Ban – For investors in digital media firms like Meta and Snap, 2022 was a turbulent year.
And, while the difficulties may have gone, investors received some encouraging news this week, which renewed their optimism.
TikTok, a major competitor for many businesses, seems set for a ban in the United States.
The US House Foreign Affairs Committee voted on Wednesday to forward legislation allowing President Joe Biden the authority to ban TikTok.
The video-sharing software was established by ByteDance, a Chinese firm, and has been a big driver in snatching market share away from social media companies.
In an interview, Laura Martin, a Needham analyst, stated that if the ban is implemented, various platforms will gain, including:
- Snap, the parent company of Snapchat
- Meta’s Facebook
“Implications are great for anybody that has been losing market share to TikTok,” said Martin.
Throughout the years, ByteDance’s video-sharing app has risen dramatically in popularity in the United States.
Its presence was most noticeable in 2022, when the unpredictable economy impacted the internet ad business.
The platform had over a billion monthly users by 2021.
According to a Pew Research Center study, over 67% of American teenagers use TikTok, with 16% saying they are nearly often on the network.
According to Insider Intelligence, the app accounts for 2.3% of the worldwide digital ad market, trailing after Google (including YouTube), Facebook (including Instagram), Amazon, and Alibaba.
Despite TikTok’s meteoric rise and growing fame, its parent firm is situated in China, which poses some privacy issues.
Furthermore, ByteDance is a privately held company, which presents a problem among officials.
TikTok was outlawed on government devices by lawmakers in December as part of a bipartisan spending agreement.
Some governors have withdrawn the program from state computer networks and public colleges since then.
In January, Sen. Josh Hawley, R-Mo., suggested a countrywide ban.
On Wednesday, TikTok responded.
“A US ban on TikTok is a ban on the export of American culture and values to the billion-plus people who use our service worldwide,” said a company spokesperson.
“We’re disappointed to see this rushed piece of legislation move forward, despite its considerable negative impact on the free speech rights of millions of Americans who use and love TikTok.”
Read also: Meta goes the extra mile for teen protection, adds new tool
Reality of the ban
While another bill was heard by the committee this week, it will take time for legislators to impose serious restrictions.
If the measure is approved by the Republican-controlled House, it must then be approved by the Democratic-majority Senate.
As a result of the resistance expressed by certain Democrats, there will be a problem.
Notwithstanding, if it passes the Senate, Biden will either sign it or veto it.
TikTok has been criticized by US officials previously.
During his presidency, Donald Trump stated that he intended to stop it by executive order in 2020.
To avoid TikTok being taken down, ByteDance had devised a future spinoff.
Nonetheless, they did negotiate an arrangement with Trump that includes corporations such as Oracle and Walmart.
The two companies were scheduled to become investors, but the deals never materialized.
TikTok may now be purchased, according to Laura Martin.
While it may be a lesser competitor with questionable experience, it would not just quit operations.
If TikTok is banned in the United States, Meta will profit the most, according to JMP analyst Andrew Boone.
Facebook has increased its spending in its Secondary features, which, unlike its flagship newsfeed, have yet to establish a sustainable revenue model.
In its fourth-quarter earnings call, Meta stated that it expects Reels to attain revenue neutrality by the end of 2023 or early 2024.
“If TikTok were to go away, I think that there would be a lot more consumption of Instagram Reels,” said Boon.
Potential benefits were also mentioned for Snapchat Spotlight and YouTube Shorts.
In 2022, Meta’s Reels, Spotlight, and YouTube Shorts all failed.
After three straight quarters of falling earnings, Meta lost two-thirds of its value.
Snap stock, on the other hand, plunged 81% as growth slipped into the single digits.
For the second time in a row, the company declined to provide a forecast.
YouTube advertising revenue fell 8% year on year in the fourth quarter, falling short of analyst projections.
Because of TikTok’s success, several digital media firms have copied its business model.
As celebrities chastised Instagram for attempting to imitate TikTok, CEO Adam Mosseri addressed the modifications.
Another Instagram post, which gained more than 1.6 million likes and more than 140,000 petition signatures, urged the corporation to keep Instagram as it was.
Image source: Tech Crunch