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Breaking down how creators monetize on TikTok

Although the ability to monetize on TikTok is slow, the social media app provides influencers with ample opportunities from agencies & creators perspectives to bring in money. Yahoo Finance’s Melody Hahm joins The Final Round to break down how creators are monetizing on TikTok.

Video Transcript

MYLES UDLAND: Well, it seems like ancient history, but it was only a few weeks ago that we were spending every day on this program talking about TikToks would they, won't they, Microsoft, Oracle. I still don't really know if we learned anything from all of that, but if we can now move past the geopolitics and think about the platform itself, everyone knows that TikTok is insanely popular, insanely addictive, and Melody Hahm it would seem that from this, monetization obviously follows. Should be an easy game, create great TikToks, you will get paid money. There's all these creator houses springing up. Clearly there is money in the game, but is the monetization of the platform quite as efficient, effective, and robust maybe as the chatter around the platform might make it seem?

MELODY HAHM: Short answer, no. And, you know, we talk so often about the K-shaped recovery in every industry. It's fascinating to see the kinds of brands that are pouring money into TikTok, namely Chipotle, Walmart, Bumble. Those are three of some of the biggest spenders and most successful sort of integrators into the platform really thriving as they find these young creators that are nascent in the TikTok platform, really endemic to the platform itself. They're not YouTube buyers who are now doing a second gig on TikTok.

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I actually spoke to an agency here that specifically represents TikTok creators, and they launched their first ever reality TV show with ELF Cosmetics. They got 3,200 applications for individuals. The prize was not monetary. It was literally just getting face time with some of the biggest beauty creators on the platform already. It's a fascinating experiment to see right now, because to your point, Myles, you would think that the monetization would be a natural next step, but they have been a late mover in the game.

So just for context here, they did announce a huge fund of $200 million back in July. Vanessa Pappas, the interim Head of TikTok, has pledged that it would become a billion dollar fund over the next couple of years, but it's been slow moving. What I mean by that is still some of the biggest creators have not found outlets to actually reach brands, and so they're doing one offs, they're reaching out to product managers within Procter & Gamble and kind of forging these one off deals rather than it being a robust ecosystem like YouTube, like Instagram, which have been very successful at doing that. Just on the kind of monetary side of things, if you think about how much these creators are getting, as of now, some of the biggest creators on TikTok as I understand it are getting about $20,000 per post.

That pales in comparison to YouTube and Instagram, which are in the hundreds of thousands of dollars when you get up there, but it just shows how new the TikTok platform is, right? You don't really know how to assess the actual success of a TikTok creator in the way that you can a Casey Neistat or David Dobrik or someone on a platform that feels more legacy. So it is a growing, evolving narrative, and I'm curious to see, you know, how these 14-year-olds are going to be able to get these $100,000 deals, and they will, right? It's just a matter of time. It's just when will those connections really be forged. It's not happening, perhaps, in the near future.

MYLES UDLAND: Well, and I do wonder too, Melody, how much like the VC cycle that fed on Insta, how much that is cut off by the current pandemic? How much it just is cut off by the fact that so many of those buzzy D-to-C type plays that were such big Insta spenders, still are big Insta spenders, they just haven't had the exits that I think a lot of these founders would have wanted. I mean, you look at, you know, we don't need to name names, but we can go down the list of companies that they raised big valuations, and that might have been fine for some of their investors and early employees, but there hasn't been, outside of I guess maybe Dollar Shave, like a billion dollar exit in the kind of D-to-C CPG space that Instagram was built around, and I wonder if TikTok will find its kind of companion industry that, you know, that funds essentially the platform's growth. I mean, that is basically how Insta became Insta was all these other ancillary companies giving Facebook money for ads on that platform.

MELODY HAHM: And let's remember, Harry's, the other razor company, was supposed to get that billion dollar exit as well, and then there was antitrust scrutiny, and that deal fell through. So to your point, even with the promise of these unicorns going public or getting bought, unfortunately, that hasn't really shaped up to be the future, right? What I want to point out though, as I mentioned the earlier brands, Walmart, Bumble, of course about to go public, Chipotle, already public, it's some of these big brands that are trying to reinvent themselves.

So to your point, it's not the DTCs, because let's be real, if we saw in a prospectus like the Blue Apron's of the world pouring hundreds of thousands, millions of dollars into creators and coming up with reality TV shows, that would just be ripped apart, right, by potential investors and by underwriters. What is clearly proving to be the case, and as we talk about on a meta level with TikTok, with Oracle and Walmart and Microsoft and these legacy players wanting to get in on this action, and for a long time we said these are such strange bedfellows, it's because they need the younger audience. Where is the purchasing power? Where is the future? Where are the people who have their parents credit card numbers? These are-- it's TikTok, right?

So as much as we can say, you know, it's The Daily Harvest and all of these innovative brands that are trying to reach the youth, I think the irony here is those DTC brands are actually reaching people who are older, perhaps the older millennials, who do want to have some sort of subscription model, whereas these legacy brands are kind of boomeranging back and saying, hey, we have been around a while, but we can actually afford to based on our cash flow, based on our ability to invest in R&D and dabble with all these interesting marketing schemes to really invest in platforms like TikTok. So what's old is new, right? There was a survey earlier this summer that Gen Z, the most trusted source of news that they like is "The New Yorker." You know, they're not getting their news from BuzzFeed. They're not actually liking getting their news from quippy tweets. That's what we do, Myles, so--

[LAUGHTER]

MYLES UDLAND: I was just going to say, you know, as you're talking about social media and it's effectiveness, you wonder like, maybe the industry is just way more mature than we think it is as us millennials. You know, we're basically the median millennial, and we're not that young anymore. And so I think that a lot of the things that everyone was so excited about in the last decade might be a lot more played out, perhaps--

MELODY HAHM: Exactly.

MYLES UDLAND: Than kind of the conventional wisdom would have you believe.