As the US prepares for a ban on the popular video app TikTok, agencies representing the biggest advertisers of the app are preparing contingency plans. This includes seeking break clauses within their marketing contracts.
ByteDance TikTok, the Chinese parent of the app, was given until January 2015 to divest from its US business, or else face a ban by US legislators who are worried about its security due to its links with China.
Social media, which has more than 1bn users worldwide, is a major part of many brands’ marketing strategies, especially among younger audiences, who are less likely engage with traditional advertising, such as television.
People who are familiar with its finances say that TikTok’s sales in the US amounted to $16 billion last year, primarily from advertising.
Several advertising executives have said that their teams are now preparing alternative plans for the coming year, should TikTok not be allowed in the US, the most important advertising market on the planet.
A senior advertising executive stated that the threat of a ban was already having an effect on some brands’ spending. This person stated that they asked company executives what would happen if US blocked the site.
The ad boss stated that “They did not have a good response on how they currently sell ads in the US.” How can anyone think that they will be able do what they are doing in six months?
He said that the agency had prepared contingency plans including a “kill” clause to avoid any financial obligations in the event of an outright ban. In order to get media discounts or prominent slots, brands and their agencies sign contracts that commit to a certain amount of advertising.
This person told me, “You need to keep some distance.” You’re not short of places to promote. TikTok happens to be the most popular at the moment.
A second agency boss said that the threat of a ban had already disrupted clients’ plans. They added that other social media platforms will likely benefit from the ban.
They said, “We have contingency planning at a very high level in case something happens.” “Those audiences are going to go somewhere and our investment is following them.”
Shou Zi Chew was the Singaporean Chief Executive Officer of TikTok and attended the Cannes Lions advertising festival for a week last week.
He didn’t appear in public, but instead attended private meetings with advertising bosses to discuss the platform.
GroupM stated in a report released this month that if the ban was triggered “we would expect advertising revenue to shift to other social video platforms, such as Meta Reels or YouTube Shorts as well as to other digital media owners and creators who are currently active on these platforms”.
Third advertising boss stated that negative publicity had already hurt TikTok’s reputation with some marketers, even if US did not take any action.
They said that “More and more brands are beginning to think [where the data is going] in terms the investment they make, the return they get.” “I’m seeing a growing interest in the social impact of the platform.”
ByteDance has fought the threat of a TikTok ban, arguing it violates the free speech rights. It also claims it is impossible to separate the app from its larger group. The Chinese government said that it would not be in favor of a sale. Around 170mn Americans are using the app.
TikTok stated in a press release: “We continue seeing strong growth in advertising as brands realize that TikTok delivers results and can transform business growth no matter what size.”
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