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Digital Transformation Brand Safety Brand Strategy

As Biden issues ultimatum to TikTok, some worry marketers have too many eggs in the basket

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By Kendra Clark | Senior Reporter

March 16, 2023 | 8 min read

As the pressure rises, brands that are spending heavily on the video-sharing app may be getting cold feet.

Finger over TikTok app

TikTok’s future hangs in the balance / Adobe Stock

Advertisers have woken up to the news that their investments in TikTok could be in danger.

US president Joe Biden has issued an ultimatum to TikTok’s Chinese parent company ByteDance, urging it to sell the video-sharing app or face bans in the US. The news comes as debates about the app’s data security reach new heights – with US lawmakers pushing for a wholesale ban on TikTok and the UK announcing today that it will prohibit the platform from being installed on government devices.

The pressure indicates a change of tune for the Biden administration, which had previously been working to negotiate with TikTok to create a set of new data security and safety guardrails to quell US lawmakers’ and consumers’ concerns. Now the administration is not only pressuring ByteDance to divest from TikTok but is also supporting proposed legislation that would empower Biden to ban the app in the US.

TikTok has said it is considering its options. However, it’s pushing back against the idea that selling the app will do much good. “If protecting national security is the objective, divestment doesn’t solve the problem: A change in ownership would not impose any new restrictions on data flows or access,” said Maureen Shanahan, a company spokesperson, in a statement to the New York Times. TikTok did not respond to The Drum’s request for comment.

The development has major implications not only for American consumers but also for brands – who are advertising on TikTok in the billions of dollars. Last year, the app snagged 2.4% of all US digital ad spend – putting it on par with YouTube and ahead of Twitter (whose Elon Musk takeover has seriously spooked advertisers in recent months). Now, it’s projected that TikTok’s US net ad revenues could reach $11bn in 2024.

Advertisers consider the alternatives

As the pressure rises, many advertisers will be eyeing the exits, some experts say. “Now is the time for marketers to start preparing,” says Jasmine Enberg, a principal analyst at Insider Intelligence’s eMarketer specializing in social media. “Even if TikTok isn’t banned, any change in the way TikTok operates could have implications for brands and creators. Marketers who rely solely or primarily on TikTok should think about how and where they can diversify their spending.”

Other short-form video products like Instagram Reels and YouTube Shorts – both of which were rolled out after TikTok, gaining major traction among consumers – could be the next best thing for advertisers and creators, Enberg suggests. Still, she warns against investing too much in one type of media like short-form video. “Gen Z is the ‘TikTok generation,’ but the reality is that they use a wide variety of social and other digital platforms,” she says.

Other experts take an even more aggressive stance, arguing that advertisers would do well to divest from social media channels more broadly. “Most marketers have too many eggs in not only TikTok’s basket but Instagram’s, YouTube’s, LinkedIn’s and any other social platform where they have no control,” says Joe Pulizzi, an entrepreneur, podcaster and author of various marketing books.

The demise of TikTok, to Pulizzi, smells familiar: “We’ve been here many times before. We were here with Vine. We were here when Google+ shut down. We’re now going through Twitter’s implosion.”

He suggests that, for brands, the solution can only be found by taking a new approach. “When will marketers learn that they can use these channels but must have an ongoing strategy to move data and addressable audiences away from them in a strategic fashion – [such as] to email and membership sites?”

Not all industry leaders are so skeptical, though. Some, like James Townsend, chief exec of Stagwell’s Brand X Performance Network and global chief exec at omnichannel media agency Assembly, are advising brands to take a more measured approach to assess the situation. “We are in a wait-and-see game and we don’t believe marketers should pull back on day-to-day investments yet,” he tells The Drum. “The benefit of digital channels is they are both nimble and real-time and can be paused based on day-of market dynamics.”

Should TikTok be banned in the US market, Townsend says, another player will surely step up to absorb excess ad spend. Rather than Instagram Reels or YouTube Shorts, as Enberg has suggested, he predicts that perhaps Snapchat could seize the opportunity. In such a scenario, however, the war for attention will surely be at an all-time high, he says. “We’ve seen all platforms revamp their video-first strategies and this is just a potential accelerant for them all to go head-to-head over TikTok’s user base.”

An uncertain future

At this point, TikTok’s fate remains unclear. Some industry players don’t believe that heightened pressure on ByteDance will produce a meaningful change any time soon – and that, even if TikTok were to be sold or banned in the US market, the Biden administration would not achieve its stated goals. “Banning TikTok or selling it wouldn’t solve the issues that exist or the perceived risk,” says Matt Navarra, a leading social media consultant. “TikTok is also pushing forward with the tried-and-tested tactic of promoting how TikTok contributes to the American economy and how businesses benefit from it and would lose out if it was banned.”

Not to mention that the app could prove especially useful for the Biden administration itself, Navarra says. “The Biden administration and the Democratic Party are likely to be the biggest beneficiaries of having TikTok stay in place for the election because it swings quite favorably towards them in terms of typical voting patterns of the users. They could be causing themselves damage by banning an app that could be a very powerful tool in any future election activity.”

Considering all of these factors, Navarra says, “you do have to wonder whether a ban is going to happen.” And of course, either a ban or a sale of the platform will take some time to be finalized. “So I don’t think we’re going to have any immediate activity.”

TikTok’s chief exec Shou Zi Chew is set to appear before the House Energy and Commerce Committee in Congress next week, where lawmakers will ask him about the app’s connection with the Chinese government as well as the app’s effects on young people.

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