TikTok: Sell Out or Get Shut Out?!

Communication Author: Yiru Qian, Jiahui Liao Mar 27, 2024 05:07 PM (GMT+8)

TikTok is facing the most severe ban crisis in its history.

Tiktok brand number map

March should have been a time of blooming spring, but for TikTok, it is a dark moment.

On March 5th, the U.S. House of Representatives received a bipartisan bill called the "Protecting Americans from Foreign App Control Act," which aims to prohibit "the distribution, maintenance, or provision of internet hosting services for applications controlled by foreign adversaries." The bill only mentions two companies by name, one being TikTok and the other its parent company, ByteDance, and it mandates TikTok to divest from ByteDance within 165 days, otherwise TikTok will be removed from U.S. app stores, leading many to refer to it directly as the "TikTok Divestment Act."

Just three days later, the bill passed unanimously with a vote of 50:0. On the morning of March 13th, the U.S. House of Representatives voted again on the bill, ultimately passing it with an absolute vote count of 352 in favor and 65 against. This is the most severe crisis TikTok has ever faced. An overseas content commerce entrepreneur said, "Most people think that the biggest impact of this turmoil is simply the closure of the U.S. market, but in fact, it's not the case. To some extent, losing the United States is equivalent to losing all English-speaking markets." He emphasized, "Even more (markets)."


TikTok Globalization: Facing Challenges and Difficulties

Since its launch in May 2017, the U.S. market has always been one of TikTok's main battlefields. However, its journey in the U.S. can be described as "walking on thin ice." The main reason for this is that TikTok's opponents have always been concerned that its parent company, ByteDance, from China, would use various means to obtain U.S. user data and share it with the Chinese government, or infiltrate positive propaganda for the Chinese government and discordant voices from China into TikTok. On March 23rd last year, the U.S. Congress held a hearing on TikTok for more than five hours. TikTok CEO Zhang Yiming attended and responded to questions from U.S. lawmakers on issues such as "national security." However, during the hearing, Zhang Yiming was heavily questioned and underwent over 200 questions from the U.S. House Committee on Energy and Commerce for more than 5 hours. Anti-China lawmakers fabricated Chinese issues, repeatedly asking absurd and low-level questions like "Can your software connect to Wi-Fi?" Similarly, in the latest hearing attended by Zhang Yiming, he was still repeatedly harassed by lawmakers, even questioning his nationality and involving his family members.

As early as August 2020, former President Trump signed two executive orders targeting TikTok's U.S. operations, claiming it threatened national security. However, at that time, senior U.S. officials believed that Trump ignored U.S. law and did not provide much support, so the executive orders did not take effect as planned. After President Biden took office in 2021, he revoked the ban on TikTok. However, shortly after, in 2022, Biden began to prohibit nearly 4 million federal government employees from using TikTok on government devices, and in June of the same year, the United States forced TikTok's U.S. user data to be transferred to Oracle's cloud servers in the United States for Oracle to supervise compliance issues.

During the same period, India, known as the "graveyard of foreign companies," also caused considerable trouble for TikTok. On June 29, 2020, the Indian government announced the ban of 59 Chinese apps, including TikTok, citing "security" concerns, believing that these apps were engaged in activities detrimental to Indian sovereignty, defense, national security, and public order. Unlike in the past, the ban took effect immediately. According to Reuters, just one day later, TikTok could no longer be found in the Indian app stores of Google and Apple, and TikTok already downloaded on phones could not display any videos.

In addition, considering the influence of the United States, the attitude of the U.S. government towards TikTok also greatly affects how other markets treat TikTok. After the U.S. House of Representatives voted on the bill, on March 16th, the Canadian Minister of Industry stated that TikTok was under national security review, and the government's decision would be announced after the review.

In the face of difficulties, the mediocre yield and waver, while the brave break through the siege and control their fate. However, compared to the relatively gentle counterattacks in the past, such as establishing a U.S. data security department, restructuring operational structures, adjusting equity structures, and introducing foreign executives to the management team, this time TikTok is more direct and decisive.


On March 7th local time, TikTok pushed a splash screen message to its U.S. users: "Stop a TikTok shutdown," calling on users to oppose the bill. According to reports from media such as The Washington Post, on that day, the offices on Capitol Hill were "flooded" with protests from TikTok users. A congressional staffer said that the offices of the House of Representatives received hundreds of calls from TikTok users, sometimes answering more than 20 calls per minute, and some offices even received more than 1,000 calls.

Understanding the Importance of TikTok

As a phenomenon-level app with over 1 billion active users worldwide, TikTok, the "largest platform for content creators" and China's most successful global application, has become an important part of today's global digital ecosystem. Understanding the importance of TikTok correctly is not only about understanding its massive user base but also an effective reference for benchmark cases of Chinese companies going global in the digital age.

Firstly, in terms of user numbers, public data shows that since its launch, TikTok has been downloaded globally over 5.17 billion times, with over 1 billion daily active users worldwide. Its market shares are highest in India (12%), China (11%), the United States (9%), Indonesia (8%), and Brazil (6%). Instagram ranks second with 829 million downloads; Facebook ranks third with 635 million downloads, and Temu ranks seventh with 337 million downloads. According to data from market intelligence agency Sensor Tower, TikTok was the most downloaded social media app in the United States in 2023, with 47 million downloads, and has 170 million users in the United States. That is to say, more than half of Americans share and browse on TikTok. After the bill passed, there even appeared entries like "use VPN to browse TikTok" on U.S. social networks, which to some extent indicates the attractiveness of TikTok to some American people.

In terms of revenue, TikTok is the main driver of revenue growth for ByteDance. According to foreign media reports, ByteDance's revenue in 2023 was approximately USD 120 billion (about CNY 863.5 billion), a year-on-year increase of 40%. Among them, TikTok's revenue in the United States reached USD 16 billion (about CNY 115 billion), a record high, accounting for about 13.3% of the total revenue. And because TikTok is still in the investment period overseas, its future revenue may not be inferior to Douyin's (TikTok's Chinese version) domestic revenue. In terms of advertising, according to Statista, TikTok's advertising revenue in the United States was only USD 2.1 billion in 2021, but it is expected to exceed USD 11 billion by 2024, indicating promising prospects.

Meanwhile, since launching its e-commerce business, TikTok has become increasingly intertwined with American society, influencing the American commercial economy to a certain extent. During last year's "Black Friday," TikTok Shop entered the U.S. market with a strong presence, adopting two models: "content + shelf" and allowing both self-operated and fully hosted merchants to participate. Benefiting from significant support in discounts, resource allocation, and traffic, TikTok Shop has fully activated the ecosystem of short videos and internet celebrities in overseas markets, becoming the preferred platform for many brand sellers in social e-commerce layout. For example, the toy brand Educational Insights achieved a sales growth of 300% to 400% when it first joined TikTok Shop, and TrioBeauty's order volume on "Black Friday" increased by 525% compared to the previous month, with 44% of sales coming from video content, 28% from live streaming, and another 28% from product detail pages. With the support of this data, more domestic and foreign brands are bound to actively layout TikTok in the U.S. market, seeking higher sales and exposure.

According to related data, there are currently an estimated 7 million small and medium-sized enterprises in the United States that reach customers and conduct business through TikTok. A report released by the Oxford Economics Research Institute cited by The Washington Post on March 13, 2023, estimated that in 2023, TikTok brought in USD 14.7 billion in revenue for U.S. small and medium-sized enterprises and contributed USD 24.2 billion to the U.S. gross domestic product (GDP). TikTok has created at least 224,000 jobs in the United States, particularly prominent in California, Texas, Florida, New York, and Illinois. Some brand founders profiting from TikTok, in interviews with foreign media, expressed that if this ban were to take effect, it would have a "fatal impact" on their livelihoods.

Moreover, as the most popular social platform among young people in the United States, TikTok's influence has even spread to the U.S. presidential election. In February of this year, President Biden himself appeared in a TikTok video, interacting with netizens and answering their questions, hoping to rally young voters on TikTok. While former President Trump, who strongly opposed TikTok, adhering to the principle of "the enemy of my enemy is my friend," supported opposing the ban on TikTok in this incident, and the fundamental reason for his change in attitude may be the desire for young voters. According to a survey by the Pew Research Center, one-third of U.S. adults under the age of 30 frequently browse news on TikTok, and a large number of young TikTok users are opposed to this bill. "What people see may be its influence on public opinion, but more importantly, it (TikTok) has far-reaching impact on social and economic institutions, as well as the subsequent redistribution of interests," said Zhang Sicheng, former chief strategy officer of Minglue Group, to EqualOcean, "Regardless of how it retaliates, TikTok's fate in the U.S. market has been sealed, and its prospects in the global market will also be full of uncertainties."

Potential Buyers Lurking

If this bill ultimately takes effect as a law signed by the U.S. president, ByteDance will need to divest TikTok's U.S. business within 6 months or sell it to another non-Chinese company; otherwise, TikTok will be removed from major app stores and completely banned in the United States. In this case, TikTok's strong ability to attract funds will make it a "high-quality target," attracting one potential buyer after another. In the upcoming acquisition battle, all parties are eagerly watching TikTok's fate, preparing to embrace this exciting investment opportunity.

On March 9th, after the first round of voting on the bill, foreign media reported that former Blizzard CEO Bobby Kotick proposed the idea of acquiring TikTok to potential partners such as OpenAI and had contacted ByteDance CEO Zhang Yiming, expressing interest in acquisition. However, ByteDance denied this, saying that the reports were untrue, and Zhang Yiming did not communicate on related matters.

On March 14th, former U.S. Treasury Secretary Steve Mnuchin also revealed in an interview that he was assembling a team to try to acquire TikTok. Mnuchin said he had conversations with investors interested in the deal but refused to disclose the identities of specific investors. In addition, Canadian businessman Kevin O'Leary said in an interview that if the bill passes, TikTok must be sold, "I would raise my hand and say 'I'll buy it'." Chris Pavlovski, CEO of the short video platform Rumble, expressed in a letter posted on social media that if ByteDance divests ownership of TikTok, Rumble intends to participate in the acquisition and operate TikTok in the United States, ready to become a cloud technology partner.

Although there are multiple potential buyers showing strong interest, ByteDance has explicitly stated that it will not sell TikTok. This event evidently reflects the American-style bandit logic, and the stock prices of Meta and Alphabet also surged after the bill was passed, becoming potential evidence.

Bottom Line

TikTok is at its most dangerous moment, but in turn, this may indicate that it is at its strongest moment. Although TikTok's future is full of uncertainties, whether it will turn danger into safety, have a close call, or other possibilities, it remains a mystery. But this moment is also worthy of deep reflection. How Chinese companies in the new era of going global can protect their interests under political risks and balance the delicate game between economic interests and ideology in the competition between major powers. As a practitioner in the European and American market development strategy service industry told EqualOcean, "Failure to resolve the current crisis of TikTok, the U.S. market for other Chinese companies going global will be a time bomb."