TikTok, the renowned short video application, has reached a remarkable milestone, becoming the first non-video game entertainment app to exceed US$10 billion in global user spending. This achievement highlights the app's widespread appeal and the robust growth of its Beijing-based parent company, ByteDance, in the face of various political challenges.
Standing out amongst giants
TikTok's journey to this financial milestone places it in a rarefied group of apps that have achieved such a level of gross revenue, as reported by app analytics firm data.ai. Previously, this elite group was dominated by video games such as Candy Crush, Monster Strike, and Tencent Holdings' Honour of Kings. According to Sensor Tower data, PUBG Mobile is also speculated to have crossed this threshold.
The revenue figures for TikTok are compiled from both Apple's iOS App Store and Google Play. Other top-earning non-game apps include Tinder, YouTube, Disney+, and Tencent Video, which mostly derive their income from subscription services. However, TikTok distinguishes itself with a different revenue model, as it does not offer a subscription service.
TikTok's revenue drivers
The primary source of TikTok's income is its virtual currency, TikTok Coins. Users purchase these coins to send as gifts to content creators during their live streams. In addition to this, advertising is a significant contributor to TikTok's revenue, and the app is making strides in e-commerce. This diversification could boost TikTok's revenue to an estimated US$15 billion in the coming year, as predicted by data.ai.
E-commerce challenges and prospects
TikTok recently encountered a hurdle in Southeast Asia when Indonesia banned social media-based online shopping. This move was aimed at protecting local small and medium-sized businesses. Consequently, TikTok had to suspend its TikTok Shop in Indonesia. However, the company is poised to resume online shopping in the country, following a US$1.5 billion investment in the e-commerce division of PT GoTo Gojek Tokopedia, thereby becoming the largest shareholder in the Indonesian company.
ByteDance's global impact
ByteDance, the parent company of TikTok, continues to hold the title of the world's most valuable private company, bolstered by the success of TikTok and its Chinese version, Douyin. The company's revenue witnessed a 40% increase year-on-year, reaching US$29 billion in the second quarter, closely following Facebook's Meta Platforms. Despite this growth, ByteDance's valuation has decreased by 10% to US$268 billion, and the path to its eagerly awaited initial public offering remains uncertain amid increased regulatory scrutiny in the US.
Strategic streamlining for growth
In response to challenges in the domestic market, ByteDance has recently downsized its involvement in the video gaming sector. The company's main gaming unit, Nuverse, saw the closure of most of its projects that were yet to be online, leading to significant staff reductions. This strategic decision aligns with ByteDance's focus on long-term strategic growth areas.
