TikTok is back in the hot seat — not that it ever really left — again facing threats of a nationwide ban in the U.S. under a proposed bill now in the hands of the Senate. The bill, which might force a sale of the app if it wishes to stay in the region, raises questions of how an evolving social media landscape could play into TikTok’s fate and what the impact could also be for marketers.
The latest bill against TikTok comes as the ByteDance-owned platform continues to stoke national security concerns stemming from its Chinese ownership and handling of U.S. data. The bill, dubbed the Protecting Americans from Foreign Adversary Controlled Applications Act, was passed rapidly by the House in a landslide 352-65 vote last week and now heads to the Senate. If the bill progresses, President Joe Biden has already stated that he would sign it into law, giving TikTok 165 days to sell or be banned in the U.S.
“The bill’s progression to the Senate with the overwhelming support from the House and as Biden has voiced that he backs the bill is what makes this one feel more real — but it’s still not time to panic,” said Ed East, co-founder and group CEO of Billion Dollar Boy, in emailed comments. East noted that ultimately, he doesn’t expect a complete ban to enter effect on condition that the Senate’s decision is still up in the air and TikTok would have time to sell if the bill becomes law.
While the Senate has also indicated that there might be some down time before a choice is made, questions have understandably surfaced as to what makes this ban attempt different, who could stand to learn and where social media ad dollars may shift.
The making of a ‘perfect storm’
TikTok has repeatedly found itself in political crosshairs since its Western emergence — the app is already banned on most U.S. government devices — but arguably the most serious threat to its existence beyond that of the present day got here in 2020 under former President Donald Trump, who attempted to ban the app via a since-revoked executive order. At the time, multiple parties hoping to purchase the app got here forward, including Microsoft, Walmart and Texas-based tech firm Oracle, which now helps store U.S. TikToker data. Trump has since modified his stance and come out against the current push for a ban.
While the latest ban attempt is in some ways harking back to those of the past, the key difference in the current debate is the passing of time, which has allowed for a wider awareness and aperture around the issues surrounding TikTok, in response to Mike Proulx, vice chairman and research director for Forrester. The years since 2020 have seen an increase in questions around social media’s impact on elements like mental health, misinformation and children’s safety while consumer privacy concerns and antitrust laws have reached a boiling point.
“All of this stuff together equate to the perfect storm of presidency needing to take some sort of regulatory motion almost about social media,” Proulx said. “This is something that has been brewing for a while and the conditions just happened to be ripe at the moment for heightened motion.”
There’s no shortage of instances that show the growing desire by the government to manage social media. In January, a Senate hearing discussing apps including TikTok, Snap, Meta and X (formerly Twitter) and their ability — or lack thereof — to maintain children protected saw Sen. Thom Tillis, R-N.C. decrying to top social executives that, “We could regulate you out of business if we desired to,” painting a tense picture of Congress’ current regard for the platforms.
“The bill’s progression to the Senate with the overwhelming support from the House and as Biden has voiced that he backs the bill is what makes this one feel more real — but it’s still not time to panic.”
Ed East
co-founder, group CEO, Billion Dollar Boy
The protection of information has also been a hot-button topic across the board. In the U.S., TikTok has attempted to handle concerns about its data practices with Project Texas, its billion-dollar U.S. data separation project announced last 12 months. However, damning findings in January based on information from internal documents and current and former employees found that TikTok still is sharing U.S. user data with its parent company in China, something that Project Texas was put in place to avoid.
Beyond social itself, the broader economic landscape has shifted. President Biden has been more comfortable imposing trade sanctions on China than former President Trump. In a possible push to combat China’s attempts for economic dominance, Washington might be more prone to undergo with a TikTok ban if ByteDance refused a sale.
Picturing a possible suitor
Though a giant “what if” stays as as to whether or not the bill banning TikTok would pass, a good greater speculation is whether or not ByteDance would comply with divest and if its highly praised algorithm could be a part of the deal. In response to the news, TikTok released a press release claiming that “the bill was jammed through for one reason: it’s a ban,” occurring to say that it hopes the Senate will consider the facts and realize the economic opportunity offered by the app, which touts 170 million American users and supports 7 million small businesses.
Still, a small handful of interested buyers have already come forward, amongst them “Shark Tank” star and businessman Kevin O’Leary and Bobby Kotick, the former CEO of Activision. Following the passing of the bill by the House last week, former Treasury Secretary Steven Mnuchin also announced that he was establishing an investor group to try to purchase the app. Mnuchin, who chaired the Committee on Foreign Investment in the U.S., is the founding father of Liberty Strategic Capital, which has made numerous investments, including with cybersecurity firms, angling the exec as a robust potential prospect.
Whoever might attempt to buy TikTok would want a variety of capital. The app, a favourite amongst younger audiences, was last valued internally at $268 billion.
“If, and that is capitalized in italics, ByteDance were to make a decision this, there is momentum already brewing on potential buyers due to the impact that TikTok as an app has had on culture, society, demographics, creativity, all types of elements of each day lives for nearly half of the country,” said Proulx.
During 2020’s ban attempt, hopeful TikTok buyers got here forward for various reasons. Walmart hoped to spice up its promoting business while Oracle wanted help bolstering its data services. TikTok in the years that followed has matured right into a powerhouse, constructing out a robust promoting business while also extending into areas like social commerce. Accordingly, interest from potential suitors this time around could take a latest form.
“The conversation is perhaps different this time around than it was in 2020, when it just gave the impression of a startup social network,” said David Tiltman, senior vice chairman of content for WARC.
“What is the AI mess around TikTok? I don’t have a solution for that, but that is a matter that might be asked.”
David Tiltman
Senior vice chairman of content, WARC
U.S. promoting spend on TikTok was estimated to be $8.7 billion in 2023 and is expected to grow to $10.9 billion this 12 months, in response to WARC Media findings. For perspective, in 2020 and 2021, spending in the U.S. on TikTok was smaller than that for Snap, per WARC data. Because of TikTok’s widespread growth, interested buyers could envision the app’s future in multiple ways, Tiltman noted. In addition to potential interest around existing elements of TikTok’s business like commerce, he expects inquiries to rise around the app’s potential to mesh with ongoing hype around AI.
“What is the AI mess around TikTok? I don’t have a solution for that, but that is a matter that might be asked,” Tiltman said.
Given the context of the latest ban attempt, it’s critically essential that any potential buyer has each the credibility and public perception of standing for consumer privacy rights, in response to Proulx.
“It would must be an organization that each the government and consumers trust as an objective, honest, third-party broker in the mix, or else you find yourself trading one problem for one other, and even worse, exacerbating the problem that already exists,” Proulx said.
Where the dollars could shift
Beyond regulation, social media more broadly has evolved greatly since 2020. Instagram Reels, Meta’s answer to TikTok, launched in August of that very same 12 months. Since then, some findings have indicated that branded video content on Instagram Reels outperforms that on TikTok and Facebook.
If marketers were to shift their budgets away from TikTok, Proulx believes the dollars would flow to Reels. Amid the government’s antitrust crackdown, that will bring with it antagonistic consequences.
“Meta becomes the benefactor in all of this, and while it’s good for Meta as an organization, each from the standpoint that they may likely see a cloth increase in each users and promoting revenue, it now strips the marketplace of competition,” Proulx said.
Other competitors have also appeared, including YouTube Shorts, which YouTube has continued working to monetize. Among platforms, advertisers in North America this 12 months plan to extend their budgets on TikTok, YouTube and Instagram, in that order, per WARC’s recent Marketer’s Toolkit findings, indicating that the latter two are the likely benefactors of any potential ban.
Still, any motion against TikTok is prone to send marketers into something of a scramble — 67% of U.S. B2C marketers report that their organization plans to extend investment in TikTok this 12 months, per Forrester’s 2024 Marketing Survey. As a choice on the app looms, Proulx advises starting to plan around the potential outcomes.
“Every marketer must be contingency planning now, and in the event that they aren’t,” Proulx said, “they’re already behind the curve.”
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