A possible upcoming U.S. ban on Chinese social media platform TikTok could prompt a redistribution of advertising market share, benefiting rivals in the digital ad space including Meta Platforms Inc. (META), Alphabet Inc. (GOOG), and Snap Inc. (SNAP).
- A possible U.S. ban on TikTok could benefit rivals including Meta, Alphabet, and Snap.
- TikTok’s rapid growth has threatened long-standing social media platforms that are already struggling to grow userbases and attract digital advertising dollars.
- Nearly a fifth of all internet users are active on TikTok, which has about 2.3% market share of digital advertising globally.
- U.S. regulators are investigating TikTok over alleged surveillance of U.S. journalists, with CFIUS recently asking owner ByteDance to sell its stake in the platform or face a possible ban.
Legislative pressure is building on ByteDance, the Chinese privately held company that owns TikTok, amid national security concerns. Earlier this month, the U.S. Committee on Foreign Investment in the United States (CFIUS) asked ByteDance to sell its stake in the platform or face a potential ban.
Ban Could Benefit Social Media Rivals
A possible ban could be a boon for some of TikTok’s beleaguered rivals in the digital ad market, which has struggled in recent months amid a cooling economy. Platforms like Facebook, Instagram, YouTube, and Snapchat could be “huge beneficiaries” of a TikTok ban, Needham analyst Laura Martin told CNBC.
TikTok’s hold on the global digital advertising market is due in large part to its popularity with teenagers, as two-thirds of U.S. teens use the platform. TikTok controls about 2.3% of the global market, behind only two older, more established rivals.
However, TikTok has grown at a rapid pace in the last few years, while other platforms have struggled. As of 2023, an estimated 834 million users access TikTok at least once per month, representing almost a fifth of all internet users worldwide.
Facebook’s short-form video platform Reels, a direct competitor to TikTok, stands to benefit in particular. Meta so far has been unable to generate consistent revenue from Reels, although it said in its latest earnings call that it expects the platform to be revenue-neutral by the end of 2023 or early 2024. Instagram’s Reels feature and Snapchat’s Spotlight tool, also similar to TikTok’s format, could also benefit.
Meta, Snap, and Alphabet’s YouTube posted declining growth, revenue, or share prices throughout 2022 as the broader tech industry faltered after rapid growth early in the pandemic.
The U.S. Justice Department is in the midst of an investigation into alleged surveillance of U.S. journalists at BuzzFeed and the Financial Times through TikTok. Employees accessed journalist data in an apparent effort to identify leaks of company information. ByteDance said last week that it “strongly condemned” the actions of those employees, who were no longer at the company.