How TikTok Makes Money?

How TikTok Makes Money: A 2025 Breakdown

When I first downloaded TikTok, it was hard to imagine how this free, addictive app could be a money making machine for its owner, ByteDance. With its endless feed of short videos and no obvious subscription fees or big e-commerce storefront, TikTok doesn’t scream “revenue generator” at first. However, as I dug into how TikTok operates, I discovered that this app has built a powerhouse business model behind the scenes. Today, I want to walk you through exactly how TikTok makes its money. I’ve researched this through various sources and will break down all the ways – from advertising to commerce – that TikTok turns our attention into income.

It All Starts with Massive Engagement (And Why That Matters)

When I think about TikTok’s success, one thing stands out: people spend a ton of time on it. TikTok’s algorithm is good at serving up videos that keep us glued to the screen. I’ve caught myself losing an hour watching cooking hacks, comedy skits, and dance challenges without even realizing it. And I’m not alone – on average, TikTok users spend many minutes (often almost an hour per day) on the app. This high engagement is the foundation for how TikTok makes money. Why? Because in the digital world, user attention equals value. The more eyeballs and time you have on your platform, the more opportunities to monetize that attention, especially through ads or sales.

By 2025, TikTok has over 1 billion monthly active users globally. Most of these users are young (teens to late 20s primarily, though older groups are catching up) and highly engaged. This demographic is gold for advertisers. So, from the get-go, TikTok’s vast, active user base is the reason it can make money at all. Every revenue stream – whether it’s an ad, a digital gift, or a shopping feature – is built on top of the fact that millions of us are scrolling TikTok daily. With that in mind, let’s get into the specific ways TikTok turns our scrolling into revenue.

1. Advertising: TikTok’s Biggest Cash Cow

The most straightforward way TikTok makes money is advertising. If you’ve used TikTok, you’ve likely encountered ads, even if they blend pretty well into the content. As a user, I remember scrolling my For You Page and suddenly seeing a video from a brand or an influencer partnership – it might look like regular content, but somewhere it’s labeled “Sponsored”. That’s TikTok’s primary money maker right there.

Why advertisers love TikTok: TikTok offers access to a young, trend setting audience on a platform where content can go viral overnight. Brands know that TikTok isn’t just another social media app; it’s often the birthplace of memes, music hits, and product trends (ever heard of #TikTokMadeMeBuyIt?). So advertisers are willing to pay to get their message in front of TikTok users. And because TikTok’s algorithm can target content to the right niches, ads can reach people who are likely to be interested.

TikTok launched its formal ad platform, TikTok For Business, in mid-2020, and since then the ad revenue has skyrocketed. To throw in some numbers: in 2023 TikTok’s advertising revenue was estimated around $13 billion+, and it’s projected to be even higher in 2024 (over $17–23 billion, depending on the estimate). This puts TikTok in the big leagues, quickly catching up to older platforms. Advertising makes up roughly 75-80% of TikTok’s total revenue as of 2024, which shows how critical it is.

Let me break down the main types of TikTok ads – understanding these helped me see how TikTok inserts paid content into our TikTok experience:

• In-Feed Ads: These are the most common. As you scroll through videos on your For You feed, every so often you’ll see a video that is an ad. It might be a cool DIY clip sponsored by a craft company, or a funny sketch promoting a movie – content that looks native to TikTok but is actually an advertisement. These in-feed ads can be up to 60 seconds (though most are shorter to match TikTok’s style). Users can interact with them almost like any other TikTok (like, share, comment) which is great for advertisers because it doesn’t feel as forced as a banner ad. TikTok charges brands in various ways for these ads (some use a cost-per-impression model, others cost-per-click, etc., much like other online ad platforms).
• Brand Takeover Ads: If you open TikTok fresh and immediately see a full-screen ad before you see any user content – that’s a Brand Takeover. It literally “takes over” the app for a moment. These are usually a 3-5 second long visual (could be a short video or a static image with a link). For example, a big film studio might do a brand takeover on the day a new superhero movie releases, so that every user who opens TikTok that day sees their promo instantly. From TikTok’s perspective, this is prime real estate – and it’s priced accordingly. In fact, TikTok only allows one brand takeover per day per user, so it’s exclusive. I found out that a Brand Takeover ad can cost on the order of $50,000 (or more) for a single day of exposure. That buy guarantees the advertiser a certain number of impressions (views) – often around 5 million views. That’s a lot of cash for TikTok from one client in one day. But big brands are paying it because reaching millions of teens/young adults in a memorable way is huge for them.
• Top View Ads: This format is somewhat similar to Brand Takeovers and often confused with them. The difference is a Top View ad shows up at the top of your feed after a few seconds of opening the app, rather than immediately. It’s like the first in-feed post but given priority positioning. These can be longer (up to 60 seconds) because they appear as a video in your feed, not just a quick splash screen. Essentially, if the brand doesn’t snag the immediate takeover slot, they might go for Top View which you see after you scroll a bit. From a user perspective, once I’ve been on TikTok for a moment, the first thing I see might be an ad labeled “Ad” before I get into the regular content. These also command high rates, though specific pricing isn’t usually public – but they’re premium because of the guaranteed visibility.
• Branded Hashtag Challenges (HTC): This is one of TikTok’s clever signature ad products. You might have seen these: a company sponsors a hashtag challenge, which encourages users to create videos doing something creative with a product or a theme. When a challenge is sponsored, TikTok heavily promotes that hashtag on the Discover page and elsewhere. For example, a famous early one was the #GuacDance challenge by Chipotle – a campaign that got tons of users dancing about avocados and led to record guacamole sales on National Avocado Day. Brands pay TikTok to kick off these challenges and get special placement (so everyone sees the challenge banner and is tempted to click and participate). It’s interactive advertising at its finest – users willingly make content that in effect promotes the brand. The cost for a branded hashtag challenge is quite steep: on the order of hundreds of thousands of dollars. One report indicated around $150,000 just to create a branded challenge, plus another $100,000 for prominent promotion (ensuring it appears on the discovery page, etc.). It’s pricey, but when it works, a challenge can go massively viral and produce thousands of fan-made ad videos for the brand. TikTok benefits by collecting that sponsorship fee up front.
• Branded Effects/Filters: TikTok lets brands create custom augmented reality filters, stickers, and effects – the fun stuff users add to videos. If you’ve ever seen a TikTok filter that puts a product in frame or has a brand’s mascot dancing around you, that’s a branded effect. Users can apply it to their own videos for a set period (usually these branded effects are available for about 10 days). Brands pay to have TikTok develop and feature these filters. Again, it integrates the brand into user-generated content in a playful way. A makeup company might sponsor a filter that applies virtual lipstick and lashes, or a fast-food chain might have a dancing burger sticker. From what I found, brands might pay around $80,000-$100,000 for branded effects campaigns (some sources said ~$45k for 30 days, others cite different packages), which includes the development of the effect and making it available to users. TikTok’s design team might work with the brand on these. It’s another creative monetization: essentially selling a time-limited feature in the app that doubles as advertising.
  

The key point is brands are paying TikTok for visibility, whether it’s a subtle in-feed native ad or a splashy takeover. And TikTok’s revenue from this is huge. In 2024, it’s estimated TikTok brought in roughly $18 billion or more from advertising alone (globally). The growth year-over-year has been incredible – it was only a few billion a couple of years ago and has since multiplied.

One more thing I want to mention is TikTok has begun sharing some ad revenue with creators through a program called TikTok Pulse. This is somewhat akin to YouTube’s partner program. Essentially, TikTok selects the top-performing content (the top 4% of videos in terms of engagement) and if those creators have over 100k followers, they can get a cut of ad revenue when ads are shown alongside their content. It’s a 50/50 revenue split for those ads. This was introduced in 2022 to incentivize big creators to stay on TikTok (since previously, unlike YouTube, TikTok didn’t share ad money). Now, why do I bring this up in an article about how TikTok makes money? Because it shows TikTok is willing to sacrifice a bit of its ad revenue to keep the ecosystem healthy. In the long run, helping creators earn means they’ll produce more great content, which attracts more users, which means more ad impressions for TikTok to sell. So it’s a strategic give-and-take. Even with sharing, ads remain extremely lucrative for TikTok.

To wrap up the ads section: advertising is TikTok’s main monetization engine. Every time you see “Sponsored” on a TikTok post or a flashy hashtag challenge, TikTok is getting paid. With millions of businesses wanting a piece of TikTok’s cultural influence, this revenue stream isn’t slowing down – in fact, it’s projected to keep growing, possibly hitting over $30 billion annually in the next couple of years.

2. In-App Purchases: The Virtual Gifts and Coins Economy

Beyond advertising, TikTok has created an entire virtual economy inside the app. If you’ve ever watched a TikTok Live (those live-streams creators do) and seen animations of flowers, hearts, or other gifts flying across the screen – those aren’t just cute interactions; they represent real money being spent within TikTok. I was intrigued when I first saw “Rose” or “Legendary” gifts being sent to a live streamer and the streamer getting excited, thanking the user by name. It turns out these are part of TikTok’s virtual gifting system, which is a significant way TikTok makes money apart from ads.

Here’s how it works: TikTok has its own currency called “Coins.” Users can buy coins with real money directly in the app. For example, I might spend $0.99 to get 100 coins, or $4.99 for 500 coins; the more you buy in bulk, the better the exchange rate usually (up to packs of, say, 10,000 coins for around $100). These prices can vary by region, but that’s the ballpark. Now, what do you do with coins? You use them to purchase virtual gifts to send to creators. TikTok offers a catalog of these gifts – ranging from a simple icon (like a rose) that might cost just a few coins, to extravagant animated gifts (like a virtual yacht or a fireworks show) that cost thousands of coins. When you’re watching someone’s live video, you can tap to send these gifts, and an animation pops up on the screen for everyone to see, and the creator usually sees your username attached to it.

From a user perspective, it’s a fun way to support your favorite creators and get recognized by them (they often shout-out or thank gift senders). It feels a bit like tipping, but with a gamified twist. From TikTok’s perspective, this is in-app purchase revenue. Users are effectively buying digital goods (gifts) on the platform.

Now, the important part: when you send a gift, the creator doesn’t get 100% of what you spent – TikTok keeps a significant cut. TikTok converts gifts into a kind of creator point system known as “Diamonds” on the creator’s side. After a live, a creator can see that they earned, say, 1,000 Diamonds from various gifts. Those Diamonds can be converted into real money that the creator can withdraw, but TikTok retains around 50% of the value. For instance, roughly speaking, if a viewer spends the equivalent of $10 on coins and sends gifts to a creator, the creator might only be able to cash out about $5. The other $5 goes to TikTok. (The exact split might vary or have some nuances, but 50/50 is a commonly cited figure.)

This may sound steep, but it’s actually pretty similar to other live streaming platforms – many take a cut of gift or tip revenue (YouTube and Twitch also take sizable percentages of super chats or bits). And users are willingly spending for the interaction and to support creators. In fact, TikTok reportedly became one of the highest grossing apps globally thanks to these in-app purchases, surpassing $10 billion in user spending faster than any app before it (this includes Douyin in China as well).

Let me share a personal observation: I’ve watched a popular TikToker’s live stream where within minutes they received dozens of gifts – from virtual roses to something called a “Drama Queen” gift (which is a pricey one). Each of those represents some cents or dollars spent by a fan. There were over 10,000 viewers in that live; even if a small fraction send gifts, it quickly adds up. TikTok processes millions of these micro-transactions across the world every day. It’s essentially running a 24/7 global virtual goods store embedded in a social network.

But it’s not just live streams. TikTok also introduced the ability to send gifts on regular videos (for some creators) and a feature called TikTok “Tips” where you can directly tip a creator. In some markets, they even tested features where users can pay to promote their own videos (called TikTok Promote, which uses coins to boost a video’s reach – basically an advertising lite for regular users or small businesses).

All these fall under in-app purchases: users paying TikTok within the app for some benefit or virtual item. TikTok doesn’t need to manufacture anything physical or provide a tangible service – it’s all digital, which is extremely high-margin. The cost to TikTok is mainly payment processing and maintaining the system, which is minimal compared to the revenue share they keep.

To illustrate the scale, in one year (2020 to 2021), TikTok saw over $100 million in user spending just in a single month (some figures from Sensor Tower showed monthly user spending hitting that mark, largely driven by gifts). It was the top app in Apple’s App Store for consumer spending at various times. That’s huge for a social media app (most social apps rely just on ads, not direct user spend). This means TikTok effectively monetized a portion of its user base in a way social rivals hadn’t fully done at that time.

I initially thought “who actually buys these funny virtual gifts?” – but clearly a lot of people do. It’s a way to stand out in a live audience and to support content creators. And in markets like China (Douyin) this behavior was already mainstream; TikTok basically adopted it for the rest of the world. I now occasionally buy a few coins to send a gift if a live stream is really entertaining – it feels good to support the person making you laugh or giving you useful info, and the little celebratory animations are enjoyable. TikTok has effectively gamified tipping.

In summary, virtual gifting and in-app purchases are TikTok’s second big revenue stream. The company sells virtual coins for cash, those coins are spent on gifts or boosts, and TikTok keeps roughly half of that spend as revenue. This model has pumped billions of dollars into TikTok’s coffers – it’s reported that in 2022, TikTok’s in-app purchase revenue (outside of ads) was already in the billions globally and growing fast. And importantly, it’s a win-win-win: fans get to interact and show support, creators get income, and TikTok profits while promoting more engagement on the platform.

3. TikTok as a Shopping Platform: E-Commerce and Affiliate Commissions

The next major way TikTok makes money is by moving into the world of e-commerce. If you’ve noticed more shopping features on TikTok in recent years, that’s no coincidence – TikTok is trying to become a shopping destination, not just a video app. This is often referred to as social commerce. For TikTok, it means enabling transactions (product sales) directly within the app and taking a cut of each sale.

I remember when I first saw a little shopping bag icon on a TikTok video – it was on a fashion influencer’s post, and tapping it showed the details of a sweater she was wearing with an option to buy it. That’s TikTok’s commerce integration at work. Now there’s also the TikTok Shop feature where you can browse and buy products, and even a separate tab or section for some users/stores. Additionally, TikTok has live shopping events where during a live stream, products are pinned on screen and viewers can purchase in real-time as the host demonstrates them. This is reminiscent of what’s already huge in China (Douyin and other apps have very robust live commerce); TikTok is bringing that concept globally.

So how does TikTok make money from shopping? Commissions and fees. TikTok essentially acts like a marketplace (imagine a mix of Amazon and QVC, but inside a social media app). Sellers – whether they are independent small businesses or big brands – can list products on TikTok Shop or sell via live streams. When a sale is made, TikTok handles the payment and logistics info and takes a percentage of the transaction as a commission. From what I’ve gathered, TikTok’s commission fee on sales is somewhere in the range of 5% (it varies by country and product category; some sources said it can range ~2% to 8%). On top of that, there might be small transaction fees (for example, a roughly 3-4% payment processing fee).

This might not sound like a lot compared to 50% cuts on gifts, but think of it in terms of volume: if TikTok can facilitate billions in product sales (which they are aiming for – they projected tens of billions in GMV), even a 5% slice is significant. And because it’s an open marketplace model, the idea is to scale the number of transactions massively.

TikTok’s approach to building this commerce stream has a few parts:

• TikTok Shop and Storefronts: Businesses can set up their product catalogs on TikTok. Creators can also have a shopping tab on their profiles if they are selling merchandise. TikTok essentially gives them a mini-store within the app. When users find products through videos or directly on these shop tabs, they can check out without leaving TikTok. I’ve tried it – it’s a fairly smooth experience: you click a product link on a video, a panel with the item’s photos, price, and a buy button comes up, and you can purchase right there with your saved payment info. TikTok processing the payment means they can apply their commission automatically.
• Livestream Shopping: TikTok has been heavily pushing live e-commerce events. For example, a makeup influencer might host a one-hour live demo using various cosmetics, and viewers can tap to buy the exact shade of lipstick being applied, right in the moment. There are often special discounts or limited-time offers in the live to drive urgency. TikTok basically is trying to replicate the success of QVC/HSN (home shopping networks) for the digital generation. In places like Southeast Asia, TikTok live shopping has really taken off, with dedicated hours where sellers show products. TikTok again takes a cut of each sale made through these lives. Plus, these events keep users engaged (which helps ad impressions too indirectly).
• Affiliate Programs: Not every creator has their own products to sell, but many can be influencers who drive sales for others. TikTok set up an affiliate program where sellers can partner with TikTok creators. For instance, a small business selling skincare might allow affiliates – creators – to feature their products in videos. If a creator showcases a product and links it via TikTok Shop in their video, that creator might earn a commission on any sales (kind of like Amazon affiliates but within TikTok). TikTok would facilitate this and likely take a cut as well (they might take a platform fee in addition to the seller’s commission to the creator). This is a way TikTok monetizes content-driven commerce: basically aligning incentives so that creators want to make product review or recommendation videos because they can earn, which in turn leads to more transactions that TikTok gets a share of. I’ve seen this in action – hashtags like #TikTokMadeMeBuyIt are full of product recommendations and many have direct links now.
  

One concrete data point: TikTok reportedly amassed over 500,000 sellers in the US on TikTok Shop by 2024 after launching it, and a survey noted that about 37% of Americans under 60 had bought something on TikTok Shop by then, with an average purchase around $50-60. Those numbers surprised me – it shows TikTok Shop caught on quickly. TikTok also projected huge gross merchandise volumes, aiming for tens of billions of dollars in sales through its platform in coming years. This indicates how serious they are about e-commerce as a revenue source.

From my perspective, this evolution is fascinating – it’s turning TikTok into a “super-app” of sorts, not just a media app but also a shopping and entertainment hub combined. I recall ByteDance (TikTok’s parent) saw how Douyin in China became a major shopping platform (people regularly buy stuff from live streams there), so they are bringing that model westward. Initially, there were hiccups (cultural differences in shopping habits, etc.), but it’s catching on.

For TikTok, the benefit of e-commerce is diversifying revenue. Ads are great, but subject to advertising market swings and sometimes regulatory issues (and some advertisers are cautious with TikTok due to geopolitical issues). In-app gifts are mostly driven by a subset of power-users. Commerce, however, taps into the huge world of online retail – and if TikTok can insert itself as a major player, the upside is enormous. Even a 5% commission on sales is big when you scale to millions of users shopping.

One more aspect: TikTok has partnerships with platforms like Shopify, Square, WooCommerce, etc., allowing businesses to sync their inventory to TikTok easily. This shows TikTok is integrating with the e-commerce ecosystem to pull more sellers in. More sellers = more products = more chances users find something to buy on TikTok instead of elsewhere.

Also, remember those viral product trends (like a particular cleaning product or gadget that suddenly everyone buys because of TikTok)? Historically, TikTok didn’t directly earn from those because people would go to Amazon or Walmart to purchase. TikTok likely thought: why not capture that within TikTok? If a couch-cleaning slime goes viral (#TikTokMadeMeBuyIt style), having TikTok Shop means users can buy it right from TikTok instead of leaving the app, and TikTok gets a cut. This is smart monetization of virality.

In summary, TikTok makes money through e-commerce by acting as a middleman in transactions that its content inspires. It takes a percentage of every product sold through the platform. This is still an emerging revenue stream in many countries, but it’s growing fast. In some regions, TikTok Shop is now contributing a notable chunk of revenue (one report said over 10% of TikTok’s revenue in 2023 came from e-commerce). The company’s goal is clearly to turn a good portion of its huge user base into shoppers without ever leaving the app. If you can watch a video of a cool gadget and one minute later purchase it in-app, TikTok has successfully closed the “inspiration to purchase” loop – and profited along the way.

4. Creator Monetization Programs: Keeping Creators Happy (While TikTok Still Benefits)

TikTok’s ecosystem relies on content creators. Without people making engaging videos, there’s nothing to watch or for TikTok to monetize. TikTok recognizes this, so it has developed programs to help creators earn money directly – some funded by TikTok itself, some by fans or brands – which indirectly also help TikTok make money by retaining talent and attracting more users. I’ll cover a couple of these programs here, specifically the Creator Fund / Creativity Program, and Live Subscriptions, and how they fit into the revenue picture.

• Creator Fund / Creativity Program: In 2020, TikTok launched the “Creator Fund,” a pool of money (initially $200 million, later promised to grow to $1+ billion) to pay popular creators based on their video views and engagement. As a creator, if you met certain criteria (followers, consistent viral hits), you could join and start earning a little money for your content. This isn’t exactly TikTok making money – it’s actually TikTok distributing some money – but it was important for keeping creators on the platform (so they don’t jump exclusively to YouTube or Instagram where monetization was more established). Over time, TikTok realized the Creator Fund had issues (people complained payouts were low as more creators joined), so in 2023 they introduced the Creativity Program (Beta) which is an improved version, presumably with higher rewards for original longer content.
  
  Now, you might ask, how does this relate to TikTok’s revenue? Directly, it doesn’t add to TikTok’s revenue – it’s a cost. But it’s an investment in retaining the content that drives all those ad impressions and in-app purchases. By paying creators from this fund (which effectively comes from TikTok’s ad revenue pot), TikTok ensures a steady supply of quality content, which keeps users hooked, which in turn keeps advertisers and other revenue flowing. From my view, it’s a cycle: TikTok makes money from ads and spends a slice of it to pay creators, so that those creators can make more content that brings in more ads. It’s similar to how YouTube shares ad revenue – an ecosystem approach.
  
  There’s also speculation that in the future TikTok might do a rev-share on ads more broadly (beyond TikTok Pulse’s top 4% creators). If they do, it’s again sharing revenue to make more revenue long-term (by attracting/keeping creators). So while not a revenue stream, creator payments are a revenue-related strategy.
• LIVE Subscriptions: I touched on this earlier, but let’s dig a bit more. Introduced around mid-2022, TikTok Live subscriptions allow viewers to subscribe to a specific creator’s live content for a monthly fee (tiers can vary, e.g., $5 a month, etc.). In return, subscribers might get perks like a special badge next to their name, exclusive subscriber-only chat, maybe exclusive content or just the satisfaction of supporting the creator.
  
  How TikTok makes money here is straightforward: they likely take a cut of the subscription fee. If it’s comparable to other platforms, TikTok might take 30% (just an estimate – Twitch, for example, takes up to 50% of subscriptions, YouTube around 30%). One source suggested TikTok’s cut is around 30-35%. The exact number isn’t officially published, but logically TikTok would keep a portion and give the rest to the creator. So if I subscribe to my favorite TikTok chef for $4.99/month, perhaps the chef gets ~$3 and TikTok keeps ~$2 (just an illustrative split). This way, TikTok creates a recurring revenue stream.
  
  The uptake of Live subs is still growing – not every user will subscribe to creators, it’s more for dedicated fans. But it’s a bit like Patreon built into TikTok. From my experience, I’ve seen some creators hype up their subscriber badges and thank subscribers, which encourages more people to subscribe if they want to stand out or show support. For TikTok, even if only a small percentage of users do this, it’s still additional revenue with practically no cost (digital badges and allowing a private chat don’t cost TikTok much to provide). So it’s smart monetization of fan communities.
• Gifts on regular videos and direct Tipping: Similar to live gifts, TikTok also enabled sending gifts on normal (non-live) videos for some creators, and a direct tip button on profiles for eligible creators. These aren’t as widely used as live gifting, but they represent another channel where users can spend money that flows through TikTok (with TikTok taking a cut). If I really loved someone’s comedy skit, I could send, say, a virtual heart or disco ball gift on it, which might cost me some coins. The creator gets Diamonds from it, TikTok again keeps ~50%. It’s just an extension of the gift economy. Direct tipping (like “Buy me a coffee” style) might allow a user to give $10 directly to a creator – it’s not clear if TikTok takes any percentage of direct tips yet (some rumor that currently they pass most of it to the creator to encourage adoption, but they could eventually treat it like any other transaction with a platform fee).
• Brand Partnerships via TikTok Creator Marketplace: Another facet, though less directly “TikTok charging money,” is the TikTok Creator Marketplace which connects brands with creators for sponsorships and campaigns. TikTok facilitates these deals. I suspect TikTok could take a finder’s fee or commission for brokering these influencer marketing deals through their official marketplace. Even if they don’t, it encourages more advertising spend on TikTok (because brands find creators to do ads for them on TikTok). I’ve been approached via TikTok’s marketplace (as a small creator) for a campaign, and the system is all integrated – brands allocate budget, creators post content, and TikTok likely tracks it. It wouldn’t surprise me if TikTok eventually monetizes this service, if not already.
  

All these creator-focused features serve dual purposes: they enable creators to earn money (which keeps them on TikTok creating content), and many of them also directly generate revenue for TikTok (through transaction cuts or encouraging more ads). It’s a symbiotic relationship. From a user’s viewpoint, these things make TikTok feel more rewarding – as a creator, you can actually make a living or at least some income on TikTok now, and as a fan you can interact and support in meaningful ways. From TikTok’s viewpoint, it’s monetization happening in every corner: ads in the feed, users buying coins to send gifts, subscribers paying monthly, brands paying creators (and sometimes TikTok), etc. The platform itself is involved in every transaction to some extent.

5. Music and Media Partnerships: An Emerging Revenue Angle

One really interesting and unique way TikTok makes (or saves) money is through its influence on music. We’ve all seen how a song can go viral on TikTok and then dominate Spotify charts or radio – TikTok has become a hit-maker in the music industry. Recognizing this, TikTok launched a service called SoundOn which is a music distribution and marketing platform for artists.

Now, why would TikTok do that? One reason is to reduce the cost of licensing music. TikTok used to (and still does) pay record labels for the right to have popular songs available for users to put in their videos. That’s an expense. But if TikTok can promote independent music that it helps distribute, it might not need to pay big labels as much, and might even earn from music rights itself.

With SoundOn, TikTok basically said to musicians: “Upload your songs here, we’ll put them on TikTok (and even on streaming services like Spotify, Apple Music, etc.), you keep all the royalties for the first year or two, then after that TikTok takes a small cut (like 10%).” This encourages emerging artists to use TikTok as a launchpad for their music. If an unknown artist’s track goes viral as a TikTok sound and then people stream it a million times on Spotify, after that initial period, TikTok could start taking a percentage of the royalties from those streams (since TikTok/SoundOn acted as the distributor or label service). Essentially, TikTok is positioning itself like a music label or distributor who gets a share of music revenue.

While this isn’t yet a main revenue source, it’s a strategic move. Imagine a few years down the line, several of the trending songs are distributed via TikTok’s platform and it’s taking 10% of each song’s earnings across various channels. That could be sizable, and it also means TikTok doesn’t have to pay others for those songs – they own a piece of them.

There are also instances where record labels pay TikTok (or pay popular TikTok influencers) to promote a new single. For example, a label might pay to seed a dance challenge with a snippet of a song they want to turn into the next viral hit. Some of that might be off-platform deals or through TikTok’s ad products, but it underscores that TikTok is monetizing its role in the music industry.

Beyond music, TikTok also partners in events and media. TikTok sponsors big events (I’ve seen TikTok sponsoring award shows or sports events as a promotional move – that’s more marketing spend than revenue, though). But they also collaborate with film studios, brands, and other entertainment companies for special campaigns (like TikTok might have exclusive behind-the-scenes content for a new movie, etc., which could be part of an advertising package those companies pay for).

One can even consider the possibility of TikTok licensing its technology – ByteDance reportedly licensed TikTok’s algorithm to other companies. If TikTok’s tech (like its recommendation engine) is provided to say, a music app or news app in another country for a fee, that’s another revenue stream, though that might be handled by ByteDance at a corporate level rather than TikTok specifically.

6. Other Future Monetization Paths

TikTok’s current main revenue streams – ads, in-app purchases, e-commerce, and to a lesser extent subscriptions/partnerships – are already making it a fortune. But TikTok is not stopping there. From what I’ve observed, TikTok is exploring becoming a “super-app”, akin to China’s WeChat or Douyin, where multiple services are bundled into one app for convenience (and of course, monetization).

For instance, TikTok has tested or introduced features like: TikTok Resumes (a job finding feature), TikTok Stories (like Snapchat/IG stories), and even minigames within TikTok. Any of these could later open up new revenue channels. Games could be monetized via in-game purchases or ads, for example. TikTok might also integrate payments more deeply (perhaps peer-to-peer payments or fintech services, which could lead to transaction fees or financial services revenue down the line).

There’s also talk about TikTok expanding into TikTok TV apps (TikTok is now on some smart TVs). While that’s mostly to increase user reach, it could eventually allow TikTok to get TV ad budgets or have premium content.

One thing on the horizon is the whole regulatory environment – e.g., in the U.S., there have been discussions about banning TikTok or forcing a sale. If TikTok had to spin off from ByteDance, it might change some dynamics of revenue (for instance, currently a lot of TikTok’s revenue is re-invested or combined with ByteDance’s overall finances, especially in China). But for the sake of this discussion, I’m focusing on how TikTok generates revenue, which likely wouldn’t change – they’d still do ads, commerce, etc., no matter who owns them.

Conclusion: A Multi-Stream Money Machine

Looking at everything, it’s clear to me now that TikTok is monetizing on multiple fronts. When I open TikTok these days, I’m aware that nearly every interaction has a business model behind it:

• I see an ad – TikTok just earned a bit of money.
  
• I send a gift to a funny live streamer – TikTok takes a cut of that purchase.
  
• I buy a cool gadget I saw on a TikTok video – TikTok gets a commission from that sale.
  
• I subscribe to a creator’s exclusive content – TikTok likely shares in that subscription fee.
  
• A new song blows up on my feed – TikTok might eventually earn royalties if that artist used TikTok’s distribution.
  

What’s impressive is how seamlessly these monetization methods are woven into the user experience. TikTok doesn’t feel like a shopping app or a place full of ads overtly, because the ads are often entertaining and the shopping is integrated into content. It still feels like a fun video app first. That’s crucial – if users felt it was just about extracting money, they’d leave. Instead, TikTok makes spending money (whether it’s a brand’s money or a user’s money) part of the fun or utility.

Financially, TikTok’s strategy is paying off big time. In 2025, TikTok’s annual revenue is on track to rival some older social networks, and it reached that level in a fraction of the time. We’re talking tens of billions of dollars per year. It has a diversified model: even if ad budgets temporarily cut back (say, due to economic downturn or an ad boycott), TikTok still has users buying gifts and products. If perhaps user spending on virtual gifts slows, maybe ad revenue or new commerce initiatives fill the gap. This multi-pronged approach gives TikTok flexibility and resilience.

Researching this has made me a more conscious TikTok user. I now notice when something is an ad or when TikTok is nudging me to purchase coins with a sale (sometimes they offer bonus coins on bigger packages – classic upselling!). I don’t mind it, though – after all, the app provides a ton of entertainment for free, so I understand they need to monetize. In many ways, TikTok has followed in the footsteps of predecessors (ads like Facebook/Instagram, in-app purchases like gaming apps, e-commerce like Instagram/Pinterest attempted) but executed faster and in an arguably more engaging way.

To sum it all up, TikTok makes money by monetizing attention and trends. It sells our attention to advertisers in creative formats. It monetizes trends via commerce and keeps users spending within the app via coins and gifts. And it continuously finds new avenues (music, subscriptions) to expand that monetization. All while we’re dancing, laughing, and learning on our For You Pages, mostly unaware of the sophisticated business engine running behind the scenes.

TikTok’s business model shows that a social media platform can turn viral content into real dollars in more ways than one. As an avid TikTok user and an observer of tech business, I find it fascinating (and a bit concerning for my wallet) how effective TikTok has become at parting both advertisers and consumers from their money – a few seconds of our time at a time. And given their trajectory, it’s likely TikTok will come up with even more innovative money making methods in the future. One thing’s for sure: the next time I see a hashtag challenge or send a creator a gift, I’ll know exactly how TikTok is cashing in on that moment.