How could it be that TikTok, one of the world’s fastest rising apps – a mover of culture and favorite obsession of 1 billion people around the world – could face extinction in the United States? Well, if a TikTok ban could happen in India, the world’s largest democracy, it can happen in the United States, too. And a national ban on TikTok is a real possibility after the U.S. House of Representatives passed legislation that would require TikTok’s owner to sell the app or face a nationwide ban. This turn of events has sparked several questions among businesses that advertise on the app, chief among them: should businesses prepare for life without TikTok? Let’s break down some answers for you here by addressing some commonly asked questions.
Did the U.S. House vote to ban TikTok?
No, But a ban is a distinct possibility. The U.S. House voted 352-65 to mandate that within a six-month window, TikTok needs to be acquired by an entity approved by the U.S. government. This acquisition must ensure that TikTok’s owner, ByteDance, relinquishes any ownership or influence over TikTok, including the platform’s content recommendation algorithms. The bill had support from both Republican and Democrat lawmakers.
Why did the House pass the legislation?
The primary driving force behind this bill consists of national security concerns. Lawmakers have argued that TikTok’s Chinese ownership poses a threat, Lawmakers fear that the Chinese government could potentially force the company to hand over sensitive user data about U.S. citizens and use the app to spread misinformation that undermines the United States.
Is TikTok owned by the Chinese government?
TikTok is not owned by the Chinese government. TikTok is roughly 60 percent owned by global institutional investors (such as Blackrock, General Atlantic, and Susquehanna International Group), and 20 percent owned by the company’s founders, and the rest owned by employees.
Didn’t TikTok run afoul of the U.S. government years ago? Why is a ban possible now?
Yes. TikTok has faced pressure from U.S. lawmakers in the past, including President Trump’s threat to ban the app in 2020. Since then, rising tensions between the United States and Chinese government have sparked a resurgent interest in banning the app. In addition, with 2024 being an election year, lawmakers are turning TikTok into a bigger political issue than they might have any other year.
Of note: 14 states have voted to ban TikTok. So, a national mandate is not coming out of the blue. In addition, TikTok was banned in India in 2020.
Is there proof that the Chinese government has used TikTok to spy on U.S. citizens and spread disinformation?
No. But TikTok’s abuse of personal data has not helped the app’s stance that it poses no threat to the United States. TikTok is not the only app that has been guilty of data breaches, but when they happen with TikTok, the specter of tampering by a foreign power influences lawmakers’ perceptions.
How would a ban work?
It’s not clear how the app would be banned from privately owned phones is unclear. Montana’s effort to ban TikTok sought to fine the company and app stores if residents downloaded or used TikTok. If ByteDance does not sell TikTok, the House bill introduced in 2024 would bar app stores and web hosting services from distributing or updating TikTok in the United States.
What happens next in Congress?
The legislation now moves on to the U.S. Senate, which has promised to scrutinize the bill closely and cautiously. It might take weeks or months for the Senate to act on the legislation. By contrast, the House approved the bill just a week after it was introduced. The Senate will weigh the national security issues against:
- Opposition against the possible ban by tech companies, content creators, and free speech advocates. Although apps such as Instagram stand to benefit from a ban (more about that below) in the short run, the long-term implications for any app are worrisome for tech businesses that own them. The legislation is worded vaguely enough to open the door for more apps to face scrutiny from the U.S. government.
- Economic impacts on content creators and small business owners who rely on the app.
- Global implications: the move would strain U.S.-China relations further.
Possible outcomes include:
- Senate passes the bill, and President Biden signs: the Senate passed the bill, and President Biden signs it into law, leading to a TikTok ban unless ByteDance met the divestment requirements. It’s worth noting that President Biden has said he would indeed sign the bill if passed by the Senate.
- Senate defeats bill: the Senate rejects the bill, keeping TikTok operational in the United States, at least for the time being.
- Senate modifies, and further negotiation ensues: the Senate amended the bill, leading to additional negotiations with the House, or potentially setting up a compromise scenario, such as a longer window of time to sell TikTok.
Based on the wide margin of victory in the House, TikTok has reason to be concerned.
How likely is it that ByteDance would sell TikTok?
Although TikTok is not owned by the Chinese government, here’s the rub: the Chinese government could block TikTok’s sale. And there is widespread speculation that the Chinese government would block the sale of TikTok. But there is also speculation that the Chinese government would permit a sale. No one can say for sure, but the Chinese government has voiced its opposition to sale.
What happens to content creators on TikTok if a ban happens?
Content creators would certainly be hurt. Creators who rely heavily on TikTok would lose their main audience engagement platform. This would drastically reduce their reach and visibility. Their followers would likely scatter across other social media platforms, making it harder to maintain a cohesive community.
And many creators earn significant income through brand deals and sponsored content on TikTok. A ban would eliminate or seriously reduce this revenue stream. TikTok’s Creator Fund pays creators based on engagement. A ban ends this income source.
Which apps stand to benefit from a TikTok ban?
If TikTok is banned, here are the contenders likely to gain the most, and why:
Instagram Reels
- Existing Integration: Instagram enjoys a natural advantage with its established user base and existing short-form video feature, Reels.
- Meta’s Resources: Backed by Meta’s financial power and development resources, Instagram could accelerate investment in Reels, enhancing features and attracting creators.
- Potential for easier transition: Many TikTok creators likely already have a presence on Instagram, making the shift easier for them and their audiences.
YouTube Shorts
- Massive reach: YouTube’s vast user base provides an immense potential audience pool for Shorts.
- Monetization potential: YouTube’s established monetization structure, including the Partner Program, could be lucrative for migrating creators.
- Algorithm-driven discovery: YouTube’s recommendation algorithm might give smaller creators better visibility compared to other platforms.
Snapchat Spotlight
- Engaged young audience: Snapchat boasts a strong foothold with a young demographic, a desirable audience for many advertisers on TikTok.
- Spotlight’s incentives: Snapchat’s financial incentives for viral Spotlight content could attract established and emerging creators.
- Innovation opportunity: Snapchat often serves as a testing ground for new social media features, potentially allowing it to capitalize on TikTok’s absence with unique offerings.
These platforms would likely see a significant influx of users migrating from TikTok and advertisers to tap into that audience. This could be a boon for their growth and revenue. To retain these new users and advertisers, these platforms would likely need to:
- Improve features:they might accelerate the development of existing features like short-form video editing tools, AR filters, and influencer marketing tools.
- Improve the user experience: prioritizing a smooth and engaging user experience would be crucial to keep new users coming and advertisers happy.
It’s important to remember that a user migration doesn’t automatically translate to equal advertiser migration. Advertisers would carefully consider if these new platforms align with their target audience and goals. The severity and specifics of the ban (complete ban vs. limited restrictions) would also influence the overall impact.
Meanwhile, TikTok is not standing still. The company recently announced an acceleration of commerce on the platform, including integrating Video Shopping Ads into its search ads.
How would a TikTok ban affect the advertising industry?
A TikTok ban would cause a ripple effect through the advertising industry although how much of an effect remains to be seen.
Obviously, advertisers who heavily relied on TikTok would need to adapt their strategies and reallocate their budgets to other platforms. The influx of advertisers from TikTok could intensify competition for ad space on platforms like Instagram Reels, YouTube Shorts, and Snapchat Spotlight. This could lead to:
- Higher costs: as demand for ad space rises, so might the cost per impression (CPM) or cost per click (CPC) on these platforms.
- Need for refinement:advertisers may need to refine their targeting strategies to effectively reach their desired audience on these new platforms.
But it’s difficult to say definitively how rates would be affected initially. Several factors would be at play:
- Scale of migration: the number of users and advertisers migrating from TikTok would significantly influence the supply and demand balance for ad space.
- Platform strategies: how these platforms approach the influx (e.g., increasing ad inventory, keeping it limited) would also play a role.
In the long term, competition for ad space is likely to rise due to the influx, potentially leading to a sustained increase in ad rates. However, this would depend on how effectively these platforms manage the surge and expand their ad inventory.
What should advertisers do?
First off, don’t abandon TikTok if you are satisfied with the results you’ve been achieving. Even if the legislation is signed into law, there will be legal appeals, and just because the Chinese government has been grumbling about blocking a sale by ByteDance, no one knows what’s going to happen.
But do investigate alternatives – and not just because of the potential for a ban. The fact is, competitors such as Instagram are catching up to TikTok. Research firm Sensor Tower says that daily time spent on Instagram grew 10 percent over the past year, compared with growth of 1 percent on TikTok. To be sure, TikTok enjoys scale, but as noted above, Instagram is backed by Meta. and the company is facing a slowdown in user growth. A concerning Wall Street Journal article reported on March 18:
TikTok is still gaining new users, but the number of people quitting the app has grown to the point that the total number of American users has stalled, the people familiar with the matter said. In the past, TikTok consistently added more users than it was losing.
U.S. average monthly users ages 18 to 24 declined by nearly 9% from 2022 to 2023, according to the mobile analytics firm Data.ai. Some users in their 20s say they have gotten off the app entirely to focus more on life and work.
Those trends have complicated TikTok’s relationship with U.S. advertisers, which have long been drawn to its young audience. TikTok met its ad-sales growth targets for the back half of 2023 but didn’t exceed them, according to people familiar with the matter.
It does not help that TikTok has also been at war with Universal Music Group, which has hurt the TikTok user experience by denying TikTokers the ability to get access to music from popular artists.
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