At Song Candy Media we have kept our fingers on the pulse of the rapidly developing legislation and conversations surrounding the potential ban on TikTok. In the last 3 weeks we have seen TikTok banned from U.S. government devices, the RESTRICT ACT introduced, and a call from the Biden Administration, demanding Bytedance sell off TikTok or risk a full U.S. ban.
IS A BAN ON TIKTOK LIKELY?
While tensions between the U.S. government and TikTok are high, our professional assessment is that a ban is highly unlikely. The ban would still need to pass in Congress, which will be challenging for 3 reasons:
The ban poses a potential threat to freedom of speech and would be challenged in court. The opposition of this ban includes the American Civil Liberties Union, the Electronic Frontier Foundation, and other civil liberties groups who claim this ban is unconstitutional. The ACLU has stated that the selective ban of entire platforms "could cut off the flow of information, art, and communication that social media provides, interfering with communities and connections users in the United States have with each other and with people around the world. This interference with freedom of expression and association violates the First Amendment."
The ban is predicated on a concern for national security - a concern that is lacking in hard evidence. The U.S. government’s concerns are twofold. One, they are concerned that the Chinese government could use its national security laws to access the personal information that TikTok, like most social media applications, collects from its US users. Secondly, they are concerned that if China has oversight into TikTok’s algorithm and/or business they could exert pressure on TikTok to shape what users see or don’t see on the platform, which brings forward concerns of the potential for censorship and propaganda. There is currently a lack of evidence that these scenarios are or have occurred. Furthermore, TikTok has committed to spending $1.5B on data security that would create a firewall between TikTok and Bytedance. This is known as Project Texas, done in partnership with Austin, TX based company, Oracle. Since June of 2022 all U.S. user data has been stored in the Oracle Cloud.
Cyber security risks that have been identified are risks ubiquitous to the industry, not just TikTok. TikTok claims to use keylogging to debug, troubleshoot and detect bots. Not excusing keylogging, but this technology is widespread in the industry. TikTok also uses tracking pixels from 3rd party websites to bolster its advertising. Pixel tracking is used by all tech giants for their advertising businesses including Meta and Google. These risks should call attention to the need for better regulation across the industry as a whole.
WILL BYTEDANCE SELL TIKTOK?
To avoid the ban Bytedance could sell TikTok to a U.S. buyer. The question is to who? TikTok has been valued at between $40-$100 billion dollars, according to Business Insider. A sale of this size narrows the buying pool of potential buyers. In an interview with CBN News, Caitlin Chin, a fellow at the Center for Strategic and International Studies points out that a sale of this stature would bring on antitrust scrutiny. She calls out that the buyers would need to deep pockets and “a high enough risk tolerance.” Chin believes that this eliminates Meta and Google from the running. Oracle and Microsoft previously put in bids to acquire TikTok when the Trump Administration threatened a ban if Bytedance did not sell to a US buyer. Microsoft lost the bid and Oracle walked away as TikTok’s U.S. technology partner. Its possible Microsoft or Oracle could make moves again toward an acquisition, though neither company has stated an interest in doing so.
Another obstacle for Bytedance is Chinese legislation. The Chinese government put the TikTok algorithm on a list of restricted exports in 2020. If Bytedance did want to sell TikTok, the Chinese government would have to approve the sale.
WHAT CONTINGENCY PLANS SHOULD ADVERTISERS HAVE IN PLACE IF TIKTOK IS BANNED?
Maintain a diversified portfolio. The rule to a well balanced portfolio is diversification. Diversify your budget and tactics across platforms, audiences and formats to optimize performance and mitigate risk.
Follow the audience. The TikTok short form video, meme like format is not going away. The audience will bring this with them where they settle next. The most likely place is Instagram. This is where we are already seeing TikTok content surface and trend about 2 weeks after it trends on TikTok.
Keep in mind platforms that have prioritized creators. TikTok has had fast adoption by creators for being creator-centric. TikTok has easy to use tools for enabling in-app content creation. The algorithm makes it easy to reach many of the right viewers and build a community fast. Lastly, it has provided ways for creators to easily monetize content. Meta has been working to get Reels on par with TikTok features and YouTube offers more ways for creators to monetize their content and pays higher rates per view than TikTok. For these reasons Instagram Reels and YouTube Shorts will be the next stop for creators if TikTok is banned.
CONCLUSION:
A TikTok Ban is unlikely to happen because it will be hard to pass in Congress for 3 reasons:
While some members of the house see it as protecting national security, others see it as unconstitutional, challenging the first amendment, freedom of speech.
The grounds for the ban are based on hypothetical national security concerns that are currently lacking in evidence.
Cyber security concerns that we can point to, namely, keylogging and pixel tracking, are an industry-wide problem, which would need to addressed through broader legislation and reform.
Bytedance has the opportunity to sell TikTok, but has a narrow pool of potential buyers. Buyers would need to have deep pockets and a high risk tolerance to take on the high valuation and antitrust scrutiny that comes with a sale of this size.
As a risk management practice for the uncertainty ahead, advertisers should diversify their media mix, follow where the TikTok audience would most likely migrate to if TikTok were to be banned (Instagram), and follow where creators are likely to flock to based on platform functionality and commission for creators (Instagram and YouTube).
Song Candy Media is Community Marketing Agency, specializing in short form video and sound centric strategies that help brands connect with and grow their online communities. Everyone on our team has at least 10 years of experience in the digital marketing space, spanning PPC, Search, Social, Programmatic, Video, Affiliate, PR, and Influencer marketing. We have the skills to pivot active campaigns to other platforms that make sense for our clients’ audiences. We have successfully done this in the past with previous platforms that have been sunsetted mid-campaign flight.
Whether its Instagram Reels, YouTube Shorts, or any other platform that emerges in the future, we are committed to creating engaging content that connects brands with their audiences.
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Christine Hunt
Gabbie Bradford