Is it the end of the road for US TikTok? In 2020, the U.S. government announced that it was considering banning the Chinese-owned social media platform TikTok following a request from the then president, Donald Trump, who deemed it a security threat. Now, four years and a new president later and following almost annual discussions, the debate is still raging. On March 13th 2024, the U.S. House of Representatives passed a bill which requires TikTok’s parent company, ByteDance, to either sell TikTok or the app will be banned on American phones. There is also the threat of a fine for the two major app companies, Apple App Store and Google Play, and any cloud hosting companies if they continue to help provide access for Americans. Reasonably quickly, on the 23rd and 24th April respectfully, Congress approved the bill and the legislation was signed into law by President Joe Biden.
State actions and influencer reactions
In May 2023, the U.S. state of Montana government banned the app in their state, this drove a large group of influencers who make their living on the app to file a lawsuit against the legislation. The legal action resulted in the ban being blocked by a Federal judge, following a five hour congressional hearing during which the CEO of TikTok Shou Zi Chew was questioned regarding the apps link to the Chinese government.
Advertising powerhouse
With TikTok’s unique format and algorithm comes great opportunity for content creators to build a large following and therefore great advertising success. The algorithm’s ability to provide creators with a significantly larger reach than other platforms such as Instagram has led to an increase in brands' advertising investment with around 70% of brands utilizing TikTok for influencer marketing, compared to 47% of brands working with influencers on Instagram.
Creators strategize amidst potential ban
The loss of this platform in such an important market as the U.S. would clearly be devastating for the industry and would force many brands to rethink their social media plans and reallocate their spend. However, all is not lost. Many creators that rely on TikTok as their main source of income and generate the most traction on the app are encouraging their followers to show their support on other platforms such as Instagram and YouTube as a way of preparing for the downfall. With analysts at Bernstein estimating that Meta are likely to benefit from up to 60% of TikTok’s U.S. ad revenue and YouTube another 25%. Confidence in Meta was reflected in a stock price increase following the Congressional decision.
TikTok's innovations, contributions and efforts to stay afloat
Despite the threat posed to them TikTok are working on integrating Video Shopping Ads, as well as other updates, to the app. Shop Ads will now appear in the ‘shop tab’, as opposed to the main feed where they currently appear, and retailers will now show in search results. It is clear that there is a move to further explore the advertising potential of the platform and maximize advertising revenue by “creating the most seamless shopping experience possible for users to discover and purchase products”.
TikTok do not want to lose their 170 million users in their largest market, the U.S., so they have taken action in an attempt to combat this and address the concerns of lawmakers. Research was conducted in the fall of 2023 to show how important they are to the economy and the benefits they bring. The study showed that over 7 million businesses in the U.S. use TikTok, with the app driving nearly $15 billion in revenue in 2023, as well as significant GDP, tax and job contributions. Having been the most downloaded app every quarter since 2020 (according to Apptopia) and over 5 million new global customers using TikTok shop over Black Friday and Cyber Monday weekend the impact and growth is undeniable.
Looking ahead
To summarize, whilst the passing of this bill is a step further in the U.S. Governments efforts to ban TikTok, this does not mean that the U.S. will be losing the app immediately. TikTok will have 9 months to find a buyer and only if that is not achieved will the app be removed from U.S. app stores. However, ByteDance have said it would block the implementation of the bill taking it to the D.C. Circuit Court of Appeals. Whilst being appealed the so-called timer on the sale is paused, further delaying the 9-month deadline. Following the ruling of the D.C. Court, the losing side are likely to request a review, again causing delay. If all these assumptions are accurate, the bill would not come into effect until 2026. Therefore, media buyers, vendors and content creators all have a reasonable amount of time to redirect investments and energy elsewhere.
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