Situation at a Glance

On Saturday, April 20th, the House passed a bill that now sits with the Senate, which requires its China-based owner to sell its stake in the company, or face a ban in the U.S.

If the bill is passed by the Senate, it effectively requires TikTok to be sold within a year to a buyer that satisfies the U.S. government. This buyer must guarantee that ByteDance no longer has any control over TikTok or its algorithms that recommend content to users. If this sale does not happen, it would be unlawful for app stores to distribute or update the app in the United States.

You might be wondering, how is this different from the bill passed in March? This new bill is different for two key reasons: 1) It is attached to a larger foreign aid package for Ukraine and Israel, meaning it is more likely to pass through the Senate and be signed by President Joe Biden as this aid is a priority, and 2) It extends the deadline for TikTok to find a buyer, which was a concern for many Senators. This timeline is extended from 6 to 9 months, with the possibility of an additional 3 month extension if a sale is in progress. The bill now sits with the Senate.

How This Could Play Out

If the Senate passes this bill, there are several factors that will likely prolong this 12 month timeline:

  • TikTok will likely sue on the grounds of First amendment rights violations. It’s clear TikTok will push back, evident from their substantial advertising investment of over $4.5M around their economic impact, how a ban violates freedom of speech, and how U.S. businesses rely on the platform to promote their brand. They have already began ad campaigns via TV and Search.
  • Other prominent groups of U.S. citizens that make a living via the app will likely sue.
  • It’s an election year, and American sentiment on this bill could sway both parties to distance themselves from the situation.

This is another milestone in this evolving situation, with many variables at play. Back in 2020 when President Donald Trump pushed for a sale of TikTok, there was a lot of market interest and Walmart/Oracle seemed likely to triumph. We would expect similar levels of interest this time around and ultimately a sale could amount to an even more advanced capability for brands to invest in; pairing Walmart’s shopper data and fulfillment capability with TikTok’s front-end social platform, for instance.

In the case of an outright ban, there is a lot of overlap between social platforms and several competitor products exist that can deliver comparable  results for brands based on how they are currently using TikTok advertising.

For now, we do not recommend pulling investment out of TikTok but instead suggest brands look at this as a call to start testing, learning and diversifying investment across platform partners. This situation is a continued reminder regarding the need to balance going deep with one partner versus diversifying your allocation when you can.

  • Short Form Video: Facebook/Instagram Reels, Snapchat Spotlight, YouTube Shorts, X Vertical Video
  • Search: Meta, Pinterest, Reddit, Google
  • Commerce: Amazon Storefront, Instagram Shop, Instagram Product Tags

Brands should work with their Code3 paid social leads to understand where there are opportunities within their current strategy around the above products, and outline a plan to begin testing to help inform contingency plans customized for your brand’s needs.

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