Friday’s bleak jobs report revealed that millions of Americans are still out of work, but some of the country’s richest people continue to accrue wealth amid the COVID-19 pandemic.
And one controversial social media platform — TikTok — has created a brand-new class of young millionaires who are becoming the breadwinners for their households. With one in three Americans on TikTok, according to the Chinese-owned app, it has become a clear winner for eyeballs and ad dollars even as lawmakers continue to criticize its security practices.
The short-form video sharing app features everything from business advice to cooking tutorials, comedic couples pranks, and grandparents dancing — its algorithm creates a stream of videos designed to cater to your interests and suck you in for hours.
TikTok creators have found the platform, which has 689.2 million monthly active users, to be unrivaled when it comes to potential virality, followership, and creative career opportunities. It has become a new home for the kind of up-and-coming influencers who have found fame on Google’s (GOOG, GOOGL) YouTube and Facebook’s (FB) Instagram.
And many of these wealthy new TikTok stars aren’t even old enough to drink yet.
Michael Le, 20, a choreographer on TikTok, posts entertaining and wholesome dance videos, accruing 42.5 million followers 1.2 billion likes for his videos. Le recently bought a house in Los Angeles after relocating from Florida.
Michael Le speaks to Yahoo Finance.
He originally moved to California with a group of friends, but now lives and works with seven people, including his mom and younger siblings.
“I feel like financially I'm really good. I’m making smart moves. I have a team to assess what I'm doing with my money. I’m at seven figures now,” he told Yahoo Finance.
Le’s primary income source is through brand partnerships on TikTok that pay anywhere from $20,000 to $50,000 for a single post. He’s worked with brands like Amazon (AMZN) Prime Video, Bliss Skincare, Bang Energy, Postmates, Safeguard Soap, and Tums.
“It’s really random, whatever brands decide they want to work with me. I’m really open to everything. If a brand wants something, I'll typically let them know if it’s too commercialized or not and I’ll give them my input,” said Le. “If what they want is what they want, I’ll possibly raise the rate. If it’s something that’s too forced for me, I won’t do it.”
Of course, the bigger the following, the more leverage you have. The creator-brand relationship has mutual benefits, especially with older or more legacy brands. For example, Le had an existing multi-year contract with Bang Energy through YouTube and introduced the energy drink company to TikTok.
Loren Gray’s road to TikTok stardom follows a similar tune. Gray, an 18-year-old singer who also recently bought a home in Los Angeles, has 49.8 million followers on the app. For one-off posts, she charges between $20,000 and $40,000, though that varies depending on how excited she is about the collaboration.
“If I really love a brand, but it’s not as much money as I would usually make, sometimes it’s worth it to further build a partnership with them in the future. You have to move gracefully because you don’t want to take too many partnerships. You have to be selective,” she said.
From hobby to household moneymaker
Along with being a TikTok star, Gray has been a signed recording artist with Capitol Records since 2018. Her songs, including “Queen,” “Alone,” and “Cake” have all been popular soundtracks to TikTok videos.
“I have a built-in audience with my socials but music is a whole different ball game. With a music career from a social media audience you get virality but not necessarily active listeners. I definitely have a head start with my following, but I still had to build my way up,” she told Yahoo Finance.
In this screengrab, Loren Gray speaks during Graduate Together: America Honors the High School Class of 2020 on May 16, 2020. (Photo by Getty Images/Getty Images for EIF & XQ)
Like nearly all of the creator class, TikTok stars started posting content for fun, many of them first on its predecessor musical.ly, the lip-syncing startup acquired by TiKTok owner Bytedance in November 2017 and folded into the TikTok app in August 2018. Notably, singer Jason Derulo was an early and active musical.ly creator, and has become one of the savviest TikTok creators.
Le, who started posting content on musical.ly in 2015, didn’t see much traction with TikTok until last year, when it became a more mainstream destination. “TikTok creators were getting better and content was more accepted at that time. I didn't really use the platform to post native TikTok content. I posted random videos from Instagram and YouTube just for cross promotion. Then the first week I did in-house TikTok content, my following grew from 600,000 to a million in a week. That changed the game for me. I was like, ‘Let me take this a little more seriously.’”
Indeed, other TikTok influencers often take time to develop a following and learn how to market themselves, says Evan Horowitz, the chief executive of LA-based creative agency Movers+Shakers.
“People who are great at creating on any platform — it’s not their day job right away. Students, teachers, artists, they start to build a following,” said Horowitz, whose firm has been responsible for 80 billion TikTok views across its various campaigns developed for clients like E.L.F., Warner Bros, Amazon, and Match.com (IAC). “Creators can really lean into the content and nurture their platform and successfully market themselves. But nobody starts out like that.”
Given how nascent, fluid, and young TikTok’s community is, there’s been a fairly steep learning curve for individual creators. Earlier this year, TikTok identified at least a third of its users were 14 years old or younger, reflecting just how young the platform skews.
Fresh faces, future growth
In order to cater to this exploding market of creators, TikTok set up a $200 million fund in July, allowing creators 18 and older to monetize their content and reap the benefits of advertising dollars pouring into the platform. To be clear, those under 18 can still make money on TikTok through individual deals. They just can’t tap into the institutional fund.
Even taking into account TikTok’s already meteoric growth, the money-making opportunity is still in its early chapters. Just like its competitors Facebook and YouTube, TikTok’s business model heavily depends on ads. In 2019, TikTok made $200 million to $300 million in revenue worldwide, and expects to make $500 million from the U.S. alone this year, according to The Information. It’s still a small bucket relative to its parent company; ByteDance is expected to make $27 billion in ad revenue in 2020.
TikTok gave creators like Le early access to the creator fund because he was one of their larger creators, he said. He has been working with a manager at TikTok who helps facilitate deals.
Smaller creators with single-digit million followers can make between $1,000 and $5,000 per post — and the smallest creators can receive free products in exchange for posting about them.
“2019 TikTok was a Gen Z platform. The first part of 2020, a lot of them were under 18 and very new to this as a job with first-ever brand opportunities,” Horowitz said.
One of those Gen Z creators is Seth O’Brien, a 16-year-old in Chicago who posts makeup tutorials to his 4.2 million followers on TikTok. In September 2019, when he had 300,000 followers, MAC invited him to attend New York Fashion Week, where he was surrounded by other influencers and celebrities. The experience was heady.
“Even a year ago to now, I think, ‘Wow, that is insane.’ There’s totally room for everybody. And I did it. I did it 100% on my own,’” he said.
‘We can’t compare anything to TikTok right now’
The paragon of TikTok success is fellow 16-year-old Charli D’Amelio, the world’s largest TikToker who hit 100 million followers in November. She reportedly charges up to $100,000 per post. And her social clout has manifested into lucrative career opportunities including a deal with Dunkin’, where she has her own signature drink, and a reality TV show with her family, including her 19-year-old sister — and fellow TikTok star — Dixie.
In this screengrab, Dixie Damelio and Charli Damelio speak during Graduate Together: America Honors the High School Class of 2020 on May 16, 2020. (Photo by Getty Images/Getty Images for EIF & XQ)
Of course the overwhelming majority of creators who depend on TikTok for their primary source of income don’t have the luxury of TV or podcast deals. They continue to diversify their avenues for content creation, exploring Triller and Likee and continuing to post on YouTube, Instagram, and Snap.
That desire to diversify may stem from recent threats to TikTok’s very existence.
President Donald Trump threatened a complete shutdown of TikTok this summer but later settled on forcing TikTok to sell its U.S. business — giving Bytedance a Dec. 4 deadline for finalizing a sale to Walmart and Oracle. That deadline lapsed on Friday without a deal. However, a person with knowledge of the decision told The New York Times that the U.S. government would continue working with TikTok on a deal that would give a stake of TikTok to an American company.
The Trump administration has called the app a national security threat, suggesting the Chinese government could access personal information of the 120 million U.S. users on the app. TikTok, for its part, sued the administration, arguing the ban would “strip the rights of that community without any evidence to justify such an extreme action, and without any due process.”
Despite the intense scrutiny of TikTok, creators and their reps remain optimistic about its future. “We’re confident TikTok will still be around. I’m sure there will be twists and turns, but it’s the cat with 9 lives — it’s going to keep coming back,” said Horowitz, the Movers+Shakers CEO. “In the end, it’ll stabilize. What’s happening on TikTok is getting stronger, it really just continues to grow and flourish.”
However, Le, the choreographer, said he’s been deeply concerned about the fate of TikTok, in part because his 2.26 million subscribers on YouTube and 2.3 million Instagram followers don’t hold a candle to his 42 million TikTok followers. He acknowledges that TikTok users will go to other sites if the app goes away but said it has set a high bar for social media.
“You can’t compare anything to TikTok right now. It has to be perfect, especially to compete with something as good and revolutionary as TikTok,” he said.
Melody Hahm is Yahoo Finance’s West Coast correspondent, covering entrepreneurship, technology and culture. Follow her on Twitter @melodyhahm.
