As a TikTok Ban Looms, What Happens to Entertainment Marketing?

This past weekend, the hot new Netflix drama “Baby Reindeer” was the trending topic on TikTok, as viewers debated the true story behind the drama and whether leading actor Richard Gadd was actually a real-life victim of a stalker.

With a ban on the most popular social media app looming and signed into law by President Joe Biden on Wednesday, where will “Baby Reindeer” fans go? The prospect of the Chinese-owned app’s closure would leave a massive hole in the marketing landscape, according to marketing and public relations experts consulted by TheWrap.

“TikTok is a singularly powerful communication tool that other social media platforms cannot replace,” said Jane Owen, a Hollywood publicist. “If it disappears there will be a significant hole in direct-to-consumer communication with an entire generation.”

The prospect of losing the ability to speak to Gen Z “is devastating to many entertainment markets,” Owen said, and will result in “a massive reduction in sponsorship and advertising dollars for events.”

“Baby Reindeer” is only the latest entertainment product to benefit from the marketing power of the Chinese-owned app, which has 170 million users and a sophisticated algorithm. In just the past five years, popular Hollywood movies, including “Barbie” and “M3GAN,” have come to rely on TikTok to promote their movies or create viral promotions. Music artists like Gayle, the Nashville singer, have launched their careers on the short-form video platform, at times fueled by 30-second dance challenges from fans.

A generation of younger Americans have also come to rely heavily on TikTok for their news and entertainment in a way that made the app impossible to ignore for Hollywood studios and major music labels.

But in a sudden, decisive move after years of debate over whether China could  misuse the data of users from across the United States, the Senate on Tuesday voted to ban the app if corporate parent ByteDance doesn’t sell it to a non-Chinese company in the next nine months, advancing a bill already approved by the House over the weekend.

President Biden announced he had signed into law a National Security Supplemental bill on Wednesday that includes the potential TikTok ban. The bill also grants Biden the discretion to extend the time allowed for the sale to a full year if needed.

A defiant TikTok CEO Shou Zi Chew responded Wednesday by declaring that “rest assured, we aren’t going anywhere.” Shortly after the bill became law, he posted a video to TikTok suggesting that the ban amounted to censorship.

“Make no mistake, this is a ban, a ban on TikTok and a ban on you and your voice,” he said. “Politicians may say otherwise. But don’t get confused.”

TikTok has become a social media behemoth, generating between $8 billion and $14 billion in ad revenue last year. Without it, an estimated $16 billion in ad revenue would be up for grabs next year in the U.S., according to Bernstein Societe Generale Group.

But a ban on TikTok would by no means signal the end of the short-form video revolution that the platform helped spur. As the app has become more ubiquitous, it’s forced music and entertainment companies to create whole divisions largely focused on TikTok marketing campaigns.

Big Tech has also ramped up its own efforts to compete. YouTube has built up Shorts, as Meta has with Instagram Reels, both aiming to offer their short-form alternatives to TikTok.

Both companies can expect to be big winners in a TikTok-free market.

“I feel like it just goes to show these things can go out of style so fast,” Mike Heller, the founder of digital marketing agency Talent Resources, told TheWrap. “We did a lot of deals with Vine. Vine was like to us what TikTok is now, or Snap. And we tell brands, ‘you must utilize TikTok.’ You really have a lot of people that became influencers very fast because of the way that it virally spreads.”

Nevertheless, in the short term, TikTok’s disappearance “would be a seismic event for the TikTok influencers and brand influencers,” Wedbush Securities’ Managing Director and Senior Equity Analyst Daniel Ives told TheWrap.

Said Heller: “There’s so much noise now on social media that it’s so hard to really maximize a message, because there are so many different platforms to maximize it on. But now anytime we do a social media, a campaign, social media deal, TikTok has to be included. And it started out because they wanted to jump on a trend, and now TikTok is the trend leader.”

But, he added, “Some people in the advertising world, where they have to constantly make noise on TikTok, would secretly rather see it go away.”

TikTok’s users hardly see the issue the way the U.S. government does. A third of U.S. adults, including 62% of adults under 30, use TikTok regularly, according to Pew Research Center data. Just two years ago, 21% of U.S. adults used the platform. As more Americans have gravitated to the short-form video platform, public support for a ban has declined. Last fall, only 38% of Americans said they would support the government TikTok ban, according to Pew Research.

Adults under 30 were less likely to support a ban than older generations, with around 29% saying they would support a ban. That’s compared to 36% of those aged 30-49, and 39% aged 50-64. In a separate report, a mere 18% of teens said they would support a ban of the platform.

Hard to quit

While it was ultimately concerns that the Chinese government could be using the ByteDance app to gather Americans’ personal data that led Congress to act, TikTok has been heavily criticized for not sharing enough of its revenue with artists and entertainment companies.

Universal Music Group, the world’s largest music company, pushed back earlier this year by pulling 4 million songs from the platform, affecting both song recordings and publishing. But Taylor Swift, a Universal artist, returned to the platform to promote her new album, “The Tortured Poets Department.” She cut a special deal with the app which allowed her music to come back on April 11.

Swift’s partnership with TikTok, where she has 25 million subscribers, allowed fans special access to the release event. That included creating their own videos, accessing exclusive artwork and appearing on a ‘fan carousel’ created by the star’s marketing team.

Short-form video apps are here to stay

As TikTok has fueled marketing spend and pushed studios and music companies to pay millions of dollars to get influencers onto red carpets, it has also lit a fire under rival tech companies to hone their own short-form video offerings.

“Obviously there’s TikTok influencers who stand to have their livelihoods damaged, and they will have to move their business onto a different platform,” digital marketer Heller said. “And those who have a strong brand will move – or if they are smart – they will have already moved or [are] mirroring their brands to Instagram or YouTube.”

As TheWrap previously reported, YouTube and Meta stand to gain the most if TikTok were to disappear from the market. Most analysts betting Meta, with its Instagram Reels offering, will be the big winner, potentially pocketing up to 60% of TikTok’s revenue.

When Meta was asked by an analyst on its quarterly earnings call Wednesday how it could benefit from a TikTok sale or ban, Meta executives — including Mark Zuckerberg — declined to speculate or comment.

If TikTok were made unavailable, 60% of TikTok users surveyed by Wedbush Securities identified either Facebook or Instagram as the most likely alternative where they would spend their time. Behind those platforms, 19% of TikTok users expect to primarily replace TikTok with YouTube.

Reels reached a $10 billion run rate in the third quarter — a predictino of its future performance — and added to the growth of Meta’s consolidated advertising revenue as of the fourth quarter, Ives said.

Despite the new law, an outright TikTok ban remains unlikely, with a forced sale being more plausible, said Jack Johnston. He’s the senior Social Innovation director at Tinuiti, a marketing agency. If the sale happens, TikTok’s advertising inventory could be divided up, depending on the company’s acquirer and potential reviews of how it handles privacy concerns.

While ByteDance searches for a buyer or appeals the ban in court, advertisers may take a wait and see approach before investing more ad dollars into the app, analysts said. Up to $20 billion in ad spend could be at risk at the end of this year, Bernstein analyst Mark Schmulik said in a report.

Uncertainty about TikTok’s future could also cause advertisers to pull back, which has the potential to depress CPM advertising rates in a similar way to the falloff seen at the beginning of the COVID-19 pandemic.

“Creators and influencers could spend more time creating content on other social media platforms if TikTok is not as easy to use, readily available or loses engagement from its audience,” Johnston said.

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