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Why a TikTok Ban Would be Bad for Business

Why a TikTok Ban Would be Bad for Business

Last Updated:  
March 26, 2024

On March 13th, 2024, the US Senate passed a bill that would ban TikTok use in the United States unless it was sold to a company other than ByteDance, which is “beholden to the Chinese government”. While there have been murmurings of a TikTok ban for several years, the passing of this bill made it seem like a ban could actually happen. 

And how did businesses react to this news? They spent more money on TikTok ads.

In the six days following the bill to ban TikTok passing in the Senate, Triple Whale brands advertising on TikTok spent 38.63% more per ad account than before the bill passed. This indicates to us that brands are terrified of losing this channel, and doubling down while they can. 

In this article, we’ll discuss why exactly the US government is pushing for a ban (or at least a divestment from Chinese investors), how brands have benefitted from TikTok in recent years, and why we think a TikTok ban would be bad for small businesses (backed with a peek into Triple Whale data). 

Why Does the US Government Want to Ban TikTok? 

First of all, it’s not just the USA. Many countries in Europe as well as Canada have expressed concern over TikTok’s use, worried that the Chinese government’s access to ByteDance could allow them access to information about us. Back in 2020, Trump tried to ban TikTok via an executive order which stated TikTok threatened “the national security, foreign policy, and economy of the United States.” That was a pretty bold statement, but he later pulled back from enacting a full ban since he was alienating young voters right before the election. 

The US is scared about the access the Chinese government may have to American data, as well as the potential influence they can exert over the users of the app. Can they manipulate algorithms and subliminally push out agendas? We’re not conspiracy theorists, but anything is possible… right? 

If you compare how TikTok operates in China versus the USA, you’ll notice that children see a modified version of Douyin that includes more educational content. In the USA, children see the same version of TikTok as adults (and that’s a lot of dancing and unbridled consumerism). But are the differences because TikTok is trying to push a different version on Americans, or because they have regulations on youth social media use? 

The other important factor here is the American desire for free speech and free expression, which while it’s a First Amendment Right, it also leaves young minds vulnerable to addictive behavior and echo chambers of biased views. Since the algorithm feeds you more and more videos you’ve engaged with or liked, eventually you’re only seeing things you agree with, which is definitely confirmation bias. 

But hey, we’re not here to talk about why that’s a problem. We’re here to talk about how small businesses have taken this platform and turned it into a cog in their marketing machines, and how losing TikTok could be a devastating blow to businesses both small and large.

How Businesses Benefit From Using TikTok

Most people might think TikTok is just a social media site where people record themselves dancing, but since its popularity skyrocketed worldwide, it’s been adopted as a major marketing channel for businesses. As the third-largest social network in the world, it’s a fantastic place to reach new customers, build community, and jump on trends to get more eyeballs on your brand. This is how businesses benefit from the platform:

Using TikTok for Exposure/Brand Awareness

There’s a lot of people on TikTok, and the USA actually has the highest number of monthly active users of any country at 150 million. This is a 31% increase from last year, which shows the popularity is on the rise (unless… it just stops). It’s a great platform for brand awareness, because brands can put out simple, short videos that introduce customers to their products and let the algorithm do the work. Since Americans 18 and over are estimated to spend 55.8 minutes per day on TikTok, there’s ample opportunity for a brand to reach their ideal customer. 

Engagement on TikTok

One of the main benefits of TikTok is that it promotes engagement and interaction, which can help brands build their profile. A great example is Duolingo, which uses “unhinged content” with Duo the Owl to make people laugh. The content has nothing to do with learning a new language, but everything to do with creating content that fans enjoy, remember, and most importantly: share

A key part of the strategy employed by brands that use TikTok efficiently is social listening: investigating industry themes, comments, tags, and sentiments to discover what motivates a brand’s shared audiences is what makes the difference in creating innovative content that lands. Once a brand hits the sweet spot with viral content, it gets shown to more people, which continues the cascade of awareness and engagement. 

Behr recently had a series of videos go viral because they tapped into the ASMR trend, with cherries popping out of freshly-rolled cherry red paint combined with the sound of a cracked can of fizzy cherry cola. They engaged with the audience by responding to their comments and complying with demands for more content that “scratched their brain” just right. This might not be an immediate return on investment, unless the viewer was just about to hit up a paint store after they watched it. But it’s memorable, and the next time they need paint, they might just think of Behr first. It was (and is … this campaign might still be rolling - no pun intended) a fantastic example of a 77-year-old brand using a novel and trendy campaign to reach younger consumers. 

Brands Partnering with Influencers on TikTok

Every platform has an angle, and TikTok’s platform has always been about storytelling (did you see all of the brands who jumped on ReesaTeesa’s 50-part series??). It can be a little over-the-top, the way brands engage with content that may or may not be related to their brand, but as mentioned above, engagement is part of the game. So if BMW was hinting they might actually give ReesaTeesa a BMW and then they just didn’t, that’s also bad for business (how dare they pull a Legion?).

A lot of brands make the mistake of trying to create content angles and hooks on their own, but one beauty brand, BK Beauty, has found success by giving up creative control, spreading their products across the TikTok landscape, and letting the creators do what they do best: create content. 

This might seem like a mindblowing concept, but as Paul explains in the tweet, the content that performs well and generates conversions gets boosted by the algorithm, which in turn means more creators see what works. The creator requests your product samples, mimicking the content that works while slightly tweaking it further. The end result is thousands of creators talking about your product, but speaking about them in a way that “works” according to the TikTok algorithm. Paul was able to put the creator ecosystem to work for BK Beauty, generate loads of content that converts, and they’re then able to use that content over on Meta and YouTube.

By the Numbers: How Brands Spend on TikTok

When the bill to ban TikTok was passed in the Senate, the immediate reaction for Triple Whale brands was to spend more on the platform; when comparing the spend year-to-date before the bill passed, brands were spending $435 per day per ad account, and in the six days following the announcement, brands spent $740 per day per ad account. This indicates that brands are terrified to lose this channel and are doubling-down on spend, because they find this platform to be valuable to reach their customers. 

The threat of a ban comes at an interesting time, since TikTok just invested a ton of energy into ramping up its ad engine. They’re making it enticing for advertisers to switch over from traditional platforms like Meta or Google, because it currently costs less to acquire a customer on TikTok. 

We took a look at a cohort of Triple Whale brands doing over $10 million in annual GMV, and compared the following ad spend metrics in 2023 versus 2022:

We found that brands are spending more money, getting a better return on that investment, and requiring less investment to acquire new customers. With CPA dropping by almost 40% year-over-year, it’s clear that TikTok is a great place to discover new audiences. 

Additionally, the CPA in 2023 for the same cohort of $10M+ GMV brands was $34.11 on Meta. Those brands have to spend twice as much money to acquire a customer on Meta than they do on TikTok. And in an economic downturn, it’s not surprising that brands are choosing to spend where their dollars go further. Cost-per-Click (CPC), Cost-per-mille (CPM), and CPA are all down year-over-year. So what better time than now to destroy the ability for brands to advertise on the platform? (This is sarcasm, in case you didn’t catch it).  

TikTok’s Response to Ban

The CEO of TikTok, Shou Zi Chew, posted a video on the TikTok platform explaining why they were disappointed with the Senate vote, and how they wanted to clarify some misinformation. He stated that TikTok is committed to keeping American data safe from outside manipulation, and that if this ban passes, it will just give more power to a handful of other social media companies (looking at you, Meta). Chew said that this ban would take billions of dollars directly out of the hands of creators and small businesses in the USA. Chew specifically stated that a TikTok ban would put over 300,000 American jobs at risk, and take away the platform over 7 million businesses use to promote their brands. He made it clear as he concluded his statement that TikTok plans to fight this ban, and encouraged users to keep sharing their stories.

Would a TikTok ban infringe on an American’s right to free speech? Many civil rights advocates feel that it would, since it would prevent users from expressing themselves and from businesses being able to use the app to promote its products. They’re calling it “censorship – plain and simple”, and plan to sue should the ban come to pass. 

Final Thoughts

If I didn’t have access to TikTok, I’d probably be more productive, to be quite honest. But, I’d be behind on pop culture, conspiracy theories, and I’d also lose out on a neat way to learn about new products. TikTok has just exploded in popularity in the USA, and as Chew stated, many businesses rely on it to gain exposure for their brand, engage with their community, and promote products in the storytelling fashion that has worked very well for acquiring new customers. We believe a ban on TikTok would set small businesses back, and we hope there’s a swift resolution that makes both lawmakers and brands happy to keep engaging on the platform. 

© Triple Whale Inc.
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