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TikTok Has a Pot Problem

by Michael O'Mara, on Apr 12, 2022 9:15:00 AM

We’re talking money here, folks. TikTok doesn’t pay its creators fairly. This is a choice in stark contrast with competitors like YouTube, who (in most cases) pay their creators fairly.

This blog was inspired by Hank Green’s video about TikTok. You can watch it here

Right now, TikTok is a bathtub leaking all over the floor. And they’re just letting it happen. Let’s learn why.

Content Creators and Revenue Sharing

In general, content creators struggle to earn money from organic content. Most platforms simply don’t offer the tools necessary to earn active income. It’s a big reason why so many mistake virility with sustainable engagement. Some believe that once you go viral, you’ve succeeded. For personalities and outlets that cracked the code, that is true. For everyone else, not so much. 

Instead of relying on word of mouth or the algorithm, YouTube saw things differently. Over 15 years ago, Youtube emerged as the dominant video hosting platform, due to its accessibility and unique social structure. Content creators developed and nurtured meaningful communities through the content they created and the comments left by viewers. It’s weird to think about online forums today. Most forums have scaled back considerably as social giants like Reddit, YouTube, and Discord meet customers where content and community are based, instead of separating the two. Before, you had to talk in one place and watch or consume content in another. Thanks to sites like YouTube, everything you need is right there.

YouTube’s competitors noticed YouTube’s value and the strength of its community. That’s when they began poaching content creators left and right, offering robust revenue sharing opportunities that YouTube couldn’t. 

In response, YouTube began offering their partner program, which is now the gold standard for revenue sharing. The most popular platform decided that half of the revenue generated from ad sales should go to content creators. This was an unprecedented decision and it remains the goal that all revenue-sharing social platforms strive to meet.

YouTube’s partner program became the economic engine that propelled YouTube to global relevance. It’s also why so many social platforms struggle with monetization. No matter the size of the pie, half is a big chunk to payout. Some companies struggle to understand the value creators bring and instead focus on profit. More on that later.

Advertising Innovation

On YouTube, ads run on content. That’s a big reason why the “Adpocalypse” happened in 2017. Advertisers wanted more control over what content their brands and products were featured on. Without that control, ads—and ad revenue—dropped like flies across the platform. YouTube had to react fast or suffer a mass exodus of content creators and revenue. In response, YouTube introduced multiple changes to give advertisers more control over how their advert is placed, and content creators had to adhere to a different set of content guidelines or suffer video demonetization.  

But the Adpocalypse didn't happen on Facebook, Twitter, or TikTok. Why not? What’s different? 

Because on other platforms, most advertising runs between content, not on it. That’s how YouTube can offer so much revenue to its creators, and a big reason why social media competitors don’t.

One Big Pot

TikTok has the same problem YouTube faced all those years ago: talented communities are leaving the platform for competing platforms that offer more money.

Enter the creator fund. Created and managed by TikTok, the creator fund is a large pool of money split between qualifying content creators. This is the only way to earn income directly from TikTok. 

TikTok divides the pool of money in the creator fund by tracking the metrics that matter most, like watch time. Remember: on TikTok, ads run between content, not on content. This is why the TikTok creator fund is functionally different from the YouTube partner program. 

For example, if the creator fund is $365,000 per year, then $1,000 per day is split amongst creators. And if 100% of all views are earned by one creator, then 100% of the money in the creator fund goes to that creator. 

Do you notice the problem?

One Big Stink

The well's been poisoned. While YouTube shares a percentage of company revenue with creators, TikTok shares a static pool of money that does not change. 

In 2020, TikTok’s U.S. creator fund was an estimated $200 million USD. YouTube’s partner program? $10 billion. 

There are a lot of users on TikTok. And with the number of qualifying creators growing by the day, most earned about 2.5 cents per 1,000 views in 2021. In 2020, those same qualifying creators earned just over five cents per 1000 views.

When TikTok makes more, creators make less.

What is going on? TikTok earns more money than ever! That should mean that its creators, those responsible for engagement and content on the platform, earn more money than ever too.

Make the Pot Bigger

TikTok’s revenue grows, the number of qualifying creators grows, yet the creator fund stays the same. As YouTube’s revenue grows, the percentage of revenue paid to creators stays the same but pays out a higher amount of money. When YouTube grows, so do its creators. 

Everyone should benefit when a platform grows.

Since the creator fund is static, and not a percentage, the more money TikTok makes, the less creators make. As more creators qualify for the creator fund, the less those creators will earn.

Even though TikTok is earning more money, the pot is the same size. More views, same number of dollars in creator fund, so you earn less money.

TikTok has full control over expanding the creator fund. Its creators do not have a seat at their table. If TikTok changed how they paid their creators, that would obviously affect their bottom line.

But here’s a question: what happens when you have a platform that does not pay its creators fairly? Well, Vine happens. Vine didn’t have an effective revenue model from the start and struggled to sell advertisements on six-second clips. Some would say Vine was a dead app downloading. Heck, it’s still on my phone today. It doesn’t open and my phone yells at me every time I try, but I like seeing that green V.

TikTok is Stealing From Creators

YouTube is YouTube because it provides content creators a place to grow and earn. Also Google bought it. Remember, YouTube shared $10 billion with creators in 2020. TikTok shared just $200 million. How much did TikTok’s parent company, ByteDance, earn that year? Over  $35 billion. To be fair, not all of that revenue was generated by TikTok. But it could in the near future. TikTok's growing at an unprecedented rate. Who knows, maybe it’s the next YouTube. With the right changes, it just might be.

The money is there. There just needs to be the will to give to the creators who earned it.

When you pay creators, you thrive. When you don't, you fail. Creators do not have a platform without TikTok but TikTok does not have a platform without creators.

Can This Problem Be Fixed?

Sure can. All it takes is TikTok accepting that maximizing profits isn’t the answer to a sustainable content platform. The logical choice here is to change how advertising works on the platform and adapt YouTube’s partner program. Share that wealth and grow that pot!

Here’s to hoping TikTok makes the right call. TikTok has much more value than Vine, as well as most of its competitors. It’s growing rapidly, which has juggernauts like Facebook and Twitter scrambling to a competitive edge, like hiring a consulting firm to develop and implement spear campaigns. I want TikTok to succeed. Because when TikTok succeeds, its creators succeed. These are kids, adults, and community members expressing themselves. Some of them have a business or personal brand they want to grow but have to look elsewhere to do it. It’s time TikTok understands this and provides the platform its creators need to develop and sustain a dedicated community. That’s how TikTok survives and thrives.

Topics:BrandingCustomer Experience