Photo by Solen Feyissa on Unsplash
With the recent debates in Congress over the social media platform TikTok, the threat of the app being banned looms and has sent distraught not just to its millions of users, but also to businesses that rely on the app.
The considerations of the potential banning were first fueled in the 2020 Trump Administration when national security worries were originally examined. The discussion ended up being tabled, but tensions between China and the US still worsened by the day. The same sentiments have become a controversial issue in the White House once more. Many in Washington were concerned that the app could be used by the Chinese government to spy on American users or obtain access to their data. Additionally, some individuals have expressed apprehension about the potential for the Chinese government to exploit the app as a means of disseminating propaganda to a US audience. However, foreign relations is not the only source of support for the banning of the app. Due to the app’s unique mechanism of an endless scroll and appeal of shorter videos, this rabbit hole presents apparent mental health issues, especially in the younger generation.
Regardless of these fears, it is undeniable that a ban on TikTok would poke its own holes in both the US and global economy, specifically in the entertainment and retail industry. The app has given rise to thousands of influencers who are able to make a sustainable living through the content that they post and the deals they make with brands. What was once a small market, the influencer economy has been magnified due to TikTok’s algorithm and extensive application. However, if these influencers lose access to the platform, it could result in a significant financial setback for them as their major revenue source would be removed. Furthermore, prominent international influencers may potentially face the loss of millions of American followers and brand partnerships. Retail brands could also lose millions of dollars in profit due to the loss of these influencers as well as the advertisement channel. With the app’s widespread use and economical expenditure, it was one of the most cost-effective and efficient methods of reaching the business’ target markets. In fact, just in 2019, the app brought anywhere between $200 and $300 million in revenue worldwide. For example, following their collaboration with a prominent TikTok influencer for the #AerieRealPositivity challenge, American Eagle's Aerie brand experienced a substantial 100% increase in Q2 sales. Moreover, Mattel saw a noteworthy 116% rise in UNO sales between May 2019 and May 2020 after enlisting influencers to endorse the card game in their #unowhoyouare TikTok campaign earlier this year. Another example would be Levi, which contracted four TikTok influencers to craft personalized denim items that were subsequently advertised through in-feed ads. Throughout the campaign, product views for these bespoke pieces doubled, and Levi's digital business also doubled from the previous year, currently representing 15% of their overall revenue.
The rise of social media has been integral to business processes and promotion. It has provided an innovative way for companies to showcase their products while connecting with their audience. If a ban on TikTok is implemented, although harmful to companies as they would lose a major channel of promotion, it is highly likely that companies would end up substituting the app for Instagram Reels, YouTube Shorts, or even Snapchat Stories. The elimination of the app will change the landscape for businesses and subject them to a test as they demonstrate how expeditiously they can adapt to this significant adversity.