The U.S. ban of TikTok is set to deal a major blow to ByteDance and its Chinese owner
The ban of TikTok could also create a huge hole in the business of ByteDance, TikTok’s parent company in China. The ban, which was passed into law by the federal government last year and upheld on Friday by the Supreme Court, is a major hit to ByteDance – the second most valuable private technology company in the world, valued at $300 billion. At least a chunk of the company’s value is tied to its success in the United States, where TikTok has 170 million monthly users, according to analyst estimates.
TikTok has a larger audience outside the United States — it has 1.2 billion to 1.8 billion monthly users around the world, with its largest markets including Indonesia and Brazil — but the app’s American users are the most valuable, analysts said. TikTok earns money from ads and selling goods via its TikTok Shop. This shop pays influencers commissions to promote beauty products, gadgets or clothes. The United States is by far the most profitable market, according to Mark Zgutowicz of Benchmark Company. He said that TikTok generated an estimated $10 billion of revenue in the United States in 2014, out a total revenue estimated between $20 billion and $26 billion. ByteDance’s business dilemma is huge. Facebook, Twitter, and other social media apps were blocked in China 15 years ago. However, this was before they had gained a large following. The closest comparison is the ban on TikTok by the Indian government in 2020. TikTok lost an audience of 200 million users there, but has since gained users elsewhere.
Whether TikTok may still escape a U.S. ban is unclear. Donald J. Trump, the president-elect, is considering an executive ordering that would allow TikTok continue to operate until new owners can be found. He could also direct the Justice Department not to enforce the law, or delay enforcement for a set period.
TikTok did not respond to a request for comment.
In court papers, it has said if it is banned, its U.S. business will be hurt. “Many current and would-be users and creators — both domestically and abroad — will migrate to competing platforms, and many will never return even if the ban is later lifted,” the company wrote.
ByteDance, which operates a family of apps in China and internationally, remains a business juggernaut even if TikTok’s ban in the United States goes ahead on Sunday, when the law takes effect. Douyin, the Chinese social media app, is where the company gets most of its revenue. According to a source familiar with the company, ByteDance, including TikTok brought in approximately $73 billion during the first half 2024. The Information earlier reported ByteDance’s revenue.
ByteDance, founded in 2012 by the entrepreneur Zhang Yiming and others, is backed by U.S. investors including Susquehanna Capital, which owns around 15 percent of the company. General Atlantic, Coatue Management, BlackRock and HongShan, the firm formerly known as Sequoia Capital China, have also invested in ByteDance.
TikTok’s ban in the United States will probably help its American competitors. Analysts and advertisers predict that up to 85 percent of TikTok’s U.S. revenues will move quickly to Instagram, owned by Meta, or YouTube, owned by Google. Both offer video services as well as programs that share commissions on ecommerce sales or advertisements with their popular creators. It’s easy to transfer the money you spend on TikTok to Meta and Google, Mr. Zgutowicz explained. The rest could be split up between smaller platforms like Snap and Pinterest, he added. TikTok’s users and influencers may make a similar shift, even though other platforms do not offer the same algorithmic personalization that made TikTok so popular. Instagram’s Reels rewards creators who have a large following, while TikTok’s algorithms allows relatively unknown creators to find an audience. YouTube’s Shorts also focuses more on established creators.
“There are other platforms where we haven’t necessarily been focused, where we’re probably going to double down,” said Kristin Patrick, the chief marketing officer of the fashion company Marc Jacobs. She cited Instagram Reels, YouTube Shorts, and, to a lesser degree, Pinterest. She added that the brand was “preparing for the worst” with TikTok.
A survey of TikTok users conducted late last year by the investment bank TD Cowen showed that, in the event of a ban, more than half of users said they would reallocate the time they spent on TikTok to YouTube or Instagram.
People who were spending hours a day on TikTok are “not just going to go away and replace that time with reading a book or something,” said John Blackledge, an analyst at TD Cowen. “They’re going on a platform.” They’re going to find content.”
TikTok employees and executives have left the company ahead of the ban. Live Data Technologies, a company that tracks employment and job movements, estimates TikTok to have 17,000 employees in the United States by late 2024. As the ban approached, the company’s turnover jumped by 38 percent in the second part of the year, compared to 2023. Sandie Hawkins was TikTok’s head of ecommerce for the United States. She left the company in late 2023 because she wanted to take a break. During the three and a half years she spent at the company, there was a recurring threat of TikTok being banned, she recalled.
“Anytime there was a news cycle, we would tell the team to focus on what was in your control,” Ms. Hawkins said.
In recent days, speculation has swirled that investors may step in with a last-ditch effort to buy TikTok and save it from a ban. The company has denied any reports of a deal and said that the Chinese government would prohibit a sale. A cloud computing and e-commerce deal struck between TikTok, Walmart and Oracle and promoted by Mr. Trump ultimately failed to separate TikTok from its parent company.
Sapna Maheshwari and Adam Liptak contributed reporting.
