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TikTok’s potential U.S. ban stirs marketers, spurs contingency planning

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Imagine this: What if TikTok were banned in the U.S.? What would happen to the billions of dollars currently driving its ads business?

While this question has been asked several times in recent years, its answer is perhaps more pressing now than ever before.

U.S. lawmakers moved a step closer to banning the app after a vote on Wednesday in the House of Representatives. If ratified by the Senate, the bill would make it illegal to distribute or host TikTok in the U.S.

It would effectively block the app from its 170 million American users — unless its Chinese owner, ByteDance, sells its stake in the popular app.

What happens next depends on a few things.

Namely, what the Senate thinks. The bill’s fate now lies there, and thus far, it’s been unclear how senators will respond.

Equally uncertain is ByteDance’s reaction. It remains unclear whether executives there would readily approve a sale given the optics surrounding such a move: essentially, one of China’s most innovative companies having to acquiesce to America.

Considering all these factors, the prospect of a ban, while improbable, isn’t impossible — not by any means. Whatever concerns marketers may have had over the future of the app now seem more justified.

“This [the ban] feels like the most legitimate threat to it from our point of view, and so whereas previously, our response was, ‘let’s wait and see,’ I think now I would say our response is, we’re starting to have conversations around the implications of this and the ramifications of it,” said Kevin Goodwin, vp of digital marketing at New Engen.

Cue a lot of anxious clients.

Goodwin said he is trying to get out in front of that, anticipating the types of questions normally reserved for when they’re making contingency plans. Those clients are going to be asking about how a ban would impact their growth, he said. They’ll want to know whether they need to readjust their strategy as a result. Depending on the response, they may seek ways to preemptively mitigate any negative repercussions. In short, there’s certainly heightened tension surrounding the topic of TikTok in recent days.

Tom Stone, managing partner at digital marketing agency re:act, knows about these tensions all too well.

“Everyone is ready to go — we have been planning for this for the last three to six months,” he said. “TikTok Always On [which involves creating a continuous stream of content rather than a short-term campaign] is also extremely expensive to run for our clients due to the sheer volume of content that is required, some clients may actually be a little relieved from a budgetary perspective in all honesty.” Though he did not provide exact budget figures.

This isn’t the first time the likes of Goodwin and Stone have had to deal with the possibility of TikTok being banned. The geopolitical tensions around TikTok have, in effect, made discussions like this par for the course.

“As far as how brands are thinking about this and panicking or curious, I would say is probably the way I would describe it, but they also acknowledge that there have been a lot of similar instances, but this is also the first time when there’s really been some teeth to it,” said Jack Johnston, associate director at digital marketing agency Tinuiti.

Let’s say, hypothetically, the ban does happen, and marketers like the ones working with Tinuiti and New Engen are forced to activate their contingency plans. A lot of money would suddenly be up for grabs in a hotly contested ad market.

​​For now, it’s hard to say with real confidence where that money would end up. After all, it’s not like TikTok’s growth has come at the expense of one corner of the market or a specific incumbent. If anything, the dollars pouring into that business have come from everywhere. So it stands to reason that the same logic would apply if money started to flow out of the company.

One place that money won’t go (probably) is to TikTok in other markets. That’s not really how marketers allocate their ad dollars. They do so at a country level, not a global one. That leaves the likes of Instagram, Youtube, Snapchat — i.e. anything with a short-form video ads business — as potential places for all that money.

And there could be a lot of money up for grabs. Reports from sources like The Information, combined with analysis from media experts like Brian Wieser, suggest that TikTok may have generated around $18 billion in ad revenue last year.

But that money won’t just naturally flow into those other ads businesses.

For this to happen, TikTok would need to be more directly comparable to those businesses. Given TikTok’s unique amalgamation of features from various platforms and media owners, achieving such a direct comparison is challenging.

Consequently, any ad business seeking to benefit from TikTok’s absence will have to fight for it. In this battle for market share, the creator economy could be a pivotal battleground.

“If I were running any of these platforms I’d be cutting deals left, right and center with influencers and creators,” said Wieser.

He’s talking about a land grab of sorts: platforms intensifying their efforts to recruit creators, pouring more resources into capturing larger audience shares. The ones that capture this attention best always seem to come out on top. Money follows eyeballs in advertising.

As Wieser explained: “I generally observe that there’s a relationship between share of spend on content and share of time. Content has a market value that’s broadly related to its usage.”

Before any potential scramble for creators, it’s reasonable to expect that the ad dollars previously allocated to TikTok in the U.S. would be redistributed among the primary platforms where advertisers already invest. Meta would likely be the biggest beneficiary, followed by YouTube and Google, according to eMarketer analysis.

Further, Meta could capture between 22.5% and 27.5% of TikTok’s U.S. ad revenues in the event of a ban. The higher estimate assumes a significant reallocation of TikTok’s ad revenues, while the lower estimate presumes a reallocation rate of approximately 75%, according to eMarketer.

YouTube stands to gain an additional $1.24 billion to $1.53 billion, with $410 million to $500 million of TikTok’s ad revenues redirected to Google’s display and search businesses, according to eMarketer.

“If you look at TikTok’s ad revenues in the US, we are predicting TikTok to bring in about just under $9 billion ad revenues in 2024,” said Jasmine Enberg, principal analyst for social media at eMarketer. “It’s certainly not nothing, but it would be incremental revenues to Meta considering that we’re expecting it to bring in about $62.7 billion this year. So Meta is the dominant force in social media advertising. So it would be an easy switch for advertisers to move their ad dollars to Meta if TikTok were to be banned.”

Contingency plans, spending forecasts and the battle for creators all depend on numerous uncertainties becoming clearer. Until there’s clarity on the future of TikTok in the U.S., many advertisers are pressing forward at full throttle.

“We’re not seeing any advertisers pull budget from TikTok currently,” said Colleen Fielder, group vp of social media solutions at Basis Technologies. “We’ve actually been prioritizing TikTok in place of other platforms based on user behavior/time spent and because of the rep support we’re receiving and various ad credits TikTok is offering.”

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