Advertisers unmoved as U.S. court upholds law requiring TikTok’s divestment or ban
NEW YORK – TikTok advertisers were in no rush to shift their marketing budgets after a U.S. appeals court upheld a law on Friday requiring a divestment or ban of the popular Chinese-owned short video app, citing TikTok’s continued survival despite years of threats.
Chinese tech firm ByteDance must sell TikTok’s U.S. assets by Jan. 19, or the app that is used by 170 million Americans will face an unprecedented ban that jeopardises billions in ad revenue.
TikTok and ByteDance had argued that the law is unconstitutional and violates Americans’ free speech rights.
In an email to advertisers on Friday, TikTok’s president of global business solutions, Blake Chandlee, said the company planned to seek “an injunction to stop the TikTok ban from going into effect until the U.S. Supreme Court has an opportunity to review it.”
Although TikTok’s future in the U.S. remains uncertain, advertising executives said brands are maintaining their activities on the app while ensuring they have a plan B.
“Advertisers have not pulled back from TikTok, though several are developing contingency plans for potential reallocation of investment should there be a ban,” said Jason Lee, executive vice president of brand safety at media agency Horizon Media.
Horizon is working with clients to prepare for a variety of scenarios if the app is sold or banned, Lee added.
In parallel, Meta Platforms (META.O), owner of Facebook and Instagram, is poised to capture the majority of TikTok’s ad revenue if the app is banned, followed by Alphabet’s (GOOGL.O) YouTube, according to Erik Huberman, CEO of marketing agency Hawke Media. Both companies have introduced short-form video features in recent years to compete with TikTok.
Still, “there’s no decision to make until there’s a decision to make,” he said.
The app continues to have an active audience, making it unlikely for brands to step away prematurely. “At the end of the day, advertisers won’t abandon the ship unless their customers do first,” said Lance Wolder, head of strategy at digital advertising firm PadSquad.
TikTok’s U.S. ad revenue is expected to reach $12.3 billion this year, according to estimates from research firm Emarketer.
“The loss of TikTok in the U.S. would cause a major shakeup in the social landscape, benefiting Meta, YouTube, and Snap, while hurting content creators and small businesses who rely on the app to make a living,” said Jasmine Enberg, principal analyst at Emarketer.
Earlier on Friday, Meta Platforms shares rose to an all-time record high of $629.78, and were up 2.3% at $622.85 in late-afternoon regular trading.
Alphabet shares were up 1.1% at $176.21.
Trump Media & Technology (DJT.O), which operates the Truth Social app and is majority-owned by President-elect Donald Trump, rose 3% to $34.78.
Shares of Snap, owner of messaging app Snapchat, rose 1.89% to $12.40.
