September 30, 2023

investors in meta, crackle And other US digital media companies are looking for signs of a comeback after the upheaval of 2022. He got some unexpected optimistic news this week.

– Advertisement –

The US House Foreign Affairs Committee voted on Wednesday to advance legislation that would give President Joe Biden the authority to ban TikTok, the viral video app owned by China’s ByteDance that is wresting market share from the social media giant.

“The implications are great for anyone losing market share to TikTok,” Laura Martin, an analyst at Needham, said in an interview. He said Snap, Meta’s Facebook and Google’s YouTube could be a “huge beneficiary” if the ban eventually goes through.

– Advertisement –

TikTok has been on meteoric growth in the US, and its effects were especially noticeable in 2022, as a booming economy dragged down the online advertising market.

In 2021, TikTok topped one billion monthly users. one august Pew Research Center survey found that 67% of teens in the US use TikTok, and 16% said they are using it almost constantly. According to Insider Intelligence, TikTok controls 2.3% of the worldwide digital advertising market, placing it behind only Google (including YouTube), Facebook (including Instagram). Amazon and Alibaba.

– Advertisement –

But there are growing data privacy concerns with TikTok because of its parent company, which is based in China and is privately held. Congress banned TikTok from government equipment in December as part of a bipartisan spending bill, several governors removed the app from state computer networks, including public universities — and Sen. Josh Hawley, R-Mo., called for a full nationwide ban. In January of renewed calls for.

See also  U.S. satellite giant Viasat’s $7.3 billion takeover of UK rival Inmarsat faces in-depth competition probe

“The US ban on TikTok is a ban on the export of American culture and the values ​​of the billions of people who use our service around the world,” a TikTok spokesperson said on Wednesday. “Despite its negative impact on the free speech rights of the millions of Americans who use and love TikTok, we are disappointed to see this hurried legislation moving forward.”

Even with the legislation coming before committee this week, there is a long way to go before lawmakers can enact any real restrictions. Assuming the bill gets through the Republican-controlled House, the Senate with a Democratic majority would have to pass some version of it, which would be a challenge based on opposition that has already been voiced by some Democrats. . If it passes the Senate, Biden will still need to decide whether to veto it or sign it.

TikTok is no stranger to challenges from US authorities, as former President Donald Trump announced his intention to ban the app by executive action in 2020.

ByteDance potentially wanted to spin off TikTok to save the app from being shut down, and the company struck a deal with Trump that included a partnership Oracle And walmartBoth of whom will become investors in Tiktok.

Those deals fell through, but Martin said it was possible the app could be successfully acquired this time. In that case, TikTok may be a weaker competitor and experience a period of uncertainty, but “it will not disappear and shut down,” Martin said.

Andrew Boon, an analyst with JMP, said Meta is likely to benefit the most if TikTok faces a US ban. Facebook is pouring money into its TikTok rival, Reels, which has yet to establish a revenue model that is as effective as the core newsfeed.

See also  Tesla stock had its worst week since March 2020 during a ‘very intense 7 days’ for Elon Musk

Meta said during its fourth-quarter earnings call that it expects Reels to become revenue neutral by the end of the year or early 2024. Videos on Facebook and Instagram more than doubled in the past year.

“If TikTok takes over, I think the consumption of Instagram Reels will be enormous,” Boone said in an interview. Snapchat’s Spotlight, he said, was introduced in 2020 and youtube shortsWhich came out in 2021, “Labh bhi hoga.”

All three platforms had around 2022. Meta shares lost two-thirds of their value as the company experienced three consecutive quarters of declining revenue. crackle’stock plunged 81% as growth fell into single digits, and the company opted not to provide forecasts for two straight periods. YouTube advertising revenue fell short of analysts’ expectations in the fourth quarter, falling 8% from a year earlier.

The rush to copy Tiktok in many circles is not good.

In July, Instagram CEO Adam Mosseri shared a video Explaining the change in social media platform after celebrities like Kylie Jenner and Kim Kardashian criticized the app for “trying to be TikTok”.

A post urging the company to “make Instagram Instagram again” received over 1.6 million likes and resulted in nearly 140,000 petition signatures. A month later, Mosseri announced his plans to move from San Francisco to London to help wean Meta users off of TikTok.

— CNBC’s Christina Wilkie, Lauren Fenner and Jonathan Vanian /m>

Watch: TikTok is probably going to be banned