Inside TikTok’s money machine – ABC News

This is Holly MacAlpine. She makes money on TikTok by letting people in on her life.

Her fans buy her virtual ‘gifts’ while they watch her live-stream.

A young woman in a warp
Holly MacAlpine is a streamer on TikTok Live.()

TikTok has made a game out of human connection — and it’s making millions as some Australian users feel sucked into a “wormhole” of addiction.

Holly is no stranger to the attention of the public, having appeared on reality TV shows The Amazing Race and Ex on the Beach.

But her experience on TikTok has been a far cry from conventional celebrity — and even from conventional social media stardom.

While the social media app is famous for its super-short videos, live-streaming on the platform is something else entirely.

At times, upwards of 400 people watch Holly in real-time on streams that often last hours.

“It’s like there’s two parallel versions of TikTok,” she says.

Some users are feeling addicted to the live format’s “rabbit hole”, with one Australian revealing how he spent more than $300,000 on gifts to streamers in a single month.

Less than a year after doing her first live-stream, Holly is now one of Australia’s top-earning streamers on TikTok Live.

But the biggest winner from all this is TikTok itself, which is pocketing more than half of the money changing hands.

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Let’s take a look at what happens in a typical TikTok live stream — and the dynamic it creates between streamers and those watching.

In real time, Holly chats with her “team” about what’s going on in her life. Messages come in from her fans, and she responds to them by speaking to the camera.

She welcomes viewers by name as they arrive and gets them excited for the main event.

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It’s called a battle.

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In it, Holly competes against another streamer to see whose fans spend the most on gifts in five minutes. The gifts look like little icons or emojis, but each one is a micro-transaction involving real cash.

The pair have each other on mute throughout the battle. This lets them speak directly to their supporters, and encourage them to give more gifts.

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As the clock counts down to zero, the tension ratchets up. The scoreboard is hidden, so the fans have no idea if their spending is propelling Holly to a win.

At the final whistle, all is revealed. Holly has lost by a mile, despite her fans collectively spending hundreds of dollars.

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Although more than 100 people were watching her, the bulk of the money came from a select few.

After the battle, Holly thanks her most dedicated supporters, calling each of them out by name.

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She stays online for another hour and battles a revolving door of other streamers.

She’ll sign off soon after that, but that’s not the end. She’ll do a few more live-streaming sessions — and dozens of battles — before calling it a day.

Battles aren’t the only way that streamers are pitted against each other.

A constantly updated leaderboard — often referred to as the rankings — measures the amount of virtual gifts received by each streamer that week.

“I didn’t know about the ranks until I started doing it but now it’s like my whole life,” says Holly.

This is one explanation for why Holly religiously thanks her fans when they buy gifts for her.

A young woman speaks into a microphone and looks at a phone sitting on a stand.
Holly MacAlpine streams from her house at the Gold Coast.()

The other is she can redeem them for cash.

And so forms a virtuous cycle — more gifts mean a higher ranking, which in turn brings extra exposure and all the gifts that come along with that.

Holly, who goes by legallyholly on TikTok, emphasises the connection she builds with the “immaculate group of people” in her “tribe”.

“I’ve got quite a lot of mums at home with bubs, I’ve got people that are potentially not in a situation where they’re consistently seeing people every day. It’s just an amazing social interaction, and it’s always positive, it’s always uplifting. I think it’s just a form of connection, I guess.”

But the financial element is impossible to ignore.

“Obviously it’s a massive driver. Like, I’m not gonna sit here and say it’s not.”

Having moved from Sydney to the Gold Coast last year, Holly largely supports herself by accumulating thousands of these gifts each week.

She estimates that she spends “about the same amount of hours as a full-time job” streaming on TikTok Live.

She has to work for it, but there’s a significant amount of money flowing her way from those on the other side of the screen.

Sucked into a wormhole

At first, Aimee Karim was a casual user of TikTok. Like most of the 9 million Australians using the app, she scrolled and swiped and watched the videos recommended to her. Sometimes, she posted videos about her weight loss journey.

But then, something changed. “You get fixated on watching people fight and [create] drama, and you start going down the rabbit hole and exploring their videos,” she says.

“One person leads to the next person and then that leads to the next person.”

A profile of a young woman in a portal
Aimee Karim spent between $35,000 and $45,000 on gifts on TikTok Live.()

In her real life, Aimee’s marriage was breaking down. Feeling isolated, she took solace in TikTok Live.

“I was really struggling with finding myself and my place, and I felt really out of sorts,” she says. “And then you connect with a group of people online that make you feel like you’re special.”

She’d be on the app as she got ready for work in the morning, and back on it as soon as she was on the train home, continuing into the early hours. “I’d get up at six o’clock and do it all over again.”

She estimates she spent between $35,000 and $45,000 in under a year on gifts for streamers — an experience she likens to being “sucked into the wormhole”.

“I got addicted to the serotonin that, when people receive a gift [from you], you feel like you’re valid,” she says.

“It’s so easy to just sit there in company and pump money and pump money.”

Hybrid addictions

Vasileios Stavropoulos, an associate professor of psychology at RMIT specialising in social media and gaming addiction, is no stranger to stories like Aimee’s.

“Addictions always start with the need of humans — of people — to feel better,” he explains.

“Progressively, they continue based on their need to feel less worse.”

What starts as a way of seeking connection devolves into a habit that’s tough to break.

A profile photo of a man in a checked shirt
Vasileios Stavropoulos believes that modern social media apps are combining multiple addictive properties.()

He says that people who are addicted to social media “aim to self medicate via the excitement or the gratification that they get”.

“It’s like a painkiller.”

Aimee’s social isolation wasn’t solved by spending time on the app — it was through forging lasting connections, on and offline, that she reclaimed her life.

Dr Stavropoulos believes that the latest breed of apps are combining multiple addictive properties into what he calls “hybrid” apps.

And by mixing the adrenaline of gambling, the bonds formed with avatars in games, and the connection from social media, TikTok Live is at the forefront of this trend.

“The mix, the ingredients, the recipe becomes more attractive when these elements are combined,” he says. “And not only does it become more attractive, but it accommodates something that we call ‘addiction hopping’ or substitution of one form of addiction with another.”

TikTok did not respond to a series of questions regarding the risks of addiction surrounding TikTok Live.

As for whether Aimee regrets her choices in this period, she says it’s complicated.

She’d like the money back in her bank account, sure, but she also forged lasting connections.

She met her current partner on TikTok. “I’ve got a group of three or four people that I’ll be lifelong friends with out of it.”

Adding to her conflicted feelings as she looks back is who benefited from her generosity.

Less than half of Aimee’s money actually went to the streamers — people like Holly who helped her through a difficult and isolating period in her life.

Play money

TikTok takes a large cut of the value of every gift given on the platform — but the exact size of that cut is not widely known, even among dedicated users.

Carmen Lee Conpain, a Sydney-based life coach, says she only heard a rumour that TikTok took a cut of 70 per cent after months of spending about $1,000 a week.

“It actually just really brought everything down [when I found out]. I was like, Oh my gosh, this is a scam,” she told ABC News.

She reduced her usage of TikTok Live following this realisation.

Other Australian users also claimed TikTok’s cut was 70 per cent. But it turns out it’s not quite so simple.

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Jin Lee is a media scholar at Curtin University.()

Jin Lee, a research fellow at the TikTok Cultures Research Network, says part of the confusion stems from the complicated process of buying, giving and redeeming gifts on the app.

Let’s take a look at how the process works…

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Money being spent in the app.()

The user pays real money — in this case, Australian dollars — through the app or website.

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Virtual coins in the gifter’s account.()

This buys them an in-app currency called “coins”, which they can then spend on gifts for streamers.

By using virtual coins rather than dollars, sometimes “people kind of forget that this is actually money”, says Dr Lee.

It “makes you feel that you are playing a game” rather than making a purchase.

An illustration of coins turning into gifts, then turning into diamonds
The gifting process.()

Each gift is worth a set number of coins. A rose costs one coin (1.85 cents). A galaxy is 1,000 coins ($18.50).

When a gift is given, it immediately turns into another in-app currency: diamonds.

These diamonds drop into the streamer’s account when their fans give them gifts.

An illustration of diamonds moving through a pipe.
Virtual diamonds in the streamer’s account.()

This complicated series of transactions creates a disconnect between in-app spending and its real-world cost, says Dr Lee.

It also obscures the cut TikTok is taking.

“By converting these currencies into several formats, TikTok is able to get some fees from each transaction,” she explains.

An illustration of diamonds being split between the streamer and TikTok.
Where the money goes.()

At the end of the pipeline, streamers can exchange their diamonds for cash. But it’s difficult to untangle how their earnings compare to TikTok’s.

The company says it doesn’t take a flat cut, vaguely adding that “various factors” influence the payout.

ABC News was able to observe one transaction from end to end, and in that instance TikTok took 60 per cent of the initial value.

So this creator would receive only $2 out of every $5 their fans spent.

TikTok reserves the right to change this exchange rate at any time, or even to void all diamonds of any value at all.

These conversions are all happening behind the scenes, but even when gifts are given in the heat of the moment, they all add up.

But to what? The scale of giving has remained a mystery to anyone outside of TikTok.

Putting a figure on how much is being spent overall — and how much is being earned — is a very difficult question to answer.

A superstar economy

“[Social media] platforms, many of them, try very hard to make it difficult for researchers to study,” says professor Patrik Wikstrom, a researcher at QUT’s Digital Media Research Centre (DMRC).

As is standard for tech companies, TikTok does not share information about how much money is changing hands on its platform.

“I would say that TikTok is probably the one that has been playing its cards closest to the chest,” says Dr Wikstrom. “So, we have to be creative and find other ways of studying the platform.”

And that’s exactly what Dr Wikstrom did — in a joint investigation with ABC News — to peek inside the TikTok Live economy.

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Patrik Wikstrom collaborated with ABC News on an experiment to track gifts given on TikTok Live.()

When a streamer receives a gift, it’s visible to everyone who’s watching live.

So, Dr Wikstrom and ABC News set up a system to monitor the gifts received by a sample of top Australian and New Zealand-based streamers.

Overall, the 84 streamers were given a combined $1.9 million in gifts from their fans. If the 60 per cent cut applies, they would have actually shared about $760,000 between them.

If this money were split equally between all the streamers, they would each receive about $9,000 a month (or $108,000 a year). However, this is not how it played out.

A bar chart showing the income of the top 30 streamers.
The top streamer made approximately $60,000 in the month.()

The top streamer made almost $64,000 in the month, while number 20 made $12,600. By rank 50, the streamer made only $3,500.

“The Internet is a superstar economy,” explains Dr Wikstrom, “which means that those on top earn lots more than those [further down].”

This phenomenon leaves streamers like Holly, who are popular but not at the pinnacle, with a much smaller slice of the money.

High rollers

But what about those who are giving the gifts?

The top spender in our experiment gave away $50,000 in the month.

But far more surprising was what the sixth highest spender — with $27,000 in recorded spending — revealed when he shared his full TikTok purchase history.

He actually spent $30,000 in a single night. And over $300,000 in the month.

A bar chart showing the spending of the top 30 gifters.
One gifter spent over $300,000 in the month.()

Most of this user’s spending went unrecorded in this project because he mostly supports streamers from Asia.

He asked to remain anonymous for this story, though shared that he’s a 45-year-old Australian farmer.

“I don’t own boats, I don’t race cars, I don’t collect wine. It’s one of my only vices,” he says.

From the outside, he appears to be getting what he wants: attention from his favourite streamers.

Several of them have posted TikTok videos thanking him personally for his gifts. A prominent Vietnamese streamer captioned one saying she wanted to give him a “passionate kiss”.

However, his actual experience echoes that of Aimee Karim. He described his use of TikTok Live as “a habit, an addiction”.

“I’ve been trying to give it up for the last six months,” he says.

“Whenever I try and cut down, I just seem to increase.”

To avoid TikTok taking a cut, he sometimes offers to give streamers money through PayPal instead.

“But a lot of them don’t want that,” he said. “They want it in gifts.”

Relationships, monetised

In July 2023, videos of a streamer named Pinkydoll went viral. By acting like a ‘Non-Playable Character’ (or NPC) from a video game, she had the rest of the internet baffled.

Every time she received a gift, she reacted with robotic precision to repeat a specific phrase she had assigned to it.

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“Patrick. Money gun, I got ya name,” she chants. “Bianca. Money gun, I got ya name.”

“Wow, picking a heart, picking a love you.”

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Pinkydoll wasn’t the only, or even the first, NPC streamer. And NPC streamers aren’t the only ones doing weird things for money on TikTok Live.

Sleepstreamers rigged up complex contraptions in their bedrooms, allowing viewers to pay for the chance to wake them up throughout the night.

This practice is now banned on the app.

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But while these are the attention-grabbing extremes, the financial realities of the gifting economy are apparent in almost every stream. It’s become a part of the TikTok Live culture.

Crystal Abidin, a professor of internet studies at Curtin University, has traced this behaviour back to its roots in Chinese live-streaming apps.

“Oftentimes the sole purpose of setting up these conversational lives is to give shout-outs [in exchange for gifts],” she explains.

And these dynamics do not form in a vacuum.

The design of online platforms can, and do, drive culture. When brand deals became cool on Instagram, people started making fake sponsored posts.

“When live streaming is primarily driven with the intention to accumulate gifts, which then translate into income, we do see a watering down of content quality,” says Dr Abidin.

“Some creators are really just aiming at maximising engagement.”

Holly acknowledges the role of the weekly rankings in creating “urgency” for her fans to purchase gifts.

“It’s a driving force for people to want to support you,” she explains.

“If you’re not in the ranks and you’re not shooting for it, then what are we gifting for?”

A young woman positions her phone on a stand while sitting beside a mirror
Holly MacAlpine supports herself through virtual gifts from fans.()

Dr Wikstrom found that about 80 per cent of the gifts given over the month were given inside battles. And that was largely because streamers spent more time in battles than outside them.

“[It] seems to be very difficult to receive lots of gifts if you’re not engaging in battles,” he says.

“Call it clever or call it cynical, but it’s a well-designed gamification. This is a game where the streamers want to be as high as possible [in the rankings] to compete with each other.”

These gamification aspects are having the desired effect, bringing extra income for streamers — and for TikTok.

In response to detailed questions about the design of the platform, a TikTok spokesperson pointed out that TikTok Live is reserved for users aged 18 and over but did not clarify any details about the gifting mechanism.

“[Gifting] not only makes the interaction more engaging but also allows creators to earn money,” they said in a statement.

This idea of increasing engagement — regardless of its nature — can leave social interactions feeling soulless and commoditised.

Aimee Karim was certainly enthralled. She spent long hours on the app, but, as she sees it now, it functioned only as a painkiller and stopped her from confronting the problems in her life.

“I didn’t realise but I was seeking validation … and I think I found it in the app,” she says.

“You’re buying love and attention and affirmation … it makes me feel really icky now, really yuck, that I felt that I had to buy — buy — something that was less substantial than what I have found in my world now.”

But it’s not only viewers who are at risk.

According to Dr Stavropoulos, the streamers racking up long hours on the app can easily become addicted as well.

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Holly MacAlpine says she has trouble disconnecting from TikTok at times.()

Some weeks, Holly takes a break from streaming — to relax, catch up on sleep and eat better — but says she finds it hard to stay off the app for long.

“I very much struggle with the fact that my whole team will still be on the app doing whatever they’re doing,” she says. “But I’m not there to be hanging out with them, which is a bit of a weird feeling.”

About this story

  • Professor Patrik Wikstrom, with financial support from QUT’s Digital Media Research Centre, ran the data collection project across 84 streamers from November 18, 2023 to December 18, 2023.
  • The software used to collect the data was written by ABC News, using the TikTok-Live-Connector library written by zerody.
  • All data is anonymised in the story to protect the privacy of users.
  • You can read the full statement provided by TikTok here (PDF download).

Credits

  • Reporting: Julian Fell
  • Design, video editing and illustration: Teresa Tan
  • Development: Ashley Kyd and Julian Fell
  • Editing: Tim Leslie, Matt Liddy and Cris Tilley

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