A TikTok ban could be devastating for American retailers

  • President Trump has turned his anti-TikTok rhetoric into an executive order.
  • A ban on TikTok would mean that retailers lose millions of dollars in profit, due to the app's popularity with influencers and advertisements.
  • Justin Kline is the Co-founder of Markerly.
  • This is an opinion column. The thoughts expressed are those of the author.
  • Visit Business Insider's homepage for more stories.

This month, President Trump turned his potential TikTok ban talk into an executive order, banning the popular video sharing app unless it's sold by its Chinese-owned parent company in 90 days. TikTok is not only a part of the zeitgeist—it has emerged as a powerful marketing tool that can generate substantial sales for retailers who commit to the platform and utilize it properly. Simply put, a ban would adversely impact the entire retail industry.

I know what you're thinking. How much spending, from retailers and users, could be taking place on TikTok to warrant such a prediction? Despite launching in 2016, the platform didn't really become an advertiser's jewel until 2019 – it's estimated that the app brought in anywhere between $200 and 300 million in revenue worldwide last year. And it's aiming for $500 million just in the U.S. during 2020.

Retailers can scale their advertising on TikTok, from brand takeovers for $50,000-100,000 to native ad campaigns for a minimum of $500. Not included in TikTok's revenue is the amount brands put toward influencer marketing. Many creatives are compensated directly by brands and pay is scaled based on the number of followers and average engagement that the user has. Further, some brands might choose to compensate influencers with products. For the early adopters of TikTok advertising, the app has proven to be a worthwhile investment in a short amount of time. A few big winners include:

  • American Eagle's Aerie brand, which reported a 100% jump in Q2 sales after engaging with a popular TikTok influencer for the #AerieRealPositivity challenge.
  • Mattel, which reported a 116% increase in UNO sales from May 2019 to May 2020 after deploying influencers to promote the card game in its #unowhoyouare TikTok campaign this spring.
  • Levi, which hired four TikTok influencers to create personalized denim pieces that were promoted via in-feed ads. Product views for these custom pieces doubled during the campaign and Levi's digital business also doubled from last year, now accounting for 15% of its total revenue.

With results like that, it's no wonder that brands would be concerned about a potential ban. We may even see efforts–in a last-ditch attempt–to get their products, branding and slogans in front of users before the app goes dark (not likely in my opinion). If that happens, these brands will be negatively impacted. Sales from loyal TikTokers will taper off—just like the memes and trends found on the app, the attention span of these users is relatively brief, and brands will lose these audiences and their buying power if they are no longer able to serve up frequent branded content on TikTok.

TikTok users will (perhaps begrudgingly) migrate to other platforms such as Snapchat and YouTube in search of comparable video content if a ban occurs. Social platforms like Instagram and Facebook are familiar to most TikTok users, and useful for advertising and marketing in their own right. 

But the reality is, they cannot match the authenticity and freshness of TikTok and this will prove to be a crucial missing link for turning posts and engagements into retail sales. If you thought things couldn't get even more interesting, Instagram recently launched Reels, a TikTok copycat.

Despite having immediate access to Instagram's user base, Reels will most likely not be a viable alternative to TikTok for brands and creatives. Even in the event of a ban, loyal TikTok users will not be able to find the same type of organic content and energy that the TikTok platform embodies.

While Reels has the short video concept, it's lacking what users like the most about TikTok: a highly engaged user base, a fresh user interface, video filters galore, an unprecedented music library, staff that is highly passionate and communicative, and a feed that hasn't been bastardized in an effort to squeeze out more ad dollars.

TikTok makes you want to keep scrolling to see what's out there, while Instagram's Reels requires that you seek out content by searching. Plain and simple, Reels will not be a substitute in the event of a potential TikTok ban. We can, however, anticipate that users turn to it more than other options, such as Facebook and Snapchat. 

Brands will also be less likely to put all of their eggs into a new TikTok-less basket, as there is no adequate replacement for TikTok. Traditional social ads, sponsored content and user activations on these networks won't grab users in quite the same way. Competitors will surely jump to create similar offerings in the wake of a ban, but they'll likely be met with skepticism.

If Generation Z and Millennial users aren't as compelled by the organic content found on Facebook and Instagram, they'll likely feel uninspired with branded posts. Even if a contender for TikTok emerges, the most nimble brands may find themselves pouring time and money into a platform that will not yield the same ROI as TikTok.

But enough about the brands! Social media influencers are now a part of an established industry and economy in their own right. Influencers exist on all platforms these days, but those who got their start and made a name for themselves on TikTok will be more impacted by a ban than brands.

Influencers based in the US will lose an entire revenue source if they lose access to TikTok. Even international influencers who are spared could stand to lose millions of US followers (and US-based brand partnerships).  For the few influencers that remain, it might not be possible to survive on sponsorships from international brands alone.

In order to keep their corner of the market afloat, TikTok influencers will have no choice but to take to other platforms and attempt to rebuild their followerships. Those who find themselves on a new platform with little to show for themselves beyond their TikTok history will have a hard time winning back brand partners and finding new channels of revenue. Plus, they'll have to find new ways to engage their audiences, since they'll be working with less video creation functionality on other platforms.   

At a time when some brands are boycotting Facebook and its subsidiaries – or being otherwise cautious with advertising budgets – TikTok has become a beacon of hope for retailers willing to take a risk on a nascent platform that delivers fast and powerful results. A ban of the app would cut brands off from hundreds of millions of potential shoppers, creating a ripple effect on advertising budgets and influencer incomes that could shake up the retail industry as a whole.

Justin Kline is Co-founder of Markerly, an influencer marketing technology partner and platform working with some of the largest consumer brands in the world.

This is an opinion column. The thoughts expressed are those of the author(s).

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