Why TikTok's Creator Fund Matters

Youtubers like myself, we take something as a given that the amount of money we make from YouTube is a function of the amount of money we make for YouTube. I've made a lot of YouTube videos and on a lot of YouTube channels over the years, so I know very well that not every view is created equal. Individual videos can make way more per view, and channels can have huge varieties of how much money they make per view. Lots of different things affect this. The majority of YouTube ads are auctioned off to potential buyers, and those buyers are interested in reaching specific people.

If you make content about personal finance for a few affluent 30-somethings, there's a lot more competition for your audience than if you're making content for teenagers who don't have as much disposable income. On YouTube, you make 55% of whatever YouTube makes selling ads against your content. There's a lot to be said for this transparency. It has a certain amount of fairness, but it also has a certain amount of unfairness. People who get 10 times more views can end up making significantly less money, and that's not really fair to the creator nor is it fair to the audience, who will be less served because advertisers are less interested in them.

That's not a new problem, of course. This has always been the case with magazines, movies, and TV shows. You make more and can spend more on higher quality content if your audience has the money to pay either for a subscription or for a product that an advertiser is selling—or both. Completely unexamined, this is an effect of income inequality. The amount of content being created for rich people is just very high. It's pleasant and makes the world better for those people, making them feel more valued in society if they see more stuff being made for them.

This affects what audiences get served and which creators can make a living. TikTok, however, has found a different way. Unlike Instagram, TikTok shares revenue immediately. I just made my first thousand dollars through the TikTok Creator Fund, which budgets $ 200 million a year to compensate TikTok creators, not based on how much money they make for the platform, but based on how much engagement a creator's content gets.

My assumption is that the most important bit of engagement is the view or possibly the amount of time spent viewing. None of this is explicit, but I can tell from my numbers that it seems to be mostly based on views. If the entire TikTok platform gets a billion views on any given day and I am responsible for a million of those views, I will take home 0.1% of the fund's daily allocation.

The money is divided up equally among all accounts that receive this engagement or qualified engagement. There are some caveats, but the engagement in certain regions and countries might not count or counts less, which makes sense because advertising is much more valuable in the US than in Brazil. There are also protections against fraud that decrease certain creators' per engagement revenue. But everyone seems to make pretty much the same amount of money per view on any given day, whether the audience is 40-year-olds or pre-teens.

On YouTube, this difference can be like 10x to in some extreme cases 25x from creator to creator. TikTok’s model may not be inherently good or bad, but it is different in a meaningful way. Monetization on TikTok matters, and the fact that they've established this creator fund matters in the grand scheme.

Thus, people with wealthier audiences don't automatically and immediately make more than people with poorer audiences, which might be crucial. YouTube could never make such a shift now. However, it could be a better system for platforms that care more about rewarding content that rewards viewers rather than just making money.

Two important notes: First, TikTok might have done this because they believe that attention is the one true currency. Alternatively, it could be due to the nature of how ads are displayed on the platforms. On TikTok, ads appear as independent pieces of content in the feed, making it nearly impossible to credit any individual creator with any individual ad impression.

Second, other revenue streams like brand deals, in-app gifts, merchandise, and crowdfunding are still more lucrative for those with audiences that have more disposable income. But in this one area, there's an egalitarian distribution of resources impacting which creators can make a living through their passion and which audiences are served.

If TikTok continues increasing the creator fund budget and perhaps aligns it with a fixed percent of their ad revenue, matching or exceeding YouTube’s percentage, the quality and quantity of content on their platform will escalate. This shift could inspire more creators and spark a different kind of magic.

Keywords

YouTube
TikTok Creator Fund
Engagement
Income Inequality
Content Monetization
Audience Demographics
Ad Revenue
Egalitarian Distribution
Content Quality

FAQ

Q: What is the TikTok Creator Fund? A: The TikTok Creator Fund is a $ 200 million annual budget to compensate creators based on the engagement their content receives, such as views and possibly watch time.

Q: How does TikTok's monetization model differ from YouTube’s? A: On YouTube, the revenue is based on how much money you make for YouTube through ads tied to your content. On TikTok, the revenue from the Creator Fund is based on the amount of engagement your content gets, leading to a more egalitarian distribution.

Q: Why is the TikTok model seen as more egalitarian? A: On TikTok, the revenue is distributed more equally based on engagement, which means even creators with less affluent audiences can potentially earn the same per view as those with wealthier audiences.

Q: What are the benefits of ads not being tied to individual content on TikTok? A: This approach avoids the problem of advertisers being responsible for the content against which their ads are shown. It simplifies ad placement and reduces the complexity of technology needed to manage ad impressions.

Q: How does TikTok's engagement-based earnings affect creators? A: It allows a wider range of creators to make a living by distributing funds based on viewer engagement rather than the wealth of their audience, impacting which types of content get produced and who can succeed on the platform.