TikTok’s days as a China owned and operated entity in the United States end next Tuesday. The new owners will have the sexiest, newest advertising vehicle on the planet.
President Trump gave the ByteDance-owned social media sensation until September 15 to sell if it wants to be allowed in U.S. cyberspace. It’s CEO, Kevin Mayer, stepped down last week. Who will buy it? Speculation is still that ByteDance will sell to Microsoft MSFT and maybe partner, Walmart WMT . It would be quite the catch, even if they paid a small fortune for it.
Trump’s attack on TikTok came roughly a month after India banned it, along with over 50 other Chinese apps, and on a moment’s notice. There was no warning.
Trump, for all the talk of him being a tyrant, at least gave ByteDance two months to find a suitor. India, while being more brash, at least let ByteDance keep its prized possession and didn’t give it an ultimatum: sell to us, or leave.
India was home to 611 million TikTok users, so the ban was problematic for ByteDance. By comparison, China has only 196.6 million users. The U.S. is in third place with 165 million, of which 44% are under the age of 25.
Assuming a major American corporate brand takes it over, TikTok will become a greater advertising vehicle than it already is. The home of Madison Avenue and the old fashioned snake oil salesman, Americans love to sell stuff. Big companies and influencers dominate the scene. TikTok is the perfect place for them. Everyone is on it. Average time spent on TikTok per day is 52 minutes, according to the Business of Apps 2019.
Monthly average users jumped 51% from January to August. Spending on the app now stands at $592 million for TikTok.
“Generation Z is driving TikTok’s meteoric rise,” says Eugene Levin, chief strategy officer of SEMrush, a marketing analytics software company in Boston. “Digital marketers are already adjusting to the trend.”
According to SEMrush, web searches for “Is TikTok shutting down” rose more than 10,000% this summer when the narrative of a Trump TikTok ban took hold in the press and on social media.
Of course, the layman knows TikTok as something their children spend too much time on. Companies know it as a way to reach customers under the age of 30 who are not subscribing to newspapers and glossy magazines.
Major companies such as Proctor and Gamble and luxury brands like Prada are pouring significant money into TikTok ads. Advertising on TikTok is up to four-times cheaper than the cost of advertising on Facebook, according to Digiday.
Relatively low ad rates on TikTok versus Twitter, Facebook, YouTube and Instagram are part of the reason why corporate brands are jumping on the TikTok bandwagon, says marketing intelligence platform Singular. They’ve ranked TikTok the number one platform for driving advertising return on investment in 2020.
“In the next year there will be a major shift to video content, with a focus on short, creative and sometimes provocative video clips,” says Levin. Advertisers will be all over this.
The process of spinning out the U.S. operations of Tik Tok won’t be easy. For now, it appears as if ByteDance, and Beijing, is standing down, perhaps afraid to make too much noise in an election year here.
If Trump wins, though, China may have to worry about its other major app: WeChat, the Tencent owned messenger that India banned a few months ago.
WeChat won’t be the advertising power that TikTok will become, but the implications for a WeChat ban would be huge. Not so much because of the impact it would have on users in the US, although that would also be bad, given that WeChat is a key method of communication between many Americans with friends and family in China. It could hurt American companies with operations in China. From what we know now about a Trump plan to ban WeChat, multinational companies would not be able to pay for advertisements there, which would have a material impact on their sales in Greater China.
Is a U.S. takeover of WeChat next?
China will hope that Trump relents or bet on challenger Joe Biden going easier on WeChat. If not, China will blame the U.S. for something the U.S has blamed China for for years: not playing fair. They would see this as a way the Americans are capturing, or stunting the growth of key, competitive Chinese tech firms. How they retaliate against corporate America, which loves the Chinese consumer, probably won’t be known until next year. And only in the event Biden takes of Trump’s mantle on China tech. Or Trump wins. Then, for China tech giants Huawei and WeChat, it may be an all hands on deck moment.