Saturday, May 25, 2024

Can businesses survive a TikTok ban?

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As the government moves forward with legislation that could result in TikTok being banned across the United States, there is growing concern for the impact this could have on businesses.

A bill signed into law by President Joe Biden in April mandates that TikTok’s Chinese parent company ByteDance divest its stake in the company within the next year, citing concerns over national security associated with user data. TikTok has rejected these concerns.

With more than 150 million users in the U.S. alone, the app has become a vital platform for business—particularly small and medium-sized enterprises (SMEs)—to reach customers and drive sales.

According to TikTok data released in March 2024, more than 7 million small U.S. businesses use the platform. The company reported it drove $14.7 billion in revenue for these businesses in 2023, and contributed $24.2 billion to U.S. gross domestic product (GDP) in the same timeline.

Can businesses survive a TikTok ban? As legislation moves forward, there are concerns about the impact of the loss of the social media platform.

Photo illustration by Newsweek/Getty

The same report said that 39 percent of SMEs said access to TikTok was critical to their business, while 69 percent said the platform had led to increased sales for them in the last year.

TikTok’s importance for business isn’t limited to the U.S., either. Earlier this year the platform reported a contribution of €4.8 billion ($5.1 billion) to the GDP of several European countries in the last year.

Ninety percent of our sales are through the platform.

Paul Tran – co-founder of Love & Pebble

Responding to the potential ban, TikTok said in a video statement on its platform that it has spent “billions of dollars” to secure user data and that it will “keep fighting” for its users’ rights in court.

Meanwhile experts have warned that a ban could have far-reaching consequences for U.S. businesses. Denish Shah, a marketing professor at Georgia State University’s Robinson College of Business, told Newsweek: “TikTok serves as an important channel for acquiring and retaining customers and promoting one’s products and services.”

Paul Tran, co-founder of skin care brand Love & Pebble told Newsweek: “A TikTok ban would catastrophically impact our business—90 percent of our sales are through the platform.”

Having spent the last few years building their platform on TikTok, Love & Pebble use the social media app for organic reach of customers and to share their story.

“[A] TikTok ban would essentially kill our American dream that we’ve worked so hard for,” Tran said.

Content creators and influencers on the platform are also concerned about the future of their personal brand if a ban comes into force, but experts believe there is hope.

There will be some short-term pain. However, I think businesses can manage.

Denish Shah – marketing professor at Georgia State University’s Robinson College of Business

Michael Jaconi, co-founder and CEO of mobile commerce platform Button, told Newsweek: “If a ban does occur, some creators will see a temporary reduction in income, but I believe it’s unlikely to be a long-term issue.”

While Shah explained that businesses have a chance to think about how to handle a ban. “The good news is that there is enough time for firms to pivot to other platforms,” he said.

“At a more fundamental level, TikTok represents the popularity of short-form videos that consumers love to consume. The obvious platforms for businesses to migrate [to] for short-form videos is Instagram reels and YouTube shorts.”

“There will be some short-term pain. However, I think businesses can manage the migration to alternative short-form video platforms relatively easily,” Shah added.

When it comes to contingency plans, Tran said that Love & Pebble would potentially have to move their market. “Our backup plan currently is that we are launching our brand on TikTok in Vietnam, where there is no potential ban in place,” he said.

But despite ideas for how to mitigate the pain of losing the platform that drives most of their sales, Tran was clear that it would have a negative impact long-term. “A TikTok ban would destroy our company and brand and take away all the traction we’ve grown over the years,” he said.