Will the U.S. ban TikTok?

The Monopoly Report has rescued our intrepid founder from the windowless room in Virginia and is bringing you insight into the global efforts against the ad side of big tech.

I’m Alan Chapell. I’ve been working at the intersection of privacy, competition and advertising for decades and I’m going to be writing for The Monopoly Report. Check out our first Monopoly Report podcast with Jason Kint of Digital Content Next.

The TikTok ban: who are the winners and losers?

Last week, I promised to move away from the ‘All Google All the Time’ programming here at the Monopoly Report. This week, I want to write about the law that may force the shut-down of the 5th biggest social platform and the generator of nearly $10 billion ad dollars over the past year. Yep, talking about TikTok and the new law that may ban TikTok from the U.S. (i.e., H.R. 7521, the Protecting Americans from Foreign Adversary Controlled Applications Act).

Background on the TikTok Law

The NY Times wrote a good piece on the lead up to the TikTok divestment law moving through Congress and another one on TikTok’s response to the Law. (H.R. 7521) Also, Megan Gray offered some great insights – including some really fun details about how the TikTok law made its way through Congress. Anyway, the law requires that TikTok divest from its Chinese ownership within nine months (with a possible three-month extension), or face being removed by the App stores. The ban is set to take effect Jan 19, 2025 – meaning that the law won’t even fulfill what seemed like its primary purpose of protecting the 2024 elections from undue foreign influence. Sigh…

The TikTok Law is positioned NOT as a privacy law, but rather as a national security law designed to protect Americans from influence of a foreign adversary. In that way, the law is similar to the recent Biden Executive Order which prevents the transfer of sensitive data to “countries of concern” and the recently passed Protecting Americans’ Data from Foreign Adversaries Act of 2024 (PADFA /  HR 7520) which seeks to stop the sale of sensitive data to a list of foreign entities in the name of national security. (As an aside, ask your privacy lawyer about PADFA as it carries some interesting implications.)

The TikTok law is not a ban, it only requires divestment, right?

Let’s spare ourselves the semantics debate. Only the U.S. Congress could think that a billion-dollar company could possibly sell itself off in nine months – even if it didn’t have to deal with the additional headache of untangling one of the more valuable algorithms on the planet.

TikTok must have done something wrong, correct?

As I wrote last week with respect to Google - I’m not here to praise or bury. I’m here to talk about the impact of a ban on the digital ad industry. In that light, questions as to whether or not the platform is being used for propaganda or manipulation, or to beam back all your data to China are well-covered elsewhere.

Where do things stand?

This is a bit of an oversimplification, but here goes. According to the U.S. Government, the nexus of the national security threats posed by TikTok are due to its ownership by the Chinese company Byte Dance. TikTok is fighting back – claiming that the law is unfair, arbitrarily singling TikTok out, and violating at least few of the Amendments to the U.S. Constitution. The DOJ has in turn responded – saying that TikTok presents a significant national security issue because of their connections to the Chinese Government, that they don’t respect privacy, and that they generally should not be trusted. But when asked for proof, the DOJ provided heavily redacted documents – and basically said: “trust us – these guys are bad.”

By now, you’re probably asking yourself: OK, but how does this impact me? And now we’re getting into the meat. Let’s say the ban goes forward. What happens to TikTok? And what happens to all the ad dollars that are currently flowing into TikTok Here are the winners and losers of the TikTok Law.

The Winners

The other tech giants – If TikTok is forced to close shop, those ad dollars will have to go somewhere. Initially, the ones in the best position to accept the groundswell of ad dollars are larger companies. And who knows, maybe this causes advertisers to take a second or third look at Snap.

Funny how “tech giants” seems to ALWAYS be the answer when we’re talking about the beneficiaries of a major change. Are there any other winners if TikTok gets banned? I couldn’t think of any. Maybe some obscure ad agency? I’m open to suggestions…

The Losers

• TikTok and its parent, Byte Dance – It’s not just giving up the revenue, but all that money they invested in building up this audience.

•  The Harris campaign – Not to wax political, but the last thing VP Kamala Harris’ campaign wants to do right now is Tik off the under 25 vote on the eve of the 2024 elections.

•  The “National Security” card – The U.S. has deftly played the national security card lo these past twenty-five years. Is it still a winner? As a poker player, you never want to bluff when the other side thinks you’re holding a weak hand.

• EU to U.S. data transfers - It’s worth noting that almost all of the above allegations have also been made against any number of the U.S. Internet giants by EU policymakers in connection with EU to U.S. data transfers. In a monkey-see-monkey-do world of International diplomacy, a U.S. ban of TikTok might ultimately make it harder for you to close that big 2025 deal in Europe you’ve been counting on given that most U.S. ad tech firms store EU data in the U.S.

• Other social and video platforms – This is related to the above point, but hits closer to home for at least some of the tech giants. Political momentum is a funny thing. If the political winds are such that Platform A is problematic for whatever reason… welp, sooner or later those same political winds may lead U.S. policymakers to question whether Platform B, C or D is also problematic. We’re not there yet, folks. But let’s not pretend that we’re miles away.

How will all of this play out?

I’m sorry, but we’re out of time. I will say that I think there’s still room for a political settlement  - although the way the law is crafted apparently makes any such settlement challenging to say the least. There’s also an irony in play here. The more pressure that TikTok places on the two presidential campaigns or the Biden administration, the more susceptible they are of accusations of attempting to influence – which is one of the reasons they’re in this spot. It’s kind of the modern equivalent of the Salem witch trial in that respect.

Editor’s Note: We’re considering doing a pod on the impact of the TikTok ban. Ping me if you think it’s a good idea and/or you’re on the advertiser or agency side and can speak to how you’re thinking about this stuff.

Introducing, Alan’s Hot Takes…

There’s so much going on with big tech these days. I thought it might be helpful to share a few thoughts each week to help everyone sound smart at the next First Wednesday or other digital ad meetup. (I like to pretend that everyone else is as excited about this stuff as I am).

• Privacy literacy – My friends, “pseudonymous” and “anonymous” are different terms which carry distinct implications. Let’s. Stop. Using. Them. Interchangeably. #McPrivacy.

• DOJ Remedies in Google Search antitrust - The DOJ has made its pitch for remedies in the Google antitrust case and appears to be swinging for the fences. Look for a pod on this in the near future.

• AI overviews is good for publishers? Paul Bannister calls Google’s bluff on AI Overviews. Anyone from Google want to come on the pod and show your math?

• DOJ Vs Ticketmaster – I like this antitrust case both as a musician and a music fan. And big props to Rolling Stone for finding a way to make lawyers look cool. Jonathan Kanter (DOJ) and Lina Kahn (FTC) are out on the speaking circuit these days. Serious question – what happens to all these antitrust cases if they’re no longer around in 2025 after the election?

•  UK CMA and Google’s Privacy Sandbox commitments – Big props to the CMA for sticking to its word. Don’t listen to the conventional wisdom, choice screens are much more complicated and problematic than some would have us believe – both on the privacy and competition front. On a related note, we need to move Google from its current role of explainer in chief for all Sandbox feedback. It’s simply not productive to have every bit of feedback on the Sandbox sanitized via Google-speak.

• Legal basis in the EU - The EU Court of Justice just confirmed that legitimate interest might be viable for targeted ads and data sales. But I wouldn’t leave the IAB TCF just yet. Those EU folks sure do seem to like consent. (See chart below).

If there’s an area that you want to see covered on these pages, if you agree/disagree with something I’ve written, or if you just want to yell at me, please reach out to me on LinkedIn or in the comments below.