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Ban – 2022 was a turbulent year for investors in digital media businesses such as Meta and Snap.
Yet, the difficulties may have passed as investors received some encouraging news this week, reviving their optimism.
TikTok, a major competitor for many businesses, is on the verge of being banned in the United States.
The news
The US House Foreign Affairs Committee voted on Wednesday to forward legislation giving President Joe Biden the authority to ban TikTok.
The video-sharing app is developed by the Chinese business ByteDance, and it has been a major driver in stealing market share from social media titans.
In an interview, Laura Martin, a Needam analyst, stated that if the ban is implemented, multiple platforms will profit, including:
- Snap, the parent company of Snapchat
- Meta’s Facebook
- YouTube
“Implications are great for anybody that has been losing market share to TikTok,” said Martin.
TikTok
The video-sharing app owned by ByteDance has seen a rapid ascent in the United States over the years.
Its presence was especially noticeable in 2022, when the unpredictable economy had an influence on the internet ad business.
The platform will have over a billion monthly users by 2021.
According to a Pew Research Center poll, over 67% of American youths use TikTok, with 16% saying they are virtually always on the network.
According to Insider Intelligence, the app holds 2.3% of the worldwide digital ad market, trailing Google (including YouTube), Facebook (and Instagram), Amazon, and Alibaba.
Privacy concerns
Despite TikTok’s amazing run and rising notoriety, its parent business is situated in China, which poses some data privacy issues.
Furthermore, ByteDance is a privately held corporation, which raises authorities’ concerns.
TikTok was prohibited on government devices by Lawmakers in December as part of a bipartisan funding package.
Some governors have withdrawn the program from state computer networks and public colleges since then.
Sen. Josh Hawley, R-Mo., called for a countrywide ban in January.
TikTok answered on Wednesday.
“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: Stock market ends February with losses
Reality of the ban
While there was another bill before the one brought up by the committee this week, it will take time for lawmakers to enact any serious prohibitions.
If the bill passes 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 challenge.
Nevertheless, if it passes the Senate, Biden must either sign it or veto it.
Past oppositions
The latest uproar isn’t the first time American officials have taken TikTok to task.
When Donald Trump was President, he stated that he intended to ban it by executive order in 2020.
To prevent TikTok from being taken down, ByteDance had planned a future spinoff.
They did, however, negotiate an arrangement with Trump to include firms such as Oracle and Walmart.
The two corporations would have become investors, but the transactions never took place.
TikTok, according to Laura Martin, may be purchased today.
While it may be a weaker competitor with questionable experience, it would not just shut down.
Beneficials
JMP analyst Andrew Boone believes that if TikTok is outlawed in the United States, Meta would profit the most.
Facebook has been investing more money on its Reels features, which, unlike its primary newsfeed, have yet to develop a sustainable business model.
On its fourth-quarter earnings call, Meta stated that it expects Reels to reach 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.
He also mentioned Snapchat Spotlight and YouTube Shorts as potential beneficiaries.
Rough days
In 2022, Meta’s Reels, Spotlight, and YouTube Shorts faltered.
As Meta endured three consecutive quarters of falling income, it lost two-thirds of its value.
Conversely, Snap stock sank 81% as growth slowed to single digits.
For the second time in a row, the corporation refused to issue a forecast.
YouTube advertising revenue fell 8% year on year in the fourth quarter, below analyst estimates.
TikTok’s prominence encouraged several digital media businesses to copy its business model.
As celebrities chastised the app for attempting to imitate TikTok, Instagram CEO Adam Mosseri explained the modifications.
Another Instagram post urged the business to keep Instagram as it was, garnering over 1.6 million likes and over 140,000 petition signatures.
