TikTok is breaking records yet again by becoming the first app to ever have customer spending surpass $1 billion in a single quarter. This is especially unusual because TikTok the first app of its type to top the consumer spending charts. The title was previously held by mobile games.

TikTok’s Unique Approach Pays Off

TikTok is an app that has taken the world by storm, especially in the social space. The Chinese app has grown to have more than 3.5 billion downloads with over 1.5 billion monthly active users.

The app is the fastest growing in the world and has reached milestones that have taken apps like Instagram six years to reach in 3 years. With these great numbers, the company was able to generate over $9.4 billion in revenue last year raising the company’s valuation to more than $400 billion.

According to Data.ai’s comprehensive report on mobile app revenue in 2023, the company has now made a new mark in terms of mobile monetization by surpassing $1 billion in consumer spending in the first quarter of 2023.

The mobile application, Honor of Kings, trailed behind in the digital race, garnering $570 million from worldwide consumer spending on both iOS and Google Play platforms – a figure that merely represents half of TikTok’s earnings. In the run-down of top-earning apps, YouTube claimed the third spot, raking in a substantial $530 million.

TikTok in-app purchases | Photo courtesy of Statista

TikTok has managed to set stand out from other non-gaming apps with its different approach to in-app purchases. The video-sharing app promotes one-time purchases over subscriptions, which are largely relied upon by a majority of non-gaming apps.

Intriguingly, these one-time purchases are mostly made to show support and appreciation to content creators. However, these purchases can amount to over $1 billion due to the sizable and devoted fan base that TikTok has amassed over time, enabling it to abandon the subscription model.

This approach has positioned TikTok as the only non-gaming application in the one-time purchases top ten list for earnings within the United States, among other notable gaming apps such as Candy Crush Saga, Roblox, and Pokémon GO.

Other social media platforms that are yet to consider different monetization strategies outside of conventional advertising have undoubtedly taken an interest in this creative approach and it is expected that they will begin to implement it in various capacities.

TikTok’s Dominance Show a Shift in Consumer Preference

TikTok’s achievements show that in-app purchases are becoming more widely accepted and used, which denotes a significant change in consumer preferences and habits. The change can also be attributed to the amount of time internet users spend on their mobile devices which allows them to be at ease utilizing applications for entertainment, dating, fitness, and other purposes.

The in-app purchases have led to a rise in the popularity of the subscription model as a result of consumer demand for reasonable prices and the convenience of auto-renewing services, which also ensures developers’ long-term revenue streams.

With in-app purchases, the best price point for non-gaming apps has been proven to be between $10 and $100 which accounted for a majority of non-gaming in-app purchase revenue in the US in 2023. This marked a 6-percentage-point increase from the same time in 2022.

On the other hand, for gaming apps, mid-tier in-app purchases which cost between $10 and $99 account for 42% of expenditure on mobile games. This is because consumers of gaming apps either make several inexpensive purchases or choose to spend more than $100 on in-app purchases.

Photo courtesy of Data.ai

As such, transactions under $10 account for about 45% of in-app purchase revenue in the US gaming market, while transactions over $100 account for the remainder which is still a sizable part.

Hinge: The Success Story

Regardless, TikTok’s one-time purchase approach has proven to yield massive revenue to the apps that implement it. One such app is Hinge, a popular dating app from Match Group.

Photo courtesy of Data.ai

In addition to its subscription plans, Hinge also implemented Roses, a one-time purchase option that is comparable to Tinder’s Super Likes, in 2020. By Q1 2023, Roses had contributed to more than a third of Hinge’s revenue in the US on iOS, demonstrating the enormous success of this in-app purchase.

Just by offering the right feature at the right price, Hinge was able to grow its year-on-year revenue by 60% in 2022. This grew the demand for in-app purchases costing between $25 and $100 hence Hinge also recently announced some new membership tiers at a higher price range.

In addition to the new plan that was launched earlier this year for $60 per month, Hinge also raised the price of its most popular subscription to $30 up from $20.

With this, Hinge adjusted its monetization model to a range of preferences and price sensitivity by combining the more economical one-time purchase option (Roses) with premium subscriptions which has resulted in the dating app experiencing rapid growth.

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