As the US gears up to ban TikTok, agencies which represent some of the largest advertisers on the platform are developing back-up strategies, which include seeking loopholes to dissolve their promotional agreements. ByteDance, the Chinese parent of TikTok, has until January to relinquish its US operations or encounter a ban enforced by US policymakers due to security issues linked to its Chinese connections.
The social media app, boasting over a billion users worldwide, is an integral tool in marketing campaigns for a wide range of brands, owing to its vast popularity, notably among younger demographics who are inclined to bypass traditional advertising methods, such as television.
TikTok amassed $16 billion (€15 billion) in US sales in the previous year, primarily from advertising, as reported by the Financial Times from sources familiar with the app’s monetary matters. However, several advertising magnates are said to be orchestrating supplementary strategies for the upcoming year should TikTok be absent from the US market – a crucial advertising hub worldwide.
An advertising chieftain conveyed that the potential ban was already slowing expenditure from certain brands. This person had been in conversations with executives about the consequences of a potential US ban and expressed concerns about the ongoing revenue from selling ads in the US.
The individual further noted that they were in the process of crafting back-up strategies, including a ‘kill clause’ to evade any monetary obligations in the face of a ban. Brands and their agencies usually enter into contractual agreements pledging specific advertising expenditure in order to secure prime slots or bulk discounts from media platforms.
Ironically, the individual suggested that despite TikTok’s current market domination, there were ample other platforms for promotion.
Another representative echoed the sentiments stating the possible ban was already unsettling clients’ plans. However, they inferred that this could provide an advantage to other social media platforms. Investment, they confirmed, would track and follow the shifting audience, should something untoward happen.
Shou Zi Chew, the Singaporean CEO of TikTok, was in attendance at the Cannes Lions advertising festival last week. Rather than making public appearances, he held private discussions with advertising leaders about the platform. Moreover, according to a recent report by GroupM, it was suggested that if a ban was invoked, it was anticipated that advertising revenue would switch to other social video platforms such as Meta’s Reels, YouTube’s Shorts, and other digital media stakeholders. The active creators and influencers on those platforms would also benefit.
It was also noted by another advertising bigwig that even without US action, TikTok has already suffered from negative publicity that has affected its rapport with some advertisers. “Increasingly, brands are beginning to consider where the data goes in terms of the investment and the associated return,” they stated, noticing a rising trend towards considering the broader societal influence of the platform.
The potential for a TikTok ban is being fiercely resisted by ByteDance, asserting it infringes on free speech rights and insisting that separating the app from the wider group would be unfeasible. The Chinese government has openly mentioned that they will not back any sale. The app is used by about 170 million Americans.
TikTok, in its statement mentioned, “Our advertising business continues to grow robustly as businesses recognize the significant impact TikTok can have on their growth, regardless of their size.” – Copyright The Financial Times Limited 2024.