Revenue from livestreaming is growing at nearly double the rate of TikTok's ad business.
Log onto TikTok, and among the endless scroll of quick clips, you’ll find another, omnipresent temptation: the invitation to watch creators livestream.
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A separate section on the app, constantly signposted throughout the For You Page by immersive prompts as well as a separate button at the top left of the home screen, TikTok’s livestreaming covers every interest users could possibly have—from people purporting to be based in Syrian refugee camps to those pointing the smartphone camera at a hurricane as it bears down on their home to videos of rock tumblers, all intended to keep you gawking for hours.
The app isn’t subtle about channeling users to visit its livestreaming section, and for good reason: It’s the next big driver of growth for the company.
A recent filing with UK financial authorities by TikTok Information Technologies UK, the London-based company that oversees the app’s operations in Europe, South and Central America, and Africa, highlights just how important livestreaming is becoming to TikTok’s revenue. Media coverage has focused on TikTok’s near-$1 billion in revenue in 2021 across those territories – but less attention has been paid to what’s contributing to that revenue, and how it’s changing.
In 2020, nine dollars in every 10 TikTok made across Europe, South and Central America, and Africa came from its online ads business – serving in-feed videos alongside organic content. The sums for prime positions, such as the first video shown when users open the app, are eye-wateringly large: $2.6 million for a single day in the plum spot.
In 2021, online ads had fallen to 80% of TikTok’s revenue. What changed? The proportion of turnover the app’s “livestreaming program” contributed. Livestreaming revenue as a whole still only contributes 15% of TikTok’s total turnover, but the rate at which it has grown year on year is almost double that of the company’s online ads business. In the last two years, TikTok’s online ads revenue has grown by 500%, while its livestreaming revenue has increased by 900%. A TikTok spokesperson declined to comment for this story.
“The fact that the revenue for TikTok in livestreaming is still smaller than advertising, but the growth is greater, signals the potential for it,” says social media consultant Matt Navarra. “It’s not that surprising the numbers are as they are. You’d expect the online ads business to be more developed out and mature than the live streaming, given where TikTok and social media is right now.”
There are a number of reasons for the increasing centrality of livestreaming revenue to TikTok’s income, not least the fact that the whole online ads ecosystem has taken a hit as businesses question whether to spend big in the face of what looks like an imminent global recession.
“We notice that TikTok across the board is doing a hell of a lot more to push forward with its ecommerce and shopping and livestreaming plans, because the revenue it can generate from that is so phenomenally large,” Navarra adds. “If you believe some numbers, they take up to 70% of the income from livestream creators. That’s a large chunk of money.”
The combination of economic headwinds and potentially huge returns on livestreamed content is in part why TikTok has decided to go full steam ahead with a livestreamed shopping experience in the US, potentially partnering with California startup TalkShopLive. The embracing of livestreamed shopping comes despite the company struggling to make the model profitable in the UK.
The potential for income and the opportunity to define the market ahead of competitors – not least given parent company ByteDance’s success in developing live shopping on Douyin, the Chinese sister app of TikTok – appears too good to turn down. “It’s got a lot of room for growth and exploitation outside of ByteDance’s core region of China and Asia,” adds Navarra.
And while in absolute numbers, livestreaming still accounts for a far smaller share of revenue than traditional online advertising, the momentum appears to be moving in favor of livestreamed content.
“Livestreaming is huge for TikTok,” says Brendan Gahan, partner and chief social officer at New York creative agency Mekanism. “Live commerce gets the lion’s share of coverage, but it hasn’t been rolled out broadly. So where is that revenue coming from? Digital gifting,” according to Gahan.
Gahan calls digital gifting “a turnkey revenue source for creators”, pointing to the way that the income from gifts can be converted into real cash – after TikTok takes its cut. While many digital gifts will only be worth a handful of in-app coins, the highest value gift a user can give a streamer, a TikTok Live icon, costs 34,999 coins, or nearly $450.
“Hosts often incentivize viewers to send gifts by offering shoutouts, follow backs and collabs,” says Gahan, who has identified educational creators offering gifts in exchange for services such an audit of their TikTok channel, or answering technical questions, and generally offering consultancy services that would ordinarily be paid for through cash. “It’s not uncommon to hear about top creators making upwards of low five figures off of a single Live,” he adds.
And given TikTok’s significant cut of livestream gift revenue, that makes it all the more profitable for the company – and goes some way to explaining why it’s so keen to promote it in-app. “Live revenue is likely to increase dramatically in coming years,” says Gahan, claiming it could become a “pillar” of TikTok’s revenue in the near future.
“Given some of the huge numbers coming out of ByteDance in terms of livestreaming and social commerce, you can see why they’re employing an army of agencies and third parties to recruit lots of new livestream talent to boost the level of activity in that area and ultimately increase the amount of income driven by livestreams from creators and brands,” says Navarra.
It’s all in aid of mimicking the vibrant, established livestreaming industry that typifies the Chinese internet. Douyin, ByteDance’s shortform video app equivalent in China, has a livestreaming ecosystem worth hundreds of billions of dollars that the app could well be looking to replicate in the west. One analysis estimates that 87% of Douyin users live stream content of their own. McKinsey has forecast that if the west were to follow China’s embrace of livestreaming ecommerce, it could account for up to 20% of all online sales by 2026.
Those with long memories will be remembering the mid-2010s push by Facebook into livestreamed video, which was an enormous success for a matter of moments before the company pivoted away from those plans, resulting in massive media job losses. TikTok’s turn to livestreaming is different, not least because the precedent that livestreamed video can work has already been established in China.
Key to that could be TikTok’s continued deployment and promotion of livestreaming within its app – creating a virtuous circle of revenue for the company. The ground for that has already been laid, according to those watching the company most keenly. “I suspect we’ll see similar numbers for next year, based on the activities and initiatives they’re putting in place now,” says Navarra.