Contrary to assumptions that spending might be concentrated in Asian markets, the report reveals a diversified spending pattern. While China remains a stronghold for TikTok with strong consumer activity, users in the United States have emerged as key contributors to TikTok’s revenue. Notably, both U.S. users and iOS users in China jointly account for approximately 30% of TikTok’s life-to-date revenue, forming a significant chunk of the total, approximately $6 billion. Other notable markets include Saudi Arabia, Germany, the United Kingdom, and Japan, collectively contributing about 13% of the app’s revenue from in-app purchases (IAP).
The report delves into the revenue sources within TikTok, identifying TikTok Coins as the primary money earner. TikTok Coins enable users to purchase virtual gifts within the app, which can then be exchanged for real-world currency. This ecosystem has been designed to support artists on the platform. However, despite this success in creating a micro-transaction system, TikTok has yet to transform this into a broader eCommerce marketplace.
While in-stream shopping has become a major source of revenue for Douyin, the Chinese version of TikTok, the Western counterparts have been less enthusiastic about adopting this trend. TikTok’s push for in-app shopping in Western regions has faced challenges in convincing users to embrace shopping behaviors within the app. Despite the platform’s efforts to replicate its success in other Asian nations, particularly Indonesia, where it recently secured a path to resume its shopping push, the Western audience remains cautious.
The report suggests that TikTok may redirect its focus in 2023, with expectations of an even more significant push towards in-stream shopping. One potential avenue is food delivery purchases in-stream, a strategy that has already proven successful in China. By tapping into user behaviors and preferences, TikTok aims to bridge the gap and encourage Western users to explore and embrace in-app shopping.
TikTok’s ability to get users to spend more within the app could unlock substantial revenue and revenue-sharing potential. The report emphasizes the importance of maximizing these opportunities for TikTok’s future growth. As the platform continues to evolve its strategies and offerings, it remains to be seen whether it can effectively crack the code on encouraging Western shoppers to broaden their spending behaviors within the app.
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