Media Unleashed

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Will TikTok Be Able to Generate Ad Revenue in the U.S.?

By: Becca Heacox    March 24, 2020

TikTok, the Chinese-based video-sharing social network, just experienced its best month ever, with 112.9 million app downloads in February. This made TikTok the most downloaded non-game app worldwide during the month. Social media experts are speculating the momentum may not slow down anytime soon, given the effect that COVID-19 is having on people’s social lives (or lack thereof). Installs of the app are up 96% from last year, with a total of 2 billion total app installs since launch.

Despite its large user base, TikTok has been struggling to find ways to generate revenue, especially outside of China, which accounted for 69% of total revenue in 2019. TikTok generates revenue through its newly launched Ads network, in addition to purchases of emojis and digital gifts from its users. Recent reports say TikTok ads purchased through their managed service platform average $10/CPM ($2 higher than Instagram’s $8 average). These ads are biddable, but are not available through a self-service platform yet (meaning you must work through a rep to get advertising on the platform). Most digital advertisers and brands see this as inefficient and don’t appreciate the lack of control over their advertising efforts.

The format of these ads is an in-feed video, with the option of one of three goals: cost-per-click, CPM or cost-per-6-second-view. This doesn’t leave a lot of flexibility for brands seeking to reach the mainly Gen Z audience that frequents the platform. Speculation that TikTok is working on ways to expand its ad offerings is rampant, with rumors that a self-service ad platform is in the works (no launch date has been released yet), as well as talks of adding shoppable ads.

Experts say if TikTok doesn’t find other options to entice U.S. companies to advertise on the platform, it could turn into the next Vine, which had 200 million users at its peak, but still failed to map out a sustainable revenue-generating framework.