American threats to ban TikTok more about protecting ad dollars than privacy

A blog from The Drum's editor, Stephen Lepitak, covering reaction to events in media, social media, marketing, advertising and communications in general.

America's plan to ban TikTok is more about advertising dollars than protecting privacy

The Drum’s executive editor Stephen Lepitak takes a cynical look at the potential banning of TikTok in the US, speculating that it is far more likely to be about money, and not so much about privacy.

Political decisions are, in the main, economic decisions (and good luck proving me wrong). And while I can't say I was surprised when the US government threatened to ban TikTok, I don’t believe that the reasons being offered are quite what they seem. With this administration, have they ever been?

The current president has faced numerous accusations of external interference from foreign powers since he came to office in 2016. Since then he has also built his presidency around economic growth and stability. So what exacerbates his fear of China over anywhere else? Could it be that it is developing major tech companies that could dwarf those based around Silicon Valley (a area that, it has been claimed, would be one of the world‘s richest countries if it chose to form its own international borders)?

According to Savills, the Covid-19 crisis has “transformed“ life in Santa Clara County (home to Silicon Valley) and the surrounding area. And with the five largest tech companies in the US (Alphabet, Microsoft, Apple, Amazon and Facebook) worth over $5tn at the beginning of the year and responsible for driving so much of the US economy, from ad revenues to jobs with extremely high salaries and taxes, the sector will be looking to be protected.

The potential invasion of Chinese tech

The potential of China tech giants, such as WeChat and Weibo, expanding beyond their borders has been discussed for over a decade. With TikTok, however, that expansion has finally begun as it grows rapidly around the world.

The app generated revenue of $5.6bn during the first quarter, growth of 130% year on year, and in April surpassed 2bn downloads across both iOS and Android devices according to Sensor Tower.

During Q1 alone it saw installation numbers of 315m, the largest download figure for any app to date in a single quarter. That surge was, in part, driven by the global lockdowns imposed by the Covid-19 pandemic, but also in the advertising – mainly through Snap – to build its young user base. And suddenly it has caught the attention of older generations too.

Compare that with Facebook’s 186.1m mobile downloads and Instagram’s 151.8m installs during that same time, and there is a race emerging. And it’s not just a technology one, but a geographical one – TikTok owner Bytedance is of course Chinese and the first to truly emerge from the east to rival Silicon Valley platforms.

Even as lockdown restrictions were being reduced in June, TikTok continued as the most downloaded non-gaming app, notching up $90.7m in user spending, followed by YouTube and then, perhaps unsurprisingly, Tinder. This was followed by another Chinese-owned platform, Tencent Video, while Facebook, Twitter and Snap don’t even feature in the top 10 for the month.

The health of the US competition

Facebook’s revenue in Q1 was down on the previous quarter, to $17.7bn, of which advertising made up $17.4bn. The current advertiser boycott is likely to drive that further down for another quarter, even if it is not expected to last beyond the summer.

Meanwhile, Twitter’s first quarter, which included a 24% increase in users year-on-year, saw revenue grow to $808m, of which $682m was advertising and the rest made up of data licensing and ‘other’ revenue.

The advertising offer

This is the spend TikTok is honing in on, with TikTok for Business recently launching the slogan ’Don’t make ads, make TikToks’ as it aims to help advertisers unleash their creative side.

“No matter how big or small your business, no matter what you’re making or selling, we believe your brand deserves to be discovered here,” goes the sales pitch as it explains how advertisers can reach over 20 regions and that includes sister apps TopBuzz, BuzzVideo, BeBe, Helo and News Republic.

TikTok is understood to be muscling in on the competition by offering comparative CPM pricing to an ever growing youthful audience of under-30s, while using ad products that have be built on what has come before from its competitors. However, while the platform has become a fertile place for advertisers to turn, the lack of competition in this early stages of its development may change with the inevitable uplift in advertising.

The timing for the admission over a ban on TikTok is either deliberate or ironic, with Facebook under heavy pressure from core advertisers to change its policies having hosted hate speech over the years – a pressure that it seems to be, to some extent, pushing back on. Bytedance, on the other hand, appears to be reactive and recognizes the need to build trust on its app. Last year it was the first platform to ban political advertising while Facebook and Twitter wavered with claims of neutral stances (both have since conceded following criticism).

“We have chosen not to allow political ads on TikTok. Any paid ads that come into the community need to fit the standards for our platform, and the nature of paid political ads is not something we believe fits the TikTok platform experience. To that end, we will not allow paid ads that promote or oppose a candidate, current leader, political party or group, or issue at the federal, state, or local level – including election-related ads, advocacy ads, or issue ads,” it announced in a blog on its website.

That has also been exemplified this week with TikTok no longer being available in Hong Kong following the imposition by China of its new security law that could see the country’s censorship law extended to the region. Other social media platforms have also pulled out as a result of government requests for user data.

How worried the platform actually is of a ban is unclear, but its timing in announcing its self-service advertising platform for small and medium-sized businesses the day after the threat to its US presence was made, and its offering $100m in advertising credits to small business, does seem deliberate.

Of course, the platform has faced controversy around its collection of children’s personal data, for which it was fined a record $5.7m by the US Federal Trade Commission in February 2019 and which would have put the country on its initial alert.

Is this ban an act of revenge?

The revelation of the review of TikTok’s status comes just weeks after it was revealed that a group of the app’s users conspired to embarrass the commander-in-chief on his drive for a second term in office through fake sign-ups to a rally in Tulsa, Oklahoma – a feat they attempted to repeat in New Hampshire. And this is not a president who forgives and forgets.

It’s unclear whether it will ever be banned in the US, but with the narrative of ’making America great again’ through protecting it from apparent foreign foes (Trump has built his ‘popularity’ at the cost of other world powers, not least China with his playing to baying crowds as he described coronavirus as ‘the Chinese flu’) TikTok could be a political pawn ahead of the presidential election. But be under no doubt, it greatest imminent threat is to some of the US’s biggest companies and their revenue. That’s what it is protected first and foremost, rather than the privacy of its growing North American users.

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