The countdown is in effect right now for the roughly 170 million users of video sharing app TikTok in the U.S. In a couple of days, the controversial app may stop functioning in the U.S. – and rival social media companies could catch a windfall.
Back in April, President Biden signed a law requiring Chinese-owned TikTok to be sold to a U.S. company by January 19 or else it would be shut down. Intervention from the Supreme Court could save TikTok in the U.S., but that’s unlikely to happen.
Technically speaking, it wouldn’t be an outright ban. Rather, this Sunday is the deadline for Apple and Google to remove TikTok from their app stores. But then, that’s effectively a ban since it would greatly limit access to TikTok.
In response, TikTok is taking an “if you fire me then I quit” attitude. Reportedly, TikTok will “go dark” and make itself completely unavailable in the U.S. if the aforementioned restrictions go into effect.
There’s been chatter in the mainstream press that Donald Trump, soon to become President again on January 20, will rescue TikTok. There’s no assurance, however, that saving TikTok would be one of Trump’s first acts as President, or that it’s a priority at all.
Courtesy: @genuine_impact
Bear in mind, during his first term, Trump sought to ban TikTok unless the app would be sold to a U.S. company. Then and now, many Americans view TikTok as a national security risk.
There’s a precedent for this, as TikTok was banned in India on June 29, 2020. Apparently, TikTok shut itself down the night the Indian ban went into effect.
So, even before TikTok is effectively outlawed in the U.S., the app might go dark in anticipation of the ban. Of course, young people won’t just stop using short-form video apps; instead, they’ll migrate to TikTok’s rivals.
Like it or not, some users will move to a Chinese app called RedNote, which is similar to TikTok. However, well-known American rivals to TikTok already have brand-name recognition that RedNote doesn’t have.
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Meta Platforms has both Instagram and Facebook’s Reels as direct competitors to TikTok. Meanwhile, YouTube has its similar Shorts feature.
Thus, these American tech giants could catch a windfall. Morgan Stanley managing director Brian Nowak reports that every 10% of the time users spend on YouTube which they would have spent on TikTok will add $400 million to $750 million in ad revenue to YouTube.
Courtesy: @Grit_Capital
Don’t get the wrong idea here. This isn’t a call to immediately buy shares of Meta Platforms and Alphabet (owner of Google and YouTube). Investors should, however, be aware of the trends happening in social media today.
There are, by the way, other U.S.-based social media apps for investors to consider besides Instagram, Reels, and YouTube. If TikTok is banned in America, it’s likely that Snapchat, Pinterest, and Reddit would benefit financially.
On a final note, remember that outcomes are uncertain and nothing is guaranteed. TikTok might not get banned in the U.S., and this story may subside after a while.
But if something drastic does happen in the world of short-form videos on social media, it could take place within the next few days. Stay tuned, as the clock is ticking and very soon, there may be a major upheaval along with some prime investment opportunities.
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