Ban – 2022 was a rocky year for investors in digital media companies such as Meta and Snap.
While the troubles may have passed, investors were given some promising news this week, which boosted their confidence.
TikTok, a big rival for many businesses, appears to be on the verge of being banned in the United States.
The news
On Wednesday, the US House Foreign Affairs Committee voted to forward legislation granting President Joe Biden the right to ban TikTok.
ByteDance, a Chinese company, created the video-sharing software, which has been a major driver in stealing market share from social media businesses.
Laura Martin, a Needham analyst, noted during an interview that if the ban is enacted, numerous platforms will benefit, 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
ByteDance’s video-sharing app has grown in popularity in the United States over the years.
Its presence was most obvious in 2022, when the volatile economy hampered the online advertising industry.
By 2021, the platform had over a billion monthly users.
According to a Pew Research Center research, more than 67% of American teens use TikTok, with 16% claiming they use it frequently.
Insider Intelligence estimates that the app accounts for 2.3% of the global digital ad market, following just Google (including YouTube), Facebook (including Instagram), Amazon, and Alibaba.
Privacy concerns
Despite TikTok’s spectacular growth and rising recognition, its parent company is based in China, which raises privacy concerns.
Additionally, ByteDance is a privately held corporation, which raises suspicion among government authorities.
TikTok was banned on government devices in December as part of a bipartisan budget agreement.
Since then, several governors have removed the application from state computer networks and public universities.
Sen. Josh Hawley, R-Mo., proposed a nationwide ban two months ago.
TikTok commented 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: Apple thieves plot new ways to steal iPhones
Reality of the ban
While another bill was discussed by the committee this week, legislators will need time to enact substantial limits.
If the Republican-controlled House approves the bill, it must next be adopted by the Democratic-majority Senate.
There will be an issue as a result of the opposition expressed by some Democrats.
Nonetheless, if it passes the Senate, Biden will either sign or veto it.
Past oppositions
TikTok has already been chastised by American officials.
Donald Trump indicated throughout his administration that he wanted to halt it by administrative order in 2020.
ByteDance has anticipated a future spinoff to avoid TikTok being taken down.
Yet, they reached an agreement with Trump that included companies like Oracle and Walmart.
The two corporations were supposed to become investors, but the transactions never happened.
According to Laura Martin, TikTok may now be bought.
While it may be a less experienced opponent, it would not just cease operations.
Beneficials
According to JMP analyst Andrew Boone, if TikTok is banned in the United States, Meta will benefit the most.
Facebook has expanded spending on its secondary services, which, unlike its core newsfeed, have struggled to develop a viable business model.
Meta announced on its fourth-quarter earnings call that it expects Reels to achieve 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.
Snapchat Spotlight and YouTube Shorts were also mentioned as holding potential benefits.
Rough days
Meta’s Reels, Spotlight, and YouTube Shorts all failed in 2022.
Meta lost two-thirds of its value after three consecutive quarters of declining earnings.
Snap stock, on the other hand, dropped 81% as growth slipped into the single digits.
The corporation declined to issue a projection for the second time in a row.
In the fourth quarter, YouTube advertising income declined 8% year on year, falling short of analyst expectations.
TikTok’s success has inspired numerous digital media companies to replicate its business model.
While celebrities slammed Instagram for imitating TikTok, CEO Adam Mosseri addressed the changes.
Another Instagram post, which received over 1.6 million likes and over 140,000 petition signatures, encouraged the company to retain Instagram as it was.
