FILE PHOTO: A person arrives at the offices of Tik Tok after the U.S. House of Representatives overwhelmingly passed a bill that would give TikTok's Chinese owner ByteDance about six months to divest the U.S. assets of the short-video app or face a ban, in Culver City, California, U.S., March 13, 2024. REUTERS/Mike Blake/FILE PHOTO
(Reuters) - Advertisers who turn to TikTok to market to young consumers are preparing contingency plans with social media rivals in the event the short-form video app is sold or banned in the U.S., but they are waiting for signs of Senate action before shifting marketing budgets.
House Republicans voted Wednesday to force Chinese tech company ByteDance to sell TikTok in roughly six months, or face a ban, one of the most significant challenges to the company that has long faced questions about national security concerns.
The White House has urged the Senate to pass the bill and U.S. President Joe Biden has pledged to sign it.
Meta's Reels and YouTube's Shorts, TikTok's biggest competitors, are set to be the beneficiaries of advertising budgets if the app is banned, ad experts said.
TikTok did not respond to a request for comment. The company has said it will exercise its legal rights to prevent a ban, which it says would "take billions of dollars out of the pockets of creators and small businesses."
"The momentum around this legislation is greater than in previous national efforts to curtail or sell off TikTok, and advertisers are keeping a sharp eye on developments," said Jasmine Enberg, principal analyst at research firm Insider Intelligence.
If the bill progresses, "it would put us more on alert," said Jack Johnston, senior social innovation director at Tinuiti, a digital marketing firm that has worked with brands like Revlon and Elf cosmetics.
Still three digital marketing firms, including Tinuiti, told Reuters they are advising clients to keep a "business as usual" approach to TikTok, noting the viral app has survived multiple previous attempts to restrict its availability in the U.S., including an executive order from then-President Donald Trump in 2020 to ban it.
While advertising budgets are planned months in advance, brands can quickly place or pull ads on social media to respond to events.
Videos on TikTok can quickly set off new trends in music, fashion and beauty, and brands have flocked to the app in hopes of becoming part of major cultural moments. Insider Intelligence estimates TikTok will generate $8.66 billion in U.S. ad revenue this year.
The high stakes involved with banning a major app like TikTok make an outright ban unlikely, one digital ad firm told clients on Wednesday, declining to be named to discuss the conversations.
A sale of the app is more likely, and the roughly six-month timeline would help brands prepare, Johnston said.
If the app is sold during the holiday season, a critical sales period for many companies, "then there is a little more urgency for brands that rely on this time of year for a bulk of their revenue," Johnston added.
Even if marketing budgets are redirected to Reels and Shorts, there's no guarantee the competing features could perform the same as TikTok.
"While a good portion (of TikTok users) are also active on other platforms, there is a healthy chunk that use TikTok as their primary media consumption channel. Reels and Shorts are the two logical offerings out there that most closely match TikTok's content format, but it doesn't mean that this is where users will flock to necessarily," Johnston said.
(Reporting by Sheila Dang in Austin; editing by Peter Henderson and David Gregorio)
