TikTok generated $11 billion in revenue in 2022, compared to $4.6 billion in 2021. An almost 140% increase in revenue in 2022 compared to 2021.
These days, TikTok has been threatened with various bans in the US due to political issues. If we look at TikTok from a product perspective alone, a few elements made it successful, so much so to become a key player in the digital advertising space.
TikTok is a real social app, which was an AI-first company, in the discovery paradigm.
While TikTok has become famous through its native short-form videos, in reality, two elements contributed to its incredible success.
TikTok transformed everyone into a video editor through its CapCut app.
This is a critical point to understand.
TikTok brought user-generated content to the next level by enabling millions of users to easily recombine existing content on TikTok and make it into an exponential content machine.
Indeed, CapCut is among the most popular apps.
AI discovery feed, no more the social graph
The critical turning point for TikTok was the move from the social graph to an AI-based feed.
Where the experiences of users wouldn’t be tied – anymore – to who were your friends, but rather what was sticky, based on your interaction.
In short, you could get a short-form video of a person in the other part of the world, with which you don’t have any connection, doing strange dances, only because this has proved sticky for hundreds of millions of users.
TikTok showed the world the new paradigm of AI-based discovery at scale.
All significant companies (from Instagram to YouTube) adapted and transitioned.
Indeed, by 2022, TikTok will have grown into an $11 billion-a-year player.
However, as political tensions between US and China keep growing, TikTok is risking being banned in the US.
If that happens, that might boost existing social media platforms in the US, like YouTube, Facebook, Instagram, and Snapchat, due to limited competition in the market.
In 2022, YouTube generated over $29 billion in revenue, in ads, compared to TikTok’s $11 billion. However, TikTok is growing quickly, from $4.6 billion in 2021, while YouTube’s growth has stalled, as it generated almost $29 billion in ad revenue in 2021.
TikTok is a creative Chinese social media platform primarily driven by short-form video content. It launches challenges of various types to tap into the creativity of its users and generate engaging (if not addicting content) accessible via an infinite feed. TikTok primarily makes money through advertising, thus making it an attention-based businessmodel.
The digital advertising industry has become a multi-billion industry dominated by a few key tech players. The industry’s advertising dollars are also fragmented across several small players and publishers across the web. Most of it is consolidated within brands like Google, YouTube, Facebook, Instagram, Amazon, Bing, Twitter, TikTok, which is growing very quickly, and Pinterest.
TikTok, owned by the Chinese tech giant ByteDance turned as among the most successful native micro-video platforms, and it became the go-to platform for millions of young users. Thus, the “TikToker” has already become the evolution of the “influencer” from platforms like Instagram. Those TikTokers make money in a few ways, such as monetary gifts, sponsorships, advertising agreements, affiliations, and more.
Facebook, the main product of Meta is an attention merchant. As such, its algorithms condense the attention of over 2.91 billion monthly active users as of June 2021. Meta generated $117.9 billion in revenues, in 2021, of which $114.9 billion from advertising (97.4% of the total revenues) and over $2.2 billion from Reality Labs (the augmented and virtual reality products arm).
Instagram makes money via visual advertising. Acquired by Facebook for a billion-dollar in 2012, today, Instagram is integrated into the overall Facebook (now rebranded as Meta) business strategy. In 2018, Instagram founders Kevin Systrom and Mike Krieger left the company as Facebook pushed toward tighter integration of the two platforms. In 2022, Instagram is the most successful product still, in Meta’s portfolio.
Snapchat is a camera company which business model moves across three industries: social media, content marketing, and AR. Snapchat generates most of its revenue from several ad formats (AR Ads, Snap Ads, Sponsored Geolifters, and Sponsored Lenses). The company also produces Spectacles, a set of AR glasses enabling content creators to produce interactive experiences through Snapchat.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
