received only $77 (2).
It seems creators are seeing just 1-2% payout from the ad revenue their top videos generate. TikTok claims technical difficulties in accurately tracking views and attributing payouts as the reason behind these low creator earnings so far (1).
(1) [https://fortune.com/2023/01/23/creators-report-extremely-low-earnings-from-tiktoks-ad-revenue-sharing-initiative/]
(2) [https://www.theleap.co/blog/tiktok-pulse/]
TikTok’s Recommendation Algorithm
TikTok’s success is largely attributed to its powerful recommendation algorithm. The algorithm analyzes user behavior to determine which videos to show each user on their For You feed. It favors engagement over individual creators by promoting content that is most likely to keep users scrolling and interacting (Dance, 2022).
The algorithm tracks many data points about users including videos liked, shared, commented on, and dwell time. Within the first few hours of use, it can detect a user’s interests and preferences at a granular level. TikTok then recommends hyper-targeted content to keep each user engaged (Murphy, 2021).
This results in a highly addictive, personalized experience. Critics argue the algorithm’s singular focus on engagement promotes shocking and extremist content. However, TikTok maintains the algorithm simply reflects demand, and helps creators find the right niche audience (Hern, 2022).
Sources:
Dance, J. (2022). How to Work With the TikTok Algorithm in 2024. Buffer. https://buffer.com/resources/tiktok-algorithm/
Murphy, M. (2021). How TikTok Reads Your Mind. The New York Times. https://www.nytimes.com/2021/12/05/business/media/tiktok-algorithm.html
Lack of Monetization Options
One of the biggest criticisms of TikTok is the lack of monetization options for creators. Unlike platforms like YouTube and Instagram that offer multiple ways for creators to earn money, options are very limited on TikTok.
The main way TikTok creators can earn money is through the TikTok Creator Fund, which allows popular creators to earn a certain amount per 1,000 video views. However, the pay rate is estimated to only be a few pennies per 1,000 views, which many argue is too low for the amount of views top creators get.
TikTok also lacks native features like tipping, subscriptions, affiliate links, and more that provide revenue streams on other platforms. Brand sponsorships are an option, but harder for smaller creators to obtain. While live streaming does offer gifting revenue, the TikTok LIVE user base is still smaller than rivals.
Essentially, creators are reliant on TikTok’s Creator Fund payments unless they obtain a brand deal or find creative ways to monetize outside the app. Many feel TikTok needs to expand monetization tools to properly compensate creators for the value they bring to the platform.
Comparing to Other Platforms
Compared to other popular social media platforms like YouTube and Instagram, TikTok pays its creators significantly less. YouTube in particular is known for having a much more lucrative compensation model. According to one analysis, YouTube pays between $0.10 – $0.30 per view, compared to TikTok’s $0.02 – $0.04 per view [1]. On YouTube, creators also have more options to monetize through ads, sponsorships, channel memberships, merchandise and more.
Instagram also provides more monetization opportunities through brand deals, affiliate links, and the Creator Fund which pays eligible creators. One report found that top Instagram creators can earn anywhere from $10,000 to $100,000 for a single sponsored post [2]. Meanwhile on TikTok, brand sponsorships are less common and payouts significantly lower.
Overall, the compensation on TikTok pales in comparison to the earning potential on other platforms like YouTube and Instagram. TikTok’s lack of monetization options puts it at a disadvantage for creators looking to earn substantial income from their content.
Recent Backlash
In recent years, many prominent TikTok creators have spoken out about the platform’s low pay rates. Despite amassing millions of followers and views, these creators have complained that TikTok’s compensation structure leads to very small payouts.
For example, creator @bomanizer stated “I have almost 2M followers, 88M likes, and make about $150/month from TikTok” (source). Other popular creators like @hannabananax33 and @kennedycymone have echoed similar sentiments, noting that they only earn a few dollars per day from TikTok despite having huge followings.
Much of this backlash stems from TikTok’s Creator Fund, which creators have criticized for opaque and inconsistent payment calculations. The relatively small pool of ad revenue shared through the fund leads to low earnings, even for the app’s top stars. This has provoked complaints across social media, as creators demand better monetization and transparency.
Conclusion
In summary, TikTok’s compensation structure is very different from other social media platforms due to its heavy focus on growth over revenue in its early days. While this has led to an enormous user base, it has also resulted in minimal ad revenue opportunities for individual creators. TikTok aims to keep users engaged through its powerful recommendation algorithm rather than monetization features for creators. As the app continues to mature, TikTok will likely face pressure to implement more monetization options, increase ad revenue sharing, and better compensate creators. But for now, it lags far behind platforms like YouTube and Instagram in providing income streams to users. The long-term growth versus revenue balance will be key to watch as TikTok evolves.
