TikTok, is time up?
In this outtake from the Weekend Mumbo, Damian Francis takes a look at the current situation surrounding TikTok, and who's issue it actually is.
Who is the CEO in the media and marketing industry under the most pressure right now? Not just in Australia but globally?
I would argue it is Shou Zi Chew, the CEO of TikTok, owned by Chinese company ByteDance. He’s held that position since 2021 and as I learned this week, is Singaporean. Not that the latter particularly matters but as the son of Singaporean immigrants to Australia I am still proud of the achievements of Singaporeans.
It will take a while before I forget Joseph Schooling’s Olympic gold medal in the 100m butterfly at the 2016 Games. But I digress.
Should I feel some sort of national pride at Chew’s business achievements? That is connected with one of the biggest debates in media and marketing at the moment.
Regardless of his nationality, you couldn’t pay me enough to be Chew at the moment. The former CFO of ByteDance, he and TikTok are under intense pressure currently – pressure which could result in the shutting of the business in many regions outside of China, or forced divestment.
It all comes down to the tense relationship between China and the West which could have flow on effects for media and marketing. And it’s important on a number of levels.
Do governments have the right to shut down media (or in this case social media)? Do people have the right to choose (responsibly or irresponsibly) who they share their data with? And what will happen to the micro-economy that has been built around TikTok?
I’m not going to pretend I have all the answers to those questions, but I do have a summary of how we got here and what to expect in the near future.
Who cares?
Let’s answer the most important question first – why does anyone care? With over 1.5b users and growing (but still not as many as Facebook or YouTube), TikTok is demanding attention from advertisers.
Some of those users have leveraged TikTok to create small media empires. That in itself is always slightly challenging. When you are so dependent on a platform, all it takes for success to crumble is an algorithm change – or in this case various governments intervention.
The current usage of TikTok garnered nearly US$10b in advertising revenue in 2022 according to Business of Apps. What is more interesting is tracking the significant rate that revenue has been increasing for the Chinese business. In 2021 it was US$4.6b.
There is a lot of money flowing through TikTok, the majority of which is from advertisers. Therefore there are a lot of people in our industry with vested interests.
Why would the TikTok tap be turned off?
While I mentioned previously that the fact Chew is Singaporean is neither here nor there, the fact that TikTok is owned by Chinese company ByteDance is significant.
It’s not often that world politics plays such a big part in the media and marketing industry, other than it being reported on by the media itself, but the tensions between China and large parts of the West at the moment could well have significant impacts on our industry – potentially resulting in one less outlet to spend money with.
Last week Chew appeared in the US congress to be grilled on the company’s relationship with the Chinese government, among other things.
Republican Rep. Cathy McMorris Rodgers said the app should be banned in the US and was “an immediate threat”.
TikTok’s IWD campaign
“We do not trust TikTok will ever embrace American values, values for freedom, human rights and innovation,” she said. “TikTok has repeatedly chosen the path for more control, more surveillance and more manipulation. Your platform should be banned.”
In its defence, Chew argued, “I don’t think ownership is the issue here, with a lot of respect. American social companies don’t have a great track record with data privacy and user security. Look at Facebook and Cambridge Analytica. Just one example.”
Sadly, he has a point. Closer to home, look at Optus, Medibank and now Latitude Financial. TikTok’s relationship with the Chinese Government is a very real concern, but so is the way large corporations deal with the personal data of their customers.
The wheels are in motion
While TikTok isn’t necessarily on the verge of being shutdown in certain regions, it’s a distinct possibility that it will happen in the future. Governments have already moved to ban the app on their staff’s devices.
According to the AFR earlier this month, “Chinese-owned viral video app TikTok has been banned from work-issued devices by 25 federal agencies and departments, including Foreign Affairs and Trade, Prime Minister and Cabinet, and Finance, as an investigation by Home Affairs into social media and what action the government should take nears completion.”
The United States, Canada, Belgium and the European Commission have done the same.
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Now there is an argument that it should be banned on personal phones of government employees as well, and then, of course, beyond, as mentioned earlier.
“The bottom line is that if there is a cybersecurity issue for the government users, the same applies to all of us,” Surrey University professor of cybersecurity, Alan Woodward, told The Guardian this month.
That same article also mentions that “In a privacy policy update from late 2022, the company admitted that European users may have their data accessed by employees in China.”
The US at the very least is serious. The Wall St Journal was the first to report in the middle of this month that the Biden administration has threatened to ban TikTok in the US unless ByteDance divested of its stake.
Great expectations…
While the possibility of the Biden administration forcing Bytedance to divest in TikTok is a significant issue for the brand, it wouldn’t be wise to get too far ahead of ourselves here.
Remember that Google is currently a target of the U.S. Department of Justice which in January filed a lawsuit against it. The Dept. is aiming to force Google to divest part of its $54.5 billion advertising business.
Google is being accused of using “…anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies.”
While I’m not saying that ByteDance won’t be forced to divest in TikTok or that Google won’t be forced to divest part of its advertising business, these issues are complex and take significant amounts of time to resolve.
Technology moves quickly. What we do know is that, even in a compressed market, it is likely that advertising revenue generated by TikTok will increase, and the user base will as well.
Having spoken to a number of industry executives, the challenges being faced by TikTok at the minute are not necessarily diminishing advertiser interest in the social media platform. In fact, none of them have suggested they would pull investment.
TikTok Australia General Manager, Brett Armstrong.
It is akin to the sports sponsorship situation I wrote about a few weeks ago, and even has links to the betting and wagering discussion on the latest episode of the Mumbrellacast.
The platform is there and it is attracting a significant audience. Brands want to be part of that so the money is flowing. The political precipice that TikTok is balancing on isn’t diminishing that opportunity at the moment. Unless an authority specifically says brands and consumers are not to use TikTok, it will continue to grow and that micro-economy will continue to flourish.
Should the industry wait for a government to act? Should it act itself? Is TikTok doing anything wrong? Perhaps a better question is whether it is doing anything differently to any other large corporation?
And let’s not forget a couple of very important realities. TikTok has significant control over what its users see, and its users have a strong love of the platform. After the congress hearing, Chew was portrayed as a hero across TikTok.
We are not in the habit of creating more questions than we answer when it comes to The Weekend Mumbo. But in this case I think it’s necessary. The TikTok battle has only just begun.
Update: Since writing this post, the AFR ran a story on WPP’s global CEO Mark Read and his thoughts on the TikTok situation. He said “I think clients follow where consumers are. Now there’s a question obviously, around TikTok and its ownership. I think that’s something that governments ultimately will decide. And we’ll have to see how that unfolds.” You can read the entire story here.
Damian Francis is editorial director at Mumbrella
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