Just imagine: What would happen if TikTok were banned in the US? What would happen to the billions of dollars currently driving its advertising business?
US lawmakers moved one step closer to banning the app after a vote in the House of Representatives on Wednesday. If approved by the Senate, the bill would make it illegal to distribute or host TikTok in the United States.
Unless Chinese owner ByteDance sells its stake in the popular app, it will effectively be blocked from its 170 million U.S. users.
What happens next depends on several factors.
That is, what the Senate is thinking. The fate of the bill hangs in the balance, and so far it's unclear how senators will react.
Equally uncertain is ByteDance's response. Given the circumstances surrounding such a move, it remains unclear whether Chinese executives will readily approve the sale. Essentially, this means that one of China's most innovative companies will have to acquiesce to US demands.
Considering all these factors, a ban is unlikely, but not impossible. It's not impossible. All the concerns marketers had about the future of apps now seem justified.
“this [the ban] From our perspective, it feels like the most legitimate threat to it. So where before the reaction was, “Let's wait and see,'' I think we can now say that we're starting to have conversations about the implications. “This and its implications,” said Kevin Goodwin, New Engen's vice president of digital marketing.
We queue up a lot of clients with anxiety.
Goodwin said he tries to anticipate and get in front of the types of questions that are usually prepared when creating emergency response plans. Those customers will ask how the ban will affect their growth, he said. As a result, you'll want to know if you need to readjust your strategy. Depending on the response, we may seek ways to reduce the negative impact in advance. So there's certainly been a lot of tension surrounding the topic of TikTok in recent days.
Tom Stone, managing partner at digital marketing agency re:act, knows these tensions all too well.
“Everyone is ready to go. We've been planning this for the past three to six months,” he said. “TikTok is always on” [which involves creating a continuous stream of content rather than a short-term campaign] It's also very expensive to run for our clients due to the sheer amount of content required, although to be honest, some clients may be a little more at ease from a budget standpoint. ” However, the exact budget amount was not disclosed.
This isn't the first time Goodwin, Stone and others have had to deal with a potential TikTok ban. Geopolitical tensions over TikTok have effectively made such debates par for the course.
“As for how brands are thinking about this, panicking or being curious, I guess that's probably how I'd describe it, but they're also saying that there are a lot of similar examples. “I admit, but it's also a first for me, and it's been a real learning experience,” said Jack Johnston, associate director at digital marketing agency Tinuity.
If the ban actually happens and marketers Like those working with Tinuiti and New Engen. They are forced to activate their contingency plans. In a fiercely competitive advertising market, there will suddenly be a lot of money available.
For now, it's difficult to say with confidence where that money will be spent. After all, TikTok's growth hasn't come at the expense of one corner of the market or any particular incumbent. Rather, the money being poured into the business comes from everywhere. So it stands to reason that the same logic would apply if money starts to flow out of the company.
One place where the money won't (probably) flow is on TikTok in other markets. That's not really how marketers allocate advertising dollars. They do it at a national level, not at a global level. That leaves Instagram, YouTube, Snapchat, and anything else that's in the short-form video advertising business as potential places to raise that kind of money.
And there's potential for a lot of money. Reports from sources such as The Information, combined with analysis by media experts like Brian Wieser, suggest that TikTok may have generated about $18 billion in advertising revenue last year.
But that money won't naturally flow into other advertising businesses.
For this to happen, TikTok needs to become more directly comparable to those businesses. TikTok's unique combination of features from different platforms and media owners makes direct comparisons like this difficult.
As a result, advertising businesses looking to profit from TikTok's absence will have to fight for it. The creator economy could become a crucial battleground in this battle for market share.
“If I were running one of these platforms, I would be cutting deals with influencers and creators left, right and center,” Wieser said.
What he's talking about is some kind of land grab. Platforms are ramping up efforts to hire creators and devoting more resources to capturing larger audience shares. The ones that best capture this attention always seem to come out on top. In advertising, money chases eyeballs.
Wieser explains: “It is generally observed that there is a relationship between the proportion of spending on content and the proportion of time spent on content. Content has a market value, and that market value is broadly related to its usage. .”
Before a scramble for creators occurs, it would be natural to expect that ad dollars previously allocated to TikTok in the U.S. will be redistributed among the major platforms where advertisers are already investing. Meta is likely to be the biggest beneficiary, followed by YouTube and Google, according to eMarketer's analysis.
Even further away, If banned, Meta could earn between 22.5% and 27.5% of TikTok's U.S. ad revenue. According to eMarketer, the higher estimate assumes a significant reallocation of TikTok's ad revenue, while the lower estimate assumes a reallocation rate of about 75%.
YouTube is expected to earn an additional $1.24 billion to $1.53 billion, according to eMarketer, with $410 million to $500 million of TikTok's ad revenue going to Google's display and search businesses. That's what it means.
“Looking at TikTok's ad revenue in the U.S., we project that TikTok will bring in just under $9 billion in ad revenue in 2024,” said Jasmine Enberg, principal social media analyst at eMarketer. talk. “It's certainly not for nothing, but given that it's expected to generate about $62.7 billion in revenue this year, it will be an increase in revenue for Meta. That means Meta is a dominant force in social media advertising. Therefore, even if TikTok were to be banned, it would be easy for advertisers to shift their ad spend to Meta.”
Contingency plans, spending forecasts, and the scramble for creators all hinge on a number of uncertainties that will emerge. Until TikTok's future in the U.S. is clear, many advertisers are moving forward at full throttle.
“Right now, we don't see advertisers pulling their budgets away from TikTok,” said Colleen Fielder, group vice president of social media solutions at Basis Technologies. “We have actually prioritized TikTok over other platforms based on user behavior and time spent, as well as because of the support from our representatives and the variety of advertising credits that TikTok offers.”
