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TikTok is an addiction and an opportunity. 

TikTok has created a total abdication of reason, a messy tangle of emotions, and a lack of will. The reason for me to say this is the addiction-like symptoms and lack of control of the user while using the application. It’s not just me stating this fact, there are numerous studies that point in the direction of problematic use of TikTok or other social media platforms. I am not here to judge or pass remarks on the users of social media, I am a user myself. 

On one side where addiction is hooking the next generation on the phone scrolling short-format videos. On the other side, it is also providing opportunities for creators and small businesses in building an economy at a platform level that at least in theory provides the same surface for all kinds of creators. 

The goal of this article is to focus on outcomes that will follow the ban of TikTok from the US market. What does it mean for the creators, competitors, and cold-war climate? I have my thoughts in the conclusion section.

Before I dive in I want to talk very briefly about the political climate that is pushing the US to take the decision to ban TikTok. From WSJ: 

The concern around TikTok in Washington is drawing fresh attention to how Chinese apps have woven themselves into the fabric of young Americans’ lives… Four of the five hottest apps in the U.S. in March were forged in China.

The popularity of the Chinese apps has gotten them caught in the crossfire of US-China geopolitical tension. The reasoning coming from the government is that the Chinese government firstly could gain access to American user data and secondly could influence what Americans see on the app.

The US and other governments of the world have recognized the fact that social media companies can be used to influence elections. The US is not the only country to ban TikTok. India has a nationwide ban on TikTok and dozens of Chinese apps. Canada, Belgium, New Zealand, Norway, Taiwan, etc have banned TikTok on the official phones of government officials.

Trump’s government banned the download of TikTok from the app stores but federal courts stopped the order and when President Biden came into office, his administration paused the attempt to ban the app.

I am not an expert on geo-political climate and hence cannot speak to the impact it may have on the US-China relationship. However, the technological cold war climate between the two countries will only get worse from here. The day TikTok is banned from the US will only mean a bad day in the office for some of the biggest US companies doing business in China.

With this said, let me start with the impacts of banning TikTok from the US market. Government actions are either a boon or a bane. It really depends on which side of the line you are standing on. In the story of TikTok, we have a similar situation. We have winners and losers.

Who are the winners?

1. Rivals

A possible ban on TikTok means a boon for its biggest rivals in the digital ad market. The below chart from insider intelligence is suggestive of the growth TikTok has stirred in the digital ad market. In my blog here, I had written:

Influencer ad-spend on Instagram ($2.23B) is still 3x that of TikTok ($770M). But TikTok is growing fast. At this rate, TikTok will overtake Facebook and become the No2 platform by 2024, behind YouTube. This is not good news for Meta (parent FB and Insta).

This chart is indicative that TikTok has in fact taken over Facebook as the number two platform for digital ads. Facebook and Instagram short-form video platform reels, a direct competitor to TikTok, stand to benefit in particular. Meta has struggled to generate revenue from reels and has stated in the latest earnings call that it plans to make meta revenue neutral in reels by end of 2023. This ban could certainly boost Meta’s and Google’s shares and revenue.

2. Parents

Teens across the country are struggling to rein in the use of social media. A new Pew Research survey confirms the growth of popularity of TikTok among teenagers between 13 and 17 years. 67% of the teens say they use TikTok and 16% of teens almost use it constantly. Teens using Facebook as the choice of social media platform has dropped from 71% in 2014-15 to 32% in 2022.

The ban would mean, either a break for teens from social media such as TikTok or they will flock over to other social media companies. This is a tough guess as it is hard to predict the behavioral pattern change that will occur as TikTok is banned. However, I believe there will certainly be a gap in switching from TikTok to another platform that can be utilized to build alternate habits in children.

Who are the Losers?

1. Creators – Don’t create videos, create TikTok’s

TikTok creators are small businesses trying to make a living and put food on their tables, teachers creating educational material for next-gen students, and innovative creators who represent an everyday American to the world. Creators or influencers rely on TikTok to sell everything from yoga, exercise, book, proteins, etc. Small businesses rely on low-budget advertisement and marketing. Big companies advertise on TikTok to promote their businesses and build strong brand recognition.

All of these folks can move to other platforms but there is a reason they are on TikTok. As I have established in my previous blog why TikTok has managed to grow exponentially. This is the exact reason why influencers or small businesses want to stick to TikTok.

The answer lies in its algorithm. If you look at Facebook the idea behind the app was to connect you with friends and family. Facebook’s social algorithm worked assiduously to find more family and friends that you can connect with. Their feeds would show up and you see what is happening in their life. Then you started liking businesses and events on Facebook, your feeds now have more news, games, etc items than your friends’ feeds. This means advertisement has taken over your social media feeds on Facebook. The ads that show up are for the content that you have shown interest in. The pages or people you follow.

In short, FB and Twitter provide you with content that you expect based on who you follow and like.

TikTok is different. It’s a dopamine powder, where every swipe provides you the promise of a hit. I want to be honest here, I got indulged in that too. I did not have TikTok, to write about this article I downloaded and just got hooked. TikTok is all about reels (almost the same as Insta but a better version). Once you are in the system, you keep watching for hours. It’s free entertainment at best.

Reels have nothing to do with what your friends are doing vs what you want to see. It’s all about the guilty pleasure of escapism and they do a heck of a job. Meta knows this, and they have noticed this trend with Insta reels themselves. Hence recently, Meta announced that the Facebook app will transform into a TikTok-like selection of algorithmically chosen videos and shunt of content posted by family, friends, and groups.

TikTok is the dopamine powder. Its algorithm is helping build brands. Other social media companies can provide the same but that would mean moving significantly shifting away from their visions of building a social society.

2. Shareholders and their value

TikTok is worth $67.5B per statista. Ban on TikTok would mean bad news for its investors which include ByteDance which owns 20%, employees which own 20%, and 60% are owned by global investors including the likes of Softbank, Sequoia, and KKR.

These investors definitely risk losing a major chunk of their value following the ban. TikTok also employs 7000 people in the US, which would mean tough conditions for these employees in a very hazy tech recruitment climate.

Concluding thoughts

The US should adopt controls that they think are justified when applied to US-based companies globally. They should be ready if China or any other country did the same thing to Facebook, Google, or Amazon. The US should not be blind to the differences between democratic and authoritarian countries in practice. Meaning, if the US designs a set of rules on paper that provide an environment for TikTok to make changes in the democratic conditions they should not expect the same from authoritarian countries like China which may not have the environment to put these conditions in action.

While putting these rules, the US should also consider the political situation at hand. Biden administration is trying to appear tough after the Trump administration has created the furor on China. This administration wants to show that they are really tough on China. Even if you agree that China is a threat in multiple ways, you just don’t want a policy that appears tough — you want one that works.

My thought is banning TikTok is not the solution to the overall digital threat that looms over not just the US but globally. The amount of personal data that has been collected over the last decade and is being continued to be collected has impacted our lives and for sure has changed our habits and thinking. The real problem to solve is not just banning TikTok or ByteDance from sharing personal data with the Chinese government but creating stricter laws that apply to all tech companies. Meta and Cambridge Analytica were not China and Google knowing your preference and manipulating your behavior is not China.

Laws should limit the collection and misuse of personal data as a whole. Freewheeling of data brokerage services and businesses requires restriction. Governments need to ensure that data is no longer readily available.

Cheers