Business opportunities on TikTok - an analysis.

Hey everyone. Before we begin, I've been wanting to create something for a few months now and am super excited to be launching Founder Street. A weekly breakdown of industries and the opportunities new founders could create within them.

Also, would LOVE for everyone to share 1 way I could improve this in the comments. Thanks so much.

So let's get straight into it.

This is the FounderStreet Edition #1 - How TikTok houses are making money.

Let's kick it off..

'TikTok Houses' are collectives. Creators work together under one roof to churn content with like-minded individuals. Super lucrative, with high expectations from each individual involved.

Here's a few examples..

Fenty House → (yup, Rihanna started one but closed due to COVID).
Hype House → Promoted some of the largest TikTok stars.
Wave House → UK based, just started. Built loads of hype with their weird face reveal videos.
Byte House → UK based, run by an influencer marketing agency in the UK.

Here's something interesting..

Heard of David Dobrik? He's basically created Friends but for the social media age. With different personalities playing different characters in his 'authentic' vlogs. It's clearly worked and is just another form these content houses can have, way more subtle, but extremely effective. (18M+ YT, 10M+ views per video, 14.2M IG, 23M+ TikTok).

Key Insights:

Houses are starting to evolve into media networks, replacing traditional media formats as Gen Z continues to move away from traditional television.
Great opportunities to cross-sell multiple creators to brands to amplify their content to the same audience. (eg. brand wants to work with 1 of the house creators, management can cross-promote to include multiple creators).
Many high-end collectives charge the creators on top of % commission, e.g. rental fees to cover costs. So for those looking to start their own, there's an opportunity to reduce initial overhead on the lease.

Here's what I predict:

Merchandising and tours will become an increasing area of exploration to monetize. Especially with entrants such as Fanjoy, supporting from design to production.
There's a careful balance of articulating a great contract, but these will take more cuts from revenue generated by creators, regardless of the platform they're involved in with the house.
Many houses will become subtle, such as David Dobrik. These won't be referred to as real-life houses, but a more inter-connected network starring in one another's social content to increase coverage.

Let's talk money..

Most collectives/houses are owned by a management company. Top dog takes a %. This % is likely to be on the higher end vs traditional influencers (Instagram → 10%), due to higher setup costs. Faze Clan charges at a cap of 20%.
TikTokers could charge nothing (gifted products), take a commission (smaller creators/authenticity) or a flat fee (anywhere between 3-6 figures). Many of the top ones earn serious bank.
An interesting model many TikTokers use is the per 10K view model. (e.g. 10K views = $100-$150).
- Creator X has 1M followers. Average video views of 500K+ (TikTok impressions are much higher thanks to their addictively tailored algorithm). So with the per 10K view model, this could bring in as much as $5000.
- Now let's say the brand wants multiple posts (very common, let's just say x2), and the house convinces them to work with multiple creators, let's go with 2 in total. That's 20K in revenue, with 4K going to the house at 20%. This is from just 1 brand deal with very conservative figures.

Highlighted business..

Today we'll cover Fanbytes - an influencer marketing agency.
They're created their own TikTok house for content creation - ByteHouse (close to 900k followers).
Another income stream is their merch store, launched recently. So far these are high margin products especially if they're just being promoted organically through their existing socials, with most items being sold out.
Here's an example they've already done with fashion brand BooHoo (scope of 8 videos).
In this case, we don't know what revenue model they're using to charge, but as ByteHouse is owned by an influencer marketing agency, they're easily bringing new customers in whilst avoiding additional management fees, as they're the management!
Creators could be salaried employees or given a % split to keep them incentivized long-term.

Some opportunities..

Here's my two cents/pence on what you could start looking into:

An influencer marketing agency targeting specific niches, creating specialist demand. % cut on brand deals. Min positions themselves as an agency that targets a predominantly Muslim audience which is underserved in this area.
Creating an e-learning platform for young creators to understand how to monetize their brand, as they grow, so do the deals. Think Y-Combinator for influencers.
- Nicole Wong teaches creators how to grow their social media and how to monetize through selling online courses/books.
For the right entrepreneur, why not build your own collective/house? Build your own following, collaborate with other like-minded creators, then launch your own.
For existing brands, consider starting your own TikTok house to become your content machine, think of the potential upside from Fenty Beauty.
D2C studios are taking form, where they're helping influencers create their own brands (these studios then take a % share). Genflow is doing this phenomenally. Have experience in launching D2C brands? Why not explore this angle. I also mentioned FanJoy before. Approach collectives/houses starting off and become their merch partner.

Some useful links..

This piece by Vox → Shows some of the flaws (poor management, mistreatment).
Visit Yoke Network → The agency behind the Wave house.
The Bytehouse page → Gives an overview of their performance.
Check Ian Brothwick → A pioneer in influencer marketing, great insights on his Twitter.
This piece by the NY Times → Inside look into the Hype House.

Thanks for reading. Would love any feedback you have on how this could be improved for the next edition covering another industry.