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 would force a sale of the app if it wishes to remain in the region, raises questions of how an evolving social media landscape could play into TikTok’s fate and what the impact may 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 total ban to go into effect given 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 will be some down time before a decision is made, questions have understandably surfaced as to what makes this ban attempt different, who could stand to benefit 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 came 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 buy the app came forward, including Microsoft, Walmart and Texas-based tech firm Oracle, which now helps store U.S. TikToker data. Trump has since changed his stance and come out against the current push for a ban.
While the latest ban attempt is in some ways reminiscent of 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, according to Mike Proulx, vice president and research director for Forrester. The years since 2020 have seen a rise in questions around social media’s impact on aspects like mental health, misinformation and children’s safety while consumer privacy concerns and antitrust legislation have reached a boiling point.
“All of these things together equate to the perfect storm of government needing to take some type of regulatory action with regards to social media,” Proulx said. “This is something that has been brewing for some time and the conditions just happened to be ripe at the moment for heightened action.”
There’s no shortage of instances that demonstrate the growing desire by the government to regulate social media. In January, a Senate hearing discussing apps including TikTok, Snap, Meta and X (formerly Twitter) and their ability — or lack thereof — to keep children safe saw Republican Sen. Thom Tillis of North Carolina decrying to top social executives that, “We could regulate you out of business if we wanted 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 data has also been a hot-button topic across the board. In the U.S., TikTok has attempted to address concerns about its data practices with Project Texas, its billion-dollar U.S. data separation project. However, damning findings from The Wall Street Journal 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 potential push to combat China’s attempts for economic dominance, Washington could be more likely to go through with a TikTok ban if ByteDance refused a sale.
Picturing a potential suitor
Though a big “what if” remains as to whether or not the bill banning TikTok would pass, an even greater speculation is whether or not ByteDance would agree to divest and if its highly praised algorithm would be part of the deal. In response to the news, TikTok released a statement claiming that “the bill was jammed through for one reason: it’s a ban,” going on 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 reportedly already come forward, among 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 buy the app. Mnuchin, who chaired the Committee on Foreign Investment in the U.S., is the founder of Liberty Strategic Capital, which has made a number of investments, including with cybersecurity firms, angling the exec as a strong potential prospect.
Whoever might attempt to purchase TikTok would need a lot of capital. The app, a favorite among younger audiences, was reportedly valued internally at $268 billion in December.
“If, and that is capitalized in italics, ByteDance were to decide this, there is momentum already brewing on potential buyers because of the impact that TikTok as an app has had on culture, society, demographics, creativity, all sorts of aspects of daily lives for nearly half of the country,” said Proulx.
During 2020’s ban attempt, hopeful TikTok buyers came forward for various reasons. Walmart hoped to boost its advertising business while Oracle wanted help bolstering its data services. TikTok in the years that followed has matured into a powerhouse, building out a strong advertising business while also extending into areas like social commerce. Accordingly, interest from potential suitors this time around could take a new form.
“The conversation might be different this time around than it was in 2020, when it just seemed like a startup social network,” said David Tiltman, senior vice president of content for WARC.
“What is the AI play around TikTok? I don’t have an answer for that, but that is a question that will be asked.”
David Tiltman
Senior vice president of content, WARC
U.S. advertising spend on TikTok was estimated to be $8.7 billion in 2023 and is expected to grow to $10.9 billion this year, according 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 aspects of TikTok’s business like commerce, he expects questions to rise around the app’s potential to mesh with ongoing hype around AI.
“What is the AI play around TikTok? I don’t have an answer for that, but that is a question that will be asked,” Tiltman said.
Given the context of the latest ban attempt, it’s critically important that any potential buyer has both the credibility and public perception of standing for consumer privacy rights, according to Proulx.
“It would have to be a company that both the government and consumers trust as an objective, honest, third-party broker in the mix, or else you end up trading one problem for another, or 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 same year. 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 may bring with it adverse consequences.
“Meta becomes the benefactor in all of this, and while it’s good for Meta as a company, both from the standpoint that they will likely see a material increase in both users and advertising 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 year plan to increase 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 action against TikTok is likely to send marketers into something of a scramble — 67% of U.S. business-to-consumer marketers report that their organization plans to increase investment in TikTok this year, per Forrester’s 2024 Marketing Survey. As a decision on the app looms, Proulx advises beginning to plan around the potential outcomes.
“Every marketer needs to be contingency planning now, and if they aren’t,” Proulx said, “they’re already behind the curve.”
