Previous: Remember the P4A 2021?? That was fun, right?!?!
Next: TikTok is Not Going to Vine…Here’s Why



View count:1,043,503
Last sync:2024-05-27 11:00
I have been making content on TikTok for over a year. I've got over six million followers and I reach millions of people every day. It is a tremendously powerful platform that is extremely well designed. But they are dramatically under-paying creators...a decision that I think is very bad for the creator community there, and also potentially long-term bad for the platform itself.

The original script I had for this was over an hour long, so I have lots more to say on this topic, and I hope this doesn't sound like an exhaustive discussion of a super complicated thing. But we have to start the conversation somewhere.

4:50 The Adpocalypse
6:52 Creator Funds (the good parts)
8:50 The Static Pool
11:52 The Fund is Tiny
15:42 What to Do Part 1: Collaboration
18:27 What to Do Part 2: Competition
20:30 What to Do Part 3: Collective Action

Hank: Oh, my goodness. I have been putting this one off for a long time. Every Friday, I have three hours that are usually sort of unscheduled, and I think to myself, "Should I make a video that could have a really big impact in a lot of people's lives but also make, um, you know, maybe upset some people who I work with, create more tension in my life, or should I screw around and make TikToks?" And I don't know what the implications of this are, but I do know that everything that I say in this video is, to the best of my knowledge, true and also very, very important.

Along with the many innovations of TikTok, there have been some creator monetization innovations that I think are really worrying and bad for creators. It's a bit of a giant hole in the creator economy that is only accelerating in its giant holey-ness. And I think that mostly it's gone completely unnoticed, let alone under-discussed, so let's fucking do it.

This video's gonna be kinda long. It's gonna be really in the weeds of online video. It's gonna talk a lot about the history of monetization of creator content. I'm gonna try and be, like, tell a pretty whole story here, which means that it's gonna take some time, and I appreciate everybody who watches it, whether you are involved in this economy directly, like you're actually a part of it, or whether you're involved - well, everybody is. Everybody's involved in it directly.

There are three sources of value here. There's the person creating the content and the person consuming the content, and then the person, people, who create the systems through which the content is hosted and distributed. And I think all of these people are important, but, man, when you're sitting in the middle there, it's hard for things to not go your way. Let's talk about it.

 Some History of Internet Video Monetization (1:42)

("Into the Thick of It" by The Backyardigans plays)

In 2007, YouTube was emerging - not quite emerged, but emerging - as the dominant online video platform, but something interesting was happening. A bunch of potential competitors were popping up, and they were emailing people like me, and they looked, and I think correctly, and saw a weakness in the platform and said, "If we can get a significant number of these people who have strong audiences - Smosh and Vlogbrothers and the Hill 88 - if we can get these people and pull them over onto our platform, then basically, like, YouTube, all it will have left is the copyright infringement like the Daily Show clips and the Family Guy, like, all the stuff that, frankly, they're gonna get in a lot of trouble for having.

YouTube saw this as a tremendous threat, I think correctly, but there wasn't any reason for us to go over except that those new platforms were saying, "What if we shared our revenue with you?" And that was super enticing. I remember reading these emails and being like, "Woah. You mean that I could potentially be getting paid for this?"

Most of those places were saying something like, "We're gonna give you 50% of the revenue that we earn from the advertisements on your videos." YouTube heard about this, and they created the YouTube Partner Program, the one decision in the history in the history of online media that has changed things more than anything else. A platform decided that every advertisement that runs on a video on a creator's page, half of that money is gonna go to YouTube, and half of that money is gonna go to the creator. Actually, better than that - 55% is gonna go to the creator.

It has not changed since then, and it remains a extremely impactful thing. It is a very large amount of money. In 2020, YouTube made around $20 billion, which is a lot of money. It's bigger than the entire music industry. 10 billion of those dollars went to creators. This is wild. A little more than that. 

Now, not exactly 55%, because, you know, money is made in a lot of different ways. Like, front page advertisements on, that doesn't get split between creators, because it doesn't run on creators' content, but basically, you know, about 50% of the money that YouTube makes goes right back out the door to creators.

This is amazing. This is a huge economic engine of the creator economy. It is extremely impactful. I run a business that monetizes in all kinds of ways. We have crowdfunding, we have grants, we have brand deals. We do it every way you can do it. About a third of our revenue still comes from just the regular old advertisements on YouTube. It is a really big deal.

It was a world-changing decision, and the impacts have been very positive. Now, it is not the majority of the money that creators make on the internet. After all, a lot of creators aren't majority on YouTube. Creators make more money on, in total, from brand deals than from YouTube ad sharing, but, like, not that much more. I think it's like $13 billion. The way that YouTube does things is objectively wonderful. It also created problems.

 The Adpocalypse (4:52)

("Oh No" by Capone plays)

So the details here are not important, but, at some time in the past, some journalists noticed that they might be watching a video - 'cause this is part of their job is to, like, be aware of terrible things - a video of something terrible, like a terrorist recruitment video or something, but before that video would play, YouTube would have a pre-roll on it for Delta Airlines or Coca Cola or Nissan.

This was a very bad thing for creators. I watched my ad rates tank as advertisers pulled out and basically did a little bit of a boycott of YouTube as YouTube tried to figure it out. And YouTube has had to implement a ton of features because of this. There are lots of creators who don't get their content monetized at all, there's lots of little buttons you have to check behind the scenes to get your content monetized, and there's also armies of people - like, real human beings - who are deciding whether or not content is worthy of monetization.

You'll notice, though, that you'd never really heard about an adpocalypse with Facebook or Instagram or TikTok. Now, your first thought might be, "Well, it's a different era now." But, no. There's a functional reason why this is the case: because on YouTube, advertisements run on videos, whereas on those other platforms, advertisements, for the most part, run between videos or between pieces of content. This is fantastic for those platforms, because it means that they don't have to worry about brands saying, "Why did you put my logo next to that very objectionable piece of content?" You just never hear about that happening, because it's not actually connected to the piece of content.

But it breaks something else. On YouTube, I get paid 55% of the money generated by the advertisements running on my videos, but on these platforms, the advertisement doesn't run on my videos. It doesn't run on my content. It runs on the platform between the pieces of content, and so you can make the case, "Why would we give those people any money at all? This ad isn't running on their content; it's running on our platform." Except, of course, like, nobody would be on the platform if it weren't for the content, right? So obviously, creators still should be paid, and we have created an innovation that allows for this to happen.

 Creator Funds (6:52)

("THAT'S WHAT I WANT" by Lil Nas X x "Berries & Cream" TikTok audio plays)

What TikTok did is they created a large pool of money that would be split between everyone who gets views on the platform. So the ads aren't running on the piece of content, so they can't really pay the person who was responsible for the impression. Instead, they take all of the views or all of the watch time or some metric, and they divide up a pool of money among all the people.

So, to simplify this, if the Creator Fund is $365,000 a year, that's $1,000 a day to be split up. If 100% of video views go to Charlie D'Amelio one day, then Charlie D'Amelio gets $1,000. If she splits it 50/50 with Addison Rae, then they each get $500. But in actuality, the number is higher, and the number of people it's being split between is higher, and so everybody makes a little bit of money every day.

You make more money if you get more views based on the number of views that you get, or some metric. It could be watch time. It could be watch time mixed with views. It could be watch time mixed with views and engagements like comments or shares or something. Like, it could be a lot of different things. You can do it a lot of different ways, but basically this is what's happening, and the numbers I've crunched work out to, it's roughly based on watch time.

And it's nice that you can kind of do this a number of different ways. Like, I know that this isn't currently the case, but I would like for it to be that TikTok could actually say, if someone's sound is being used in a lot of other people's videos, then they sort of, like, give a little bit of a, like, a fraction of an impression to the sound and a fraction of the impression to the person using the sound, and that way you get to reward the people who are creating a lot of culture with these really good viral sounds. 'Cause a lot of times, people make a viral sound, and their video gets 100,000 views, and their sound gets used 100,000 times, and that doesn't, that's not really rewarding them.

Anyway, creator funds. They are great. They are a good idea. They are kind of the only way to do a fair job of compensating creators when the advertisements aren't running on their actual pieces of content. They even have a number of advantages. So what's up with the title of the video, Hank?

 The Static Pool (8:50)

("Pope Is A Rockstar" by Sales x "What the fuck is up, Kyle?" TikTok audio plays)

Creator funds would be fantastic, except the well has been poisoned. You probably didn't even notice what changed when we went from the YouTube system, where a percentage of the revenue earned by the advertisement on the video gets sent to the creator, and the Creator Fund, where you have a pool of money that gets distributed among all creators. Did you notice it that time?

It's really subtle, and the implication is so huge. In the first case, on YouTube, they are sharing a percentage; in the second case, on TikTok, they are sharing a static pool of money, a flat amount that does not change if TikTok earns more money. In 2020, TikTok's US Creator Fund was $200 million. That's a lot of money, but remember, YouTube gave $10 billion to creators that year.

So with hard numbers this time, if everyone only watched Charlie D'Amelio one day of that year, then Charlie would get 1/365 of $200 million. That is $550,000, except, of course, it doesn't all go to Charlie. It gets distributed among thousands of creators. Because of the way that TikTok shares a lot of audience among a lot of creators, that ends up being, you know, less than a dollar a day for most of the people in the Creator Fund. Now, because I know how much money I make, and I know how many views I get, I can actually calculate how many dollars I get paid per view. In the world of content, this is generally calculated as per thousand view, in order to get numbers that make sense to the human mind.

I have done this calculation. I have done it over periods of time for over a year now. I'm currently making around 2.5 cents per thousand views. Now, this is, of course, orders of magnitude less than I make on YouTube, but we're gonna talk about why this isn't necessarily because TikTok is bad.

There are reasons why a view on TikTok is functionally worth less, and will always be worth less, than a view on YouTube. We'll talk about them in a second, but more important, I wanna start out by talking about the fact that I used to make five cents per view on TikTok. What happened? What changed? The pool of money is the same size. Why am I making less per view?

Because there are more views on the platform. It's grown. There are more creators, there are more users, TikTok is earning more money, but the pool is the same size. So there are more views with the same number of dollars, so you make fewer dollars per view. Literally, when TikTok becomes more successful, TikTokkers become less successful. What? Fuck me!

When TikTok makes more, creators make less. The slogan writes itself. If the fund were a percentage of revenue rather than a static pool, that would be very bad for TikTok's bottom line compared to what it is right now. They would have less profit. It would be very good for creators.

TikTok can get on PR Newswire and be like, "Over the next three years, we're sending $1 billion to creators," and that sounds like a huge amount of money, right? But they remain entirely in control of how much they pay, and as more creators join the Fund, as the app continues to succeed, creators make less money per view. But this, I think, is not even the biggest problem. Holy shit.

 The Fund Is Tiny (11:52)

(echoing "what" TikTok audio plays)

Now, a billion dollars seems like a whole heck of a lot of money, but then you're me, and you have to go and check and find that ByteDance's revenue was $36 billion last year. Now, ByteDance is bigger than just TikTok, so that wasn't all TikTok revenue, but it does make you curious, so you start to do some math. Now, you start by knowing, not like deep in your bones, but just, like, knowing factually that a view on TikTok is always gonna be less than, like, worth less than a view on YouTube.

Why? Because you don't get one ad per view of a video. Like, who ever gets one ad and then a TikTok and then an ad and then a TikTok? That's not currently, at least, how it works. There are also reasons why the advertisements might be less valuable. TikTok has been around for less time. It's really easy to swipe past them.

But if you do the work, I think you can figure this out. I think I have. I'm not saying these numbers are 100% accurate, but let's go through how I calculated them and talk about it. The reason I can do this is because I recently ran an ad campaign on TikTok that had millions of impressions, and it happened over the course of a couple of weeks.

I was specifying a pretty particular audience, which might increase the ad rate a little bit. It was sort of based on my audience generally. I think that they are a high-value audience, so maybe they are. During the course of that advertisement, I spent about $6 per thousand people I reached, so $6 per thousand views. In the parlance of the industry, a $6 CPM.

Let's assume that the audience I was targeting was double the value of the average audience on TikTok and say $3 CPM. I think that that is a dramatic underestimation, and I think it's gonna keep going up, but regardless, let's just have that be the absolute basement. That is how much I was paying TikTok for one advertisement view, not how much I was paying per view of a piece of content, because, again, the ads are not tied to the content.

So I did a little survey on my TikTok and asked people how many ads they'd get per TikTok that they see. On average- Some people got none, interestingly. People were like, "You get ads on TikTok?" Super interesting to me. Most people on average were getting about one advertisement per 10 TikToks or, like, nine TikToks they were seeing. So to translate dollars per ad view to dollars per view of a piece of content on TikTok, let's just divide it by 10 and say it's 30 cents.

So TikTok is making $3 per thousand impressions on an ad, so their making 30 cents per thousand impressions on content generally. So TikTok probably doesn't make that much per view, but it does make between, let's say, 30 and 60 cents per thousand views of content on the platform. And, look, I already showed you how much money I make per thousand views. It was 2.5 cents. That is a very different number from 30 cents.

If TikTok had the same partnership with creators that YouTube has, TikTokkers would be making, at minimum, 16 cents per thousand views. That is six times, six times what they are making now. Every creator in the Creator Fund who thinks to themselves, "Wow, $1000 a month. That's $12,000 a year." That person could be a full-time creator. They could be thinking about expanding, about hiring, about creating a business in their community for their audience.

This is the economic engine that drove YouTube forward, and TikTok is just letting it leak out of the tub into their bottom line. This change would not increase the number of full-time TikTokkers by six times. It would increase it by 1000 times, because, just from the structure of the platform, the number of creators making $6000 a month is 1000 times more than the number of creators making $1000 a month. Like, that's just how it works. The tail is very long, the drop is very steep.

So the Creator Fund should be much bigger than it is, and it should be based on a percentage of revenue. Everyone should benefit when the platform grows. Like, look, ByteDance, you own it. We don't even have any equity. We don't have a stake in this, but we do have revenue. That's all we get. That's all we get.

We don't have a platform without you, but you don't have a platform without us. So what can be done? I think three things. You got collaboration, you got competition, and you got collective action.

 Option 1: Collaboration (15:53)

Dwight Schrute: Do you want to form an alliance with me?

Jim Halpert: Absolutely I do.

Hank: After 15 years in this industry, I have realized that the people who work at these platforms are people and that there is no company absent the people. Like, they are it. It is just a bunch of people making decisions. And most people who work at YouTube are huge fans of YouTubers, and they listen to them, and they care about their success, and I think that has to be true, like, there's no doubt in my mind it's true of the people who work at TikTok.

They wanna work at these companies to help creators. Vanessa Pappas, who is the head of TikTok right now, she used to be a creator. She used to work at a company that lived day by day trying to figure out how to sustain itself in a new media ecosystem that's constantly changing and that pays way less than legacy media. She knows this struggle.

This part of the video is 100% nothing to do with leaving the platform or finding competitors to the platform, none of that. I just think you look at it, and you ask if it's fair. And, like, frankly, I don't think that TikTok has heard a lot from creators that they have a problem with this, and I don't think it's because they don't have a problem with it. I think it's because they might not understand it.

They might not understand that there is a real, like, functional difference why YouTube pays creators so much more, and it's not just because there's, like, much more money on that platform. It's because TikTok is paying creators a much smaller percentage of its revenue. And I think it's also because TikTokkers are a little bit terrified of the platform, because moderation is really haphazard, and there's lots of stories, I've witnessed it myself, of people just kind of losing their accounts and not being able to do anything about it and not knowing why it happened and being told why it happened and knowing that it's not a good reason and that, like, something, there was a mistake or there was, like, a typographical error or something.

And it's, like, an account with a million followers is just gone. So TikTokkers are really, like, scared, honestly, of criticizing the platform, and that's just a recipe for unintentional exploitation. So if the people who work at TikTok aren't experiencing this feedback - they're not hearing it, they're not feeling the pushback - like, why would they change it? 'Cause, like, everybody's boss is happy when there's more money coming into the company.

But I have a question for those people, like, do you think it's okay that, when TikTok becomes more successful, creators make less money per view, and do you think it's okay that, if we had the same partnership that we have with YouTube, we would make six times more money? Like, do you think that that's the right setup? And trying to figure out how to do right by people who are creating a ton of the value that is paying for this whole thing to work.

 Option 2: Competition (18:27)

("Face Off" by Tech N9ne plays)

So Instagram Reels and YouTube Shorts have both started to intentionally compete with TikTok by doing what those companies in 2007 did - starting to say, "What if you got paid more to be here?" The culture of those places is not the culture of TikTok, but maybe someday they could be. I think that that change would have to be slow, because I think that it takes time for cultures to create themselves, and right now, when I go on Instagram Reels, it's a lot. It's just a- It feels like a fairly bad algorithm and then a bunch of people being really dangerous on snowboards.

But there's no doubt those platforms are paying a lot more per view. Now, the way that they're doing it I think is a little suspect. In the same way as TikTok, they are not basing it on a percentage of revenue; they are just basing it on what is attracting people to the platform and what would be sort of, like, a high enough incentive to get them to start uploading content to those platforms that don't have TikTok watermarks all over them.

And it's worked for me, I gotta say. Like, I'm making more money right now on Instagram Reels than I am on TikTok, which is ludicrous, 'cause I get way more views on TikTok. But it seems very clear to me that the way that Instagram is structuring it, which is bonuses that are sort of algorithmically generated, it's unclear who gets them or why they're bigger for some people than others, and then you have to sort of, like, fill your sort of progress bar up to get the full amount of the bonus, like, all of this is based on the psychology of how to attract people over to the platform.

And then, once they're on the platform and reliant on the platform, you don't have to give the same sized bonuses, you can control it entirely yourself, and no one in this game seems interested in creating ways to compensate creators that are based on sharing revenue rather than just sort of, like, doing whatever you feel like doing this month and creating no stability in the long term for people and instead just having the company retain all of the control over how much money is being spent on creators month-to-month so that you can change that whenever you want to, which is something YouTube can't do, and thank God they can't.

 Option 3: Collective Action (20:31)

("abcdefu" by Gayle plays)

In the history of YouTube, there have been a number of times when a bunch of creators from a bunch of different areas of the website, so, like, who don't interact that much, all sort of came together to say at once that they did not like something. And, in those cases, oftentimes, real changes to the product were made. I can easily see a similar thing happening at TikTok.

Now, what I often see is that those conversations tend to not be about money specifically, because creators think that their audiences will be turned off, and instead these conversations often tend to be more about moderation, which I think is a real problem, or about things that I think are, like, problems with the algorithm that I think are mostly imagined.

I feel bad saying this, but I think that, a lot of times, what platforms hear from creators is, "Your algorithm messed up, and it's not featuring my content anymore," or, "You shadowbanned me," or something, and what that sounds like to people who work at these platforms, and this is because this is usually the case, is, "I'm not getting as many view as I used to, and I'm mad about that," when, honestly, the algorithm, like, nobody can say that the TikTok algorithm is doing a bad job. Like, we use the platform. We know that it's enticing.

So the people who work at the platforms, when they hear that kind of feedback, they don't feel like they should be responding to the concerns of creators, because the concerns of creators are just, like, they're yelling at them about problems that don't actually exist. And I think that, at TikTok, the problems that really exist are moderation problems - just the sort of, like, not having enough human beings involved in the moderation process - and monetization problems, so just not sharing anywhere like enough revenue with creators and having it be a static pool instead of a percentage amount.

So what are we gonna do? I don't know. That depends on what the three populations here do - the creators, the audience, and the platform. If I've learned anything from 15 years doing this, it's that, like, when those three groups get aligned, really amazing things happen, so I want those three groups to be aligned. I don't think that it's time to, like, call for a TikTok strike, but I do think it is time for TikTokkers to start being honest about how they feel about the platform and their criticisms of it.

I think that we need to talk about moderation problems, and we need to talk about monetization problems. We should not talk about views, because TikTok's job is not to give us views. That's our job. But this, the monetization, is a real concern. It is a real big problem with TikTok but also with everyone, because if it works for TikTok, why won't all other platforms do this? Why won't everybody say, "We're just gonna do a creator fund, and everybody's gonna think that we're great, and we'll be able to hold onto 95% of the revenue and not have to worry about YouTube sitting over here being a schmuck giving away half of its revenue?"

This is a billions of dollars problem. This is a huge hole in the creator economy. This is a huge difference. Like, I could never have built what we built at Complexly in a place like TikTok, because so much of the money is not hitting our pockets. I'm not saying TikTok shouldn't make money. Of course they should make money. They made an amazing product. It's huge; it's great.

I have been so impressed by their constant innovation. I'm super excited to see where they go next. Like, I think this platform is really smart and really weird. I'm not saying TikTok shouldn't make money. It should be a very successful business. I'm just saying it should also spawn successful businesses that operate on its platform, because the people who built the content and the culture of the platform... I think they deserve their share.

("Beggin'" by Måneskin plays)