I’ll admit it I’m obsessed with TikTok. I can easily lose hours scrolling, laughing, and learning random things I never knew I needed to know. So naturally, when I had to choose a topic for this blog post, I couldn’t resist writing about TikTok.
If you’ve been on the app, you’ve probably seen the endless banners shouting, “Invite a friend and earn €5!” TikTok has built some of the most aggressive referral programs out there. The model is simple the existing users get paid for bringing in friends, and new users can even earn money just by watching videos. On paper, it’s brilliant growth hacks don’t get more direct than literally paying people to join. But here’s the real question: is TikTok building genuine communities, or just pumping up vanity metrics?
The short-term benefits are obvious. TikTok exploded in markets like Europe partly thanks to these incentives, lowering entry barriers and making downloads skyrocket. But if we look deeper, the long-term story feels trickier. I recently read this study on referral programs in freemium platforms, and their findings were eye-opening (if interested the link will be attached at the end of the blog). They discovered that while referrals do boost acquisition, they often reduce both engagement and revenue. For what reason? Despite the fact that higher referral criteria can boost revenue, they also deter consumers from staying because they prefer to recommend others instead of paying for premium features. To put it another way, recommendations might have mixed effects.
When that perspective is applied to TikTok, it becomes evident that some individuals are signing up not because they are interested in producing or viewing content but rather for the quick money. What’s left to keep them going after the rewards end? Additionally, the overall quality of interaction for those who are genuinely interested in the community and content may suffer if the platform is overrun with low value individuals.
Personally, I think referrals are most powerful when they amplify why people actually love the platform. Imagine if TikTok offered exclusive editing features, early access to trending sounds, or unique filters as referral rewards. That would reinforce the creative culture rather than distract from it.
Of course, despite my critique, you’ll still catch me scrolling at 2AM , completely hooked but I can’t help wondering: do cash-driven referral schemes really build lasting communities, or are they just inflating numbers to look good on a quarterly report?
Link to the article:
Rodrigo Belo, Ting Li (2022) Social Referral Programs for Freemium Platforms. Management Science 68(12):8933-8962. https://doi.org/10.1287/mnsc.2022.4301
