TikTok to sell up or be banned in the U.S.

President Joe Biden has signed a bill that forces TikTok to either separate from Chinese parent company ByteDance, or face a ban in the U.S. The bill means, ByteDance has just 9 months to divest from TikTok, failing which app stores will be prohibited from distributing TikTok in the U.S.

In 2023, TikTok drove $15 Billion in revenue for small businesses in the U.S. according to their report. It’s reported that small and midsize businesses (SMBs) contributed $24 billion to the U.S. economy through their use of TikTok.

The report also highlights that SMBs utilising TikTok supported 224,000 jobs in the U.S. in 2023, with the most significant impact observed in states including California, Texas, Florida, New York, and Illinois. When we look to break this down into sectors, according to the report, it shows the largest influence was in the food and beverage sector, the second largest sector being health and wellness, followed by business services in third.

According to Statista, TikTok’s market share is already compromising 26% of the market, compared to Instagram’s 14%. The ban on TikTok will hugely impact Brands and businesses, given its 170 million U.S. users. Not only will Brands and businesses lose access to this demographic, but they will also struggle to maintain current conversion rates.

 

So, where will all the marketing budgets go?

Whilst it is unclear at this time exactly where marketing spends will be redirected should TikTok lose their battle against Biden, the likelihood is YouTube or Meta benefitting from TikTok’s demise. The two-leading short-form video platforms at present aside from TikTok are YouTube Shorts and Instagram Reels.

YouTube accounts for roughly 25% of global media traffic, with 74% of Adults in the U.S. utilising YouTube. In 2020, YouTube Shorts got 3.5 billion daily views and by 2023 this had increased to 50 billion daily views. With a further $100 million in funding invested in 2021 to further encourage content creators on the platform it is clear YouTube are gearing up to be a front runner should TikTok’s downfall happen.

Instagram is a leading social media platform and has been one of the top runners over the last few years. With short form videos growing in popularity, it is evident that Instagram Reels will follow suit.  With the Instagram algorithm prioritising Reels over other content formats and showing them more prominently in people’s feeds, Instagram users watch  17.6 million hours of reels per day. Although this may be ten times less than the 97.8 million hours people spend watching TikTok videos per day, Instagram also offers other content formats for user to interact with. Instagram Reels usage also increased by 57.4% Year-On-Year in 2023, with Meta also introducing Reels Ads in 2021 giving businesses the option to further grow their reach to 726.8 million users through Reel Ads, converting to over half of the platform’s total advertising reach.

With the uncertain future of TikTok in the U.S., President Biden’s bill urging TikTok to sever ties with ByteDance or be banned altogether has thrown the future of this platform and marketing efforts alike into question. Whilst TikTok continue to fight against this bill, the impact of the potential ban cannot be understated, considering their significant contribution to SMB’s, job creation and the U.S economy as a whole.

As brands and businesses brace for the potential loss of access to TikTok’s user base, and whilst no definitive answers are present, platforms such as YouTube Shorts and Instagram Reels stand poised to inherit the spotlight, should the opportunity arise. YouTube’s global presence and investment into short-form video content signal its readiness to step into the gap, while Instagram’s algorithm and growing popularity of short videos also position them as a potential successor.

While the bill signed by President Biden presents a significant threat to TikTok’s presence in the U.S., it’s worth questioning whether such a drastic measure can be justified considering the substantial financial gains the U.S. economy has enjoyed through the platform. However, amidst the financial gains, it can’t be overlooked the possibility that this bill might be Biden’s strategic move to redirect investments towards American owned platforms like YouTube and Meta. By potentially pushing users and advertisers toward homegrown platforms, they might be hoping to give American tech companies a leg up, but this move could disrupt the mix of creativity and business that millions of users have grown to love, particularly amongst Gen Z’s.

 

 

 

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