TikTok is a popular short-form video app with over 1 billion monthly active users. On TikTok, users can send virtual gifts called “coins” to creators during live streams as a form of appreciation and support. Coins cost real money and can be purchased directly through the app.
Unlike other social media platforms like Instagram or Snapchat that have rolled out paid features, TikTok currently does not allow users to directly buy coins. Users are only able to receive coins for free or get them as gifts. This leads many to ask: why doesn’t TikTok allow users to directly purchase coins?
TikTok’s Business Model
TikTok’s core business model revolves around advertising. As a free platform, TikTok generates revenue by showing ads to its users. Brands pay TikTok to promote their products and services to TikTok’s large user base. TikTok is able to charge high rates for advertising due to the app’s popularity and high levels of user engagement.
TikTok also makes money by collecting data on user behavior and interests. By analyzing user data, TikTok can improve ad targeting and charge even higher rates to advertisers. User data allows TikTok to gain insights into emerging trends and viral content.
Importantly, TikTok does not rely on in-app purchases or selling virtual currencies. This is a strategic choice to focus entirely on advertising revenue. Allowing users to freely create and engage with content results in more data collection and a larger audience for ads. As per Business Model Analyst, this furthers TikTok’s core business model.
Coins on TikTok
On TikTok, coins are an in-app currency that allow users to purchase virtual gifts they can send to their favorite creators during livestreams. Coins can also be used to access certain specialized creative effects or emojis (Forbes, 2022).
Currently, the only way for users to obtain TikTok coins is to purchase them directly through the app. TikTok offers coin packages that range from 100 coins for $0.99 up to 10,000 coins for $99.99 (TikTok, 2022). There is no way for users to earn free coins just by using the app or interacting with content.
Once purchased, coins can then be gifted to TikTok creators in the form of virtual items and effects during live broadcasts. This allows fans to monetarily support the creators they love. Gifting coins helps creators earn an income from the app (TikTok, 2022).
Why Other Apps Sell Currencies
Many popular social media and communication platforms like Instagram, Reddit, Discord, and Twitch allow users to purchase coins or tokens to use on their platforms. This gives users special abilities like unlocking premium features, tipping creators, or enhancing their experience. For example, on Reddit you can purchase “Reddit Coins” to reward good posts and comments. On Instagram, you can buy “Stars” to show extra appreciation for creators during live streams.
The main business incentive behind selling digital currencies is to generate revenue for the platforms. By creating their own closed virtual economies, apps give users a reason to spend real money within their ecosystems. This provides a steady income stream in addition to advertising or subscription revenues.
Selling proprietary coins and tokens is especially lucrative for platforms relying on user-generated content. The coins act as virtual tips that fans can use to support their favorite creators, while the platforms take a cut of all transactions.
Overall, digital currencies allow apps to monetize user engagement and capitalize on their audiences’ willingness to pay for enhanced experiences or to support content creators. While controversial in some cases, the model has proven highly successful for many platforms.
Human: Let’s move onto the next section.
For the h2 and section covering User Engagement, focus on how TikTok’s algorithm and content are designed to be engaging, sticky and addictive. Use the sources to cite 1 relevant quote.
User Engagement
TikTok has found great success in keeping its users highly engaged without the use of purchasable coins or currencies. According to Statista, in 2023, TikTok users spend an average of 95 minutes per day in the app. This high engagement is largely driven by TikTok’s “For You” page algorithm which provides each user with a personalized feed of videos based on their interests and engagement history.
The “For You” page is powered by TikTok’s recommendation system that leverages artificial intelligence to determine which videos a user is most likely to enjoy watching and interact with. By surfacing the most relevant and engaging content to each individual user, TikTok is able to keep people coming back throughout the day without needing to rely on purchasable currencies or rewards.
Additionally, features like duets, reactions, and stitching incentivize participation and content creation amongst users. The collaborative nature of these tools fosters a highly interactive environment where users are constantly engaging with each other’s videos in creative ways. This further strengthens the platform’s user retention and time spent without the need for monetary incentives.
Avoiding Controversy
One potential reason why TikTok does not yet offer users the ability to buy coins directly relates to avoiding controversy. TikTok has already faced scrutiny over the years, including concerns about data privacy and censorship given its Chinese ownership.
Introducing an in-app currency that can be used for tipping or transactions opens the door to new controversies TikTok likely wants to sidestep. Specifically, selling coins could enable forms of gambling or other potentially addictive money spending habits seen in other apps. With an audience full of teenagers, this could raise alarms.
After facing bans and restrictions in multiple countries, TikTok seems intent on avoiding additional controversy that could lead to further scrutiny. The app has focused heavily on content moderation and trust and safety measures. Adding coins or other monetization appears to be a lower priority than maintaining user trust.
Future Possibilities
While TikTok currently does not directly sell its own virtual currency, some signs indicate the platform may introduce coin sales in the future. According to TikTok’s Coins Policy, “the introduction of TikTok Coins is something we are considering for the future.” The policy also states that if TikTok were to sell coins directly, they would provide advance notice to users.
Given TikTok’s rapid growth and focus on monetization, directly selling coins could be a logical next step. Other social apps like Facebook and Snapchat have successfully introduced their own virtual currencies. Selling coins could allow TikTok to boost revenue while enhancing user engagement and gifting on the platform. However, any move to sell coins directly could also draw regulatory scrutiny depending on how it’s implemented.
For now, TikTok seems to be taking a cautious approach by relying on third-party payments for coins. But the company may pilot direct coin sales in select markets to gauge demand and iron out any issues before potentially rolling out broader availability. TikTok’s coins policy indicates the company is actively considering coin selling, but is likely proceeding carefully due to the app’s regulatory spotlight globally.
User Reaction
Most users seem indifferent or even pleased that they can’t directly buy coins on TikTok. According to comments on TikTok’s feedback forums, many users feel the app provides a more equal playing field without in-app purchases (TikTok Feedback). They believe buying coins could give some users an unfair advantage in gaining visibility or clout.
Some users have expressed frustration that they can’t buy coins to support their favorite creators or access premium features (TikTok Coins Feedback). However, this seems to be a minority view. Most are either neutral or positive about the lack of in-app purchases. They feel it helps maintain TikTok’s focus on entertaining short videos rather than monetization.
Overall, users don’t seem to mind the inability to buy coins directly on TikTok. Many see it as a way to keep the platform more egalitarian. While some users wish they could purchase coins to support creators, most appear satisfied with TikTok’s choice to avoid in-app transactions.
Comparisons to Other Chinese Platforms
It’s worth looking at how other major Chinese tech platforms like WeChat have implemented in-app currencies and transactions. WeChat introduced its own virtual currency called “WeChat beans” back in 2013, which allows users to purchase stickers, games, and other digital content within the app (Source).
The key difference is that WeChat does allow users to purchase these beans with real money. So while TikTok currently does not support purchasing coins, they may decide to implement something similar to WeChat beans in the future as a way to monetize their platform and user engagement. For now, TikTok coins remain a “free” virtual currency tied to likes and engagement.
Conclusion
In summary, the main reason TikTok currently does not offer users the ability to purchase coins is tied to their business model and priorities as a platform. TikTok is focused on building an engaged userbase and enabling organic content creation and sharing. Selling an in-app currency could shift the focus towards monetization and detract from the app’s core purpose.
Unlike platforms such as Facebook that rely heavily on advertising revenue, TikTok wants to enable authentic, user-generated content. Allowing users to buy coins to promote or boost their own content could lead to less organic engagement. Additionally, selling coins opens the doors to potential controversy around enabling pay-to-win dynamics.
While TikTok may consider introducing coins or premium features in the future as the platform evolves, for now their goals seem to be centered around building a large, active userbase. The choice to avoid in-app currencies helps reinforce TikTok’s identity as a platform for organic creative expression and entertainment.
By not pursuing short-term monetization through coins, TikTok aims to keep the user experience focused on creation and discovery. Their success at driving continual engagement shows this strategy is working well for now. However, it will be interesting to see if TikTok introduces new monetization models over time while still upholding their core values.
