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What’s Going on with TikTok?

For several years, there have been concerns about national security amidst Chinese and U.S. tensions. Trade disagreements and tariff wars started the process, and soon, bans on certain technologies followed. These concerns haven’t gone away, and in fact, they seem to be as intense as ever. Recently, the U.S. Senate overwhelmingly approved a bill that places restrictions on TikTok in the U.S. This new TikTok ban bill requires that the social media’s parent company sell off TikTok within nine months, otherwise, it will be banned within the U.S. for the current 170 million U.S. TikTok users. Once signed into law, which is expected, TikTok will be forced to respond to these new developments. Thus far, it looks like this reaction will be a legal challenge one.

a woman who doesn't care about Restrictions on TikTok in the U.S.
Restrictions on TikTok in the U.S. could drastically reshape social media.

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These are the latest developments in what has become a turf war between advertisers and politicians. For advertisers, TikTok represents the top short-form video platform to engage and attract consumers. For politicians, however, the ever-increasing threat of Chinese access to consumer data and user surveillance is cause for worry. If the new TikTok ban bill passes, then ByteDance, its parent company, will likely challenge under First Amendment protections. But should these efforts fall short, then there may well be restrictions on TikTok in the U.S. This will notably change the entire advertising landscape and give companies like Meta and Google a U.S. advantage.

Mutual Security and Surveillance Concerns

For U.S. lawmakers and executives, the new TikTok ban bill reflects ongoing worries about Chinese interference. Being a social media company, TikTok could be subject to governmental coercion. As such, they might be forced to provide the Chinese government with user information. Or they might allow Chinese government propaganda to exist on their platform to influence Americans. This has been a growing concern for a decade or more as evidence of fake news and election interference became apparent. This is why both sides of the political aisle support restrictions on TikTok in the U.S. Out of a desire for national security safeguards, it is believed that legislation is needed. This will better ensure citizen and consumer protections from foreign influence.

(National security when it comes to Chinese businesses is a thorny issue–read all about it in this Bold story.)

Of course, these types of concerns are not only coming from U.S. lawmakers but also from Chinese officials as well. Recently, Apple was ordered by the Chinese government to remove specific apps from the Chinese market. This included apps related to Meta and Threads as the Chinese government did not trust Meta’s platform either. They too were worried that Meta might be actively monitoring Chinese users or collecting private consumer data. The key difference, of course, is that the Chinese government doesn’t have to go through a democratic process. It can simply impose the mandate or else. For the U.S. however, a new TikTok ban bill must be passed and then signed into law. Only then can restrictions on TikTok in the U.S. be enforced.

If the new TikTok ban bill gets passed, a lot of young users are going to be “sad emoji”.

Advertisers’ Preferences

To say that advertisers and marketers don’t care about national security and TikTok would not be fair. But at the same time, the new TikTok ban bill raises other concerns for major advertisers. Restrictions on TikTok in the U.S. could negatively affect current short-form video advertising efforts. In the U.S., the average TikTok user spends about 54 minutes in the platform. This compares with an average time of 35 minutes for U.S. users of Instagram. At present, there are roughly 170 million U.S. TikTok users, which reflects a sizable consumer base. And these demographics now extend well beyond Gen Z consumers to essentially all consumer groups. These figures explain why advertisers are very interested in the recent developments surrounding TikTok.

As it turns out, advertisers in the U.S. spend large amounts on TikTok currently. Though ByteDance is a private company and does not release its financials, estimates suggest high volumes. According to some researchers, U.S. advertisers spend about $6 billion annually on TikTok’s platform. This reflects about a quarter of the total revenues that’s generated by TikTok in general. If the new TikTok ban bill moves into law, then advertisers would need to consider other options. Those options are likely to be Instagram Reels and/or YouTube’s Shorts. This would naturally be a boost for Meta and Google, but for advertisers, it might reflect a setback. In an ideal world, advertisers would therefore prefer that TikTok persist in the U.S. market. Whether this happens via legal challenges or through a sell isn’t something they likely care much about.

ByteDance’s Planned Strategy

new TikTok ban bill on two phone screens
The new TikTok ban bill could mean greater market share for Facebook and others.

While ByteDance has not elaborated greatly on the new TikTok ban bill, they do plan to fight it. In statements from the company, they stated they would be pursuing legal actions should the bill pass into law. They angle they would make such a claim would likely be under First Amendment protections of free speech. Efforts by past administrations to place restrictions on TikTok in the U.S. failed because of this. Therefore, expect ByteDance to have a similar strategy this time around. This will be the challenge U.S. officials will have when trying to demand a change in TikTok ownership. But unlike the last attempt to ban TikTok use in the U.S., current efforts will have the backing of an actual Congressionally approved law.

Should a legal challenge fail, it’s pretty evident that ByteDance has no intention of selling TikTok. Despite the U.S. representing 25% of TikTok’s market, the algorithms used by TikTok are highly valuable. In fact, these same algorithms are used by Douyin, ByteDance’s other domestic app. Douyin accounts for the largest share of ByteDance’s annual revenues. This is why the company, which is now valued at $268 billion, would ever consider selling TikTok. Should restrictions in TikTok in the U.S. proceed, ByteDance would therefore simply close the U.S. market. Whether this actually occurs will truly be interesting to see. But it’s going to take a long time before a final outcome of this saga is determined.

 

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