Canada bans TikTok on federal government devices.
Jonathan Raa | Nurphoto | Getty Images
Investors of Art Meta, Tie up and other US digital media companies were looking for signs of recovery after a turbulent 2022. This week they received some unexpectedly optimistic news.
The US House Foreign Affairs Committee on Wednesday voted to advance legislation that would give President Joe Biden the power to ban TikTok, the viral video app owned by Chinese company ByteDance that is taking market share from social media fans.
Meta rose 1% on Wednesday, while Snap was unchanged.
“The implications are great for those who are losing market share to TikTok,” Laura Martin, an analyst at Needham, said in an interview. She said Facebook, Snap and Meta Google If the ban ends up happening, YouTube could benefit “enormously.”
TikTok experienced rapid growth in the US, and its impact was particularly noticeable in 2022, when the sputtering economy crashed the online advertising market.
In 2021, TikTok surpassed one billion monthly users. A Pew Research Center survey conducted in August 2022 found that 67% of US teens use TikTok, and 16% said they use it almost constantly. According to Insider Intelligence, TikTok controls 2.3% of the global digital advertising market, behind only Google (including YouTube), Facebook (including Instagram), Amazon and Alibaba.
But TikTok has data privacy concerns because of its parent company, which is based in China and is privately owned. Congress banned TikTok from state devices as part of a bipartisan spending bill in December, several governors have removed the app from state computer networks — including at public universities — and Sen. Josh Hawley, R-Remobilization, renewed calls for a full nationwide ban in January .
“The US ban on TikTok is a ban on the export of American culture and values to the more than one billion people who use our service around the world,” a TikTok spokesperson said on Wednesday. “We are disappointed that this hasty legislation is moving forward despite its significant negative impact on the free speech rights of millions of Americans who use and love TikTok.”
Even with the legislation introduced Tuesday, lawmakers have a long way to go before an actual ban can be enacted. Assuming the bill passes the Republican-controlled House, the Democratic majority in the Senate would have to pass some version of it, which would be a challenge based on the opposition already expressed by some Democrats. If it were to pass the Senate, President Biden would still have to decide whether to veto it or sign it.
TikTok is no stranger to challenges from US officials, as former President Donald Trump announced his intention to ban the app by executive order in 2020.
ByteDance sought to potentially spin off TikTok to prevent the program from being shut down, and the company struck a deal with Trump that would have included partnerships with Oracle and Walmart, both of which would become investors in TikTok.
Those deals fell through, but Martin said it’s possible the app could be successfully acquired this time around. In that case, TikTok could be a weakened competitor and experience a period of uncertainty, but “it won’t just disappear and shut down,” Martin said.
Andrew Boon, an analyst at JMP, said Meta is likely to benefit the most if TikTok faces a US ban. Facebook is pumping money into competitor TikTok Reels, which has yet to create as effective a revenue model as the main news feed.
Mark Zuckerberg, chief executive officer of Meta Platforms Inc., left, arrives in federal court in San Jose, California, U.S., Tuesday, Dec. 20, 2022.
David Paul Morris | Bloomberg | Getty Images
Meta said during its fourth-quarter earnings call that it expects Reels to be revenue neutral by the end of the year or early 2024. Video plays on Facebook and Instagram have more than doubled in the past year.
“If TikTok went away, I think there would be a lot more use of Instagram Reels,” Boone said in an interview. He said Snapchat’s Spotlight, coming in 2020, and YouTube Shorts, coming in 2021, “will also benefit.”
All three platforms had a tough 2022. Meta shares have lost two-thirds of their value as the company’s revenue has declined for three straight quarters. Shares of Snap plunged 81% as growth slipped to single digits and the company decided not to provide guidance for two straight periods. YouTube’s fourth-quarter ad revenue missed analysts’ expectations, falling 8% year-over-year.
The rush to copy TikTok has not gone down well in many quarters.
In July, Instagram CEO Adam Mosseri shared the video explaining the changes to the social media platform after celebrities like Kylie Jenner and Kim Kardashian criticized the app for “trying to be TikTok.”
A post calling on the company to “make Instagram Instagram again” has garnered more than 1.6 million likes and led to nearly 140,000 petition signatures. A month later, Mosseri announced his plans to move from San Francisco to London to help Meta lure users away from TikTok.
— CNBC’s Christina Wilkie, Lauren Feiner and Jonathan Vanian contributed to this report
WATCH: TikTok may be banned