TikTok could be forced to update its creator funding model due to several high profile users raising questions about their monetization options, and highlighting some key flaws in the platform’s current process.
As outlined by YouTube and now TikTok star Hank Green, TikTok’s current Creator Fund, through which it’s allocated $200 million to pay creators of the top-performing clips (available to those with over 100k total views per month on their videos), is inherently unfair to top creators who regularly get payouts because the payout amount is static, while the amount of users and creators continues to rise.
As explained by Green:
“If the fund were a percentage of revenue, rather than a static pool, that would be very bad for TikTok’s bottom line. Compared to what it is right now, they would have less profit, [but] it would be very good for creators […] as more creators join the fund, as the app continues to succeed, creators make less money per view.”
In essence, Green says that with more creators signing up to the Creator Fund, that means TikTok needs to pay out a larger number of users. And because the Creator Fund doesn’t rise relative to the amount of creators or users in the app, the payout amounts inevitably decline, as the app succeeds.
Which is in stark contrast to YouTube, where creators are paid relative to the ad views that their actual content generates. TikTok can’t do that, because it can’t insert mid or pre-roll ads into short video clips, so it has to find alternate means of monetization in order to provide equitable and attractive revenue share for creators.
Which has always been the challenge with short-form video content. Vine, the precursor to TikTok, eventually collapsed for the exact same reason.
Back in 2015, when Vine was on the rise, a group of the app’s top stars, including Logan Paul and King Bach, met with executives from parent company Twitter to call for greater revenue share for their efforts.
As per Business Insider:
“The stars had a proposal: If Vine would pay all 18 of them $1.2 million each, roll out several product changes and open up a more direct line of communication, everyone in the room would agree to produce 12 pieces of monthly original content for the app, or three vines per week. If Vine agreed, they could theoretically generate billions of views and boost engagement on a starving app. If they said no, all the top stars on the platform would walk.”
Twitter didn’t have an effective monetization model for Vine’s short clips, and while it did try to add longer videos with a view to inserting ads, and it did try to push in promos to advance the app’s model, it all ended up being too little, too late. The top creators did, in fact, end up leaving as a result of their failed negotiations, and their audiences followed them to wherever they went next. When Vine was eventually shuttered in late 2016, its usage was way down on peak levels.
TikTok knows this, and it’s been trying to add in more monetization options to counter the eventual push from creators for a bigger cut of the revenue pie.
As noted by Green, TikTok’s parent company ByteDance brought in $34.3 billion in revenue in 2020, and while not all of that came from TikTok, an increasingly larger share is being driven by TikTok’s growth.
In order to provide more monetization pathways for its top stars, TikTok’s added creator tipping, along with its Creator Fund, while it’s also working on creator subscriptions and facilitating brand partnerships via its Creator Marketplace.
But the big-ticket item for TikTok is integrated commerce, enabling creators to directly monetize their presence through revenue share partnerships with brands.
This is already a key element on the Chinese version of the app ‘Douyin’, which now makes the majority of its revenue from commerce activity. TikTok’s working on several ways to integrate the same, and that, eventually, could provide a more lucrative pathway for TikTok and creators alike.
But it’s more work on the part of creators, it’s more effort than on YouTube, where they can earn money simply by signing up to the YouTube Partner Program and taking payouts from ads – which YouTube’s going to insert into their clips anyway.
Which makes this latest concern all the more pressing, and if the top TikTok stars do indeed end up banding together to seek a better deal, as proposed by Green, it could put TikTok and ByteDance in a difficult situation.
And it seems that, already, some of the app’s most popular creators are considering their next move:
Would TikTok consider increasing creator payouts in line with its rising revenue? And if it did, would that be sustainable, and acceptable by the company’s shareholders?
As a quick comparison, ByteDance’s revenue increased from $17 billion in 2019 to $34 billion in 2020. If the Creator Fund rose in line with this increase, it would have been doubled straight away, though as Green also notes, relative to the amount that TikTok generates from ads, it should actually have increased 6x over the current amount.
That would be a significant chunk out of ByteDance’s profits, and if it remained that way ongoing, with the fund rising relative to usage and ad performance, that would be a big dent for the company to have to eat.
But creators are the ones who bring the audience, and if TikTok won’t pay them, much like Vine before it, somebody else will.
If the issue escalates, that could become an existential concern. It’s nowhere near a critical stage as yet, but it’ll be interesting to see if and how TikTok responds to the new push, and what that means for the platform’s ongoing growth trajectory.
For its part, TikTok has issued a press statement on the push:
“We continue to listen to and seek feedback from our creator community and evolve our features to improve the experience for those in the program.”
Given ByteDance was very keen to highlight the $19 billion in profit it made in 2020, it’ll be interesting to see just how flexible it might be in catering to these new concerns, and likely demands from the app’s top stars.
Meta Announces New Privacy-Focused Ad Targeting Solutions, Improvements in Automated Targeting
With Apple’s ATT data privacy update changing the game for app-based advertisers, Meta has been one of the biggest losers, with the company projecting up to $10 billion in revenue loss this year alone based on the amount of users opting out of data tracking in its apps.
Of course, part of that is due to Meta’s poor reputation on data privacy and protection, with the high-profile Cambridge Analytica case, in particular, shining a light on the platform’s past lax privacy measures, which have led to misuse.
But Meta has evolved its processes, and it’s now looking to ensure that it’s providing more data-protective solutions that will help advertisers maximize their campaigns, while also aligning with broader industry shifts.
On this front, Meta has today outlined a range of new ad measures, beginning with a new element within its Advantage ad suite, which incorporates Meta’s various ad automation and AI-based tools.
As explained by Meta:
“We’re rolling out Advantage custom audience, a new targeting automation product that leverages an advertiser’s Custom Audience to reach new and existing customers. This is similar to Lookalike audiences that find people who are likely to be interested in your business, except that Advantage custom audience goes beyond the 1%, 5% or 10% similarity ranges you are used to, while also prioritizing delivery of ads to people in your Custom Audience.”
Expanding the matching depth for Custom Audiences could be big, with the process guided by Meta’s evolving machine learning tools to help maximize campaign performance with less manual effort.
Many performance advertisers have noted the improvement in Meta’s automated targeting tools, and with broader matching options to work with, it could be a good way to improve reach and response. Likely worthy of an experiment at least.
Meta’s also updating its Click to Messenger ads, with a new optimization that will target users more likely to make a purchase via a message thread.
“Typically, we show Click to Messenger ads to people who are most likely to initiate a conversation with a business on WhatsApp, Messenger or Instagram Direct. With this update, we’re introducing the ability for advertisers to run Click to Messenger ads which will reach the people who are most likely to make a purchase in a thread.”
That adds another dimension to Click to Messenger targeting, which could help to optimize reach to people that are more likely to buy in-stream. Meta’s also adding a new ad format for lead generation which will funnel customers to either Messenger or a form, depending on which one the customer is most likely to interact with.
Meta’s also made improvements to its privacy solutions, including its Private Lift Measurement product. While at the same time, it’s also been working with various academics to study the impacts of the privacy shift.
“For example, we collaborated with academics from Northwestern University and the University of Chicago to better understand the value of offsite data for ads personalization, in part to help guide the development of solutions that leverage privacy-enhancing technologies. The research reveals that advertisers’ costs increased by 37% when removing offsite data from the ad delivery system with outsized impact on smaller advertisers in CPG, retail, and e-commerce, who are often more reliant on digital performance advertising than larger, more established companies.”
So while Meta’s working to build more privacy-protective processes, it’s also looking to highlight the impacts that these changes will have on the broader industry, as it pushes the big platforms to factor such into their future changes and shifts.
Finally, Meta’s also looking to help advertisers to prepare for the next stage of digital connection, partnering with Coursera on a new, free course called “What is the metaverse?”
“This course explains what the metaverse is, what we know about it today and what it means for the future of work, play and life. We’re working with partners like Coursera to give people, businesses, creators and developers the tools needed to succeed as the metaverse takes shape.”
Though you will be getting Meta’s interpretation of what ‘metaverse’ means, which may not be exactly how it plays out. Meta’s increasingly keen to impress its vision of the metaverse future onto anyone who’ll listen, but it’s also important to note that the metaverse does not exist, and will not exist in a fully-functional, interoperable way for some time yet.
Still, it may be worth tuning in, and getting some insight into Meta’s future vision, and how it relates to advertising and brand reach.
You can pre-enroll to the new ‘What is the Metaverse’?’ course here.
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