In a groundbreaking turn of events, the U.S. House of Representatives delivered a resounding blow to TikTok, voting 352 to 65 in favor of getting TikTok banned from app stores across the country, unless it divests from its Chinese parent company ByteDance. This vote comes amidst mounting concerns over national security, with fears that TikTok could be used as a conduit for the Chinese government to access the sensitive data of Americans.
The bill to get TikTok banned in the U.S. now moves to the Senate, and if it passes, it’ll go to President Biden’s office for approval, who has already declared his unwavering support for the proposed legislation, as he said earlier in March that he’d sign it. While we don’t know if TikTok will really be banned or not, one thing is crystal clear: there are companies eagerly poised to seize the moment.
Who Benefits?
If TikTok gets banned in the U.S, a lot of American content creators, as well as TikTok users, will likely move to a different platform, and there are three main companies that many people think would benefit the most from this. These three companies are Meta Platforms (NASDAQ: META), the parent of Facebook and Instagram, Snap (NYSE: SNAP), the parent of Snapchat, and Alphabet (NASDAQ: GOOG), the parent of Google and YouTube. This is because each of them have features that are similar to TikTok, like Reels with Facebook and Instagram, and YouTube shorts with YouTube.
How Do They Compare to TikTok?
The most important metric when you consider a social media platform is the amount of people that actually use the platform. Starting with Meta. As of 2023, Facebook has around 3.03 billion monthly active users worldwide, while Instagram has 2 billion, and keep in mind that these are just two of Meta’s platforms, as it also has WhatsApp and Threads.
In its 2023 Q4 results, Meta said that it managed to add around 300 million new active users year-over-year, which shows that despite the fact that the company is already massive with billions of users, it still has more room to grow and attract more people to use its platforms. On the other hand, Snap is a much smaller company but still has 800 million monthly active users on Snapchat, an increase of more than 8% year-over-year. As for Alphabet, YouTube has around 2.9 billion monthly active users, and the platform expects to gain 200 million more users or a user growth of 6.89% from 2024 to 2025.
The three companies also make substantial revenues, as Meta made over 134 billion in 2023, Alphabet made $307.4 billion, while Snap, being a much smaller company, made approximately $4.6 billion, mainly because it doesn’t have the same big digital ads platform that Meta and Alphabet have, which helps them generate a lot of money.
Meanwhile, TikTok has over 1 billion monthly active users, and while we don’t know how much money TikTok actually made globally in 2023, we know that its parent company, ByteDance, made $120 billion, and a lot of it was likely driven by TikTok. Now, TikTok has around 170 million American monthly active users, and its revenues in the U.S. rose to $16 billion in 2023, and that’s where the TikTok ban bill would impact ByteDance, because that’s what it stands to risk, while the other three companies could gain these millions of users and billions in revenue.
Advertising Revenues
TikTok should be concerned about losing users and content creators if it gets banned, but that’s not everything, as it also risks losing American advertisers. If TikTok gets banned, a lot of American advertisers will have to move off the platform, and as mentioned above, advertising is where companies like Meta and Alphabet really make a lot of money. For instance, Meta’s advertising revenue in Q4 was $38.7 billion, while Alphabet’s was $65.52 billion. TikTok is also a leading platform when it comes to digital ads, as it made $13.2 billion in advertising revenue worldwide last year, and it could lose a good portion of that if it loses its American advertisers.
Now, when it comes to how much of a revenue boost these companies would get if TikTok gets banned, we can’t really say for sure, but it’ll definitely have a big impact on their revenues as TikTok is already making billions in the U.S. and globally, and the impact will likely be felt the most in a smaller company like Snap, which is currently really focused on growing its advertising business, and investing in its machine learning platform to back its advertising with AI.
Also, many people have pointed out that thousands of small businesses and creators won’t be able to reach their customers if TikTok gets banned, but this might not really be the case if these advertisements start moving to other places like YouTube, Instagram, or even X and Pinterest (NYSE: PINS). In fact, at least from the perspective of creators and advertisers, there really will be no big changes as Reels and YouTube shorts work in the same way as TikToks do, and all they’d have to worry about is maybe the change in advertising fees or other things like the way the ad works or how the content will be monetized.
Should Investors Buy META, SNAP, or GOOG?
Snap Inc. is arguably one of the companies that has arguably missed its opportunity in social media, as it has been around for eight years, but still hasn’t achieved profitability, even though its revenues and user base were growing, so SNAP stock might not be a stock that offers a good investment opportunity now, but it’s still worth keeping an eye on if TikTok really gets banned.
On the other hand, Meta and Alphabet are likely going to be the two main winners from this, because a lot of the content that gets posted on TikTok already gets reposted on their platforms, so it’s not really a reach to say that a lot of the content will be moved to their platforms if TikTok gets banned. This might not result in a massive impact on the two companies, since they’re already so big, but even a 5% increase in their billions of revenues would be a great boost for investors, especially when you consider the fact that these revenues would be generated without the companies having to increase their costs.
Will TikTok Really Get Banned?
Investors should keep in mind that TikTok might not end up getting banned, or that it, at least, still has a long way to go to get banned, before making any investment decision. This is because under the new bill, ByteDance would have 165 days to divest from TikTok, and while that’s extremely unlikely for ByteDance to accept, especially since the company would have to seek the approval of the Chinese government to sell the platform, and that could take way more than 165 days, it’s still more than enough time for anything to happen to stop the bill from going through.
For example, former president Donald Trump could get re-elected in November, and he had said that he doesn’t support the TikTok ban, even though he believes the Chinese platform to be a national security threat. In fact, he opposes the ban because he thinks Meta would benefit too much from it, and Trump has been against Meta since his Facebook and Instagram accounts were suspended in 2021, even though they were unsuspended in 2023, and he also believes that Mark Zuckerberg and Meta played a role in his loss in the 2020 elections. However, many think his opposition to the ban is his way of courting Gen-Z voters ahead of the upcoming elections.
Regardless if that’s the case or not, a TikTok ban will definitely have both positive and negative effects, on both its American userbase and the tensions between the U.S. and China. This is the most serious threat TikTok has faced in the country, as it might not even be able to sell the business even if it wanted to, because TikTok is valued by some at anywhere from $50 billion to $90 billion, and very few companies in the U.S. can actually afford to pay that much. In the end, we just have to wait and see how this unfolds.
Disclaimer
Please visit and read our disclaimer here.
