A few minutes every morning is all you need.
Stay up to date on the world's Headlines and Human Stories. It's fun, it's factual, it's fluff-free.
The backstory: TikTok, the popular app known for its bite-sized videos, took a noteworthy turn in 2021 when ByteDance, its parent company, introduced TikTok Shop. This marked the app's foray into e-commerce, linking local sellers with targeted user bases, with Indonesia as the pioneering market. Within a year, around 6 million sellers flocked to the platform. Last year, the video platform expanded its reach by launching TikTok Shop in the US e-commerce market.
But on top of moving into e-commerce, TikTok also has a way for users to purchase credit that they can then use to “tip” their favorite creators and live streamers. This marks a newer method of monetization, aside from revenues an app might generate from advertising, subscriptions or, especially in the case of mobile games, purchases like accessories for your characters or extra lives and other things that tempt users to spend money in the app. All in all, in-app spending for mobile platforms hit a new high of US$64 billion in 2023, so it's a growing and lucrative market.
The development: TikTok recently achieved a major feat, crossing US$10 billion in what users spent on the app, according to data.ai's latest report. It and other video platforms, like Disney+, contributed an 11% boost in consumer app sales last year. But its tipping feature accounted for the bulk of that, so TikTok is really onto something here. TikTok and similar social apps exploring new money-making avenues through features like tipping are projected by data.ai to increase direct consumer monetization by 150%, reaching US$1.3 billion this year. Unlike gaming apps, streaming, content-sharing and dating apps did better last year, with advertising growing by 8%, reaching US$362 billion. Global mobile ad spending is predicted to get up to around US$402 billion this year.
Smartphone usage is also on the rise, particularly in Indonesia, where users spend over six hours daily on apps. In the top 10 places, people spend about five hours daily on apps, leading to a 3% spending increase in 2023. South Korea, Brazil, Mexico and Turkey particularly stood out, with app spending growing by over 25%.
“Social apps and the creator economy pioneered new pathways to monetization beyond advertising,” said Lexi Sydow, director of corporate marketing and insights at data.ai. “TikTok laid the groundwork through its content creator tipping mechanism. In 2024, direct consumer monetization in social apps through in-app purchases is set to grow 150% to $1.3 billion as competition ramps up.”
“This AI growth also fueled embedded features across virtually all mobile sectors, paving the way for a fresh wave of digital innovation,” said the data.ai report.
“Ultimately, what the platforms are able to monetize is usage. And the more they can point to usage growth, retention of users and things like daily and monthly active users, those are really the bread and butter that allows them to go to advertisers and sell,” said Noah Mallin, chief strategy officer at IMGN Media. “Having a robust influencer, creator ecosystem helps to make all of that work.”