Banning TikTok in the United States will create a visible hole in the social media. For ByteDance, TikTok’s parent company in China, it could also create a noticeable hole in its business.
The ban, which was signed into federal law last year and upheld by the Supreme Court on Friday, is a major blow to ByteDance, the world’s second most valuable private technology company, valued at $300 billion. At least part 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 worldwide, with its biggest markets including Indonesia and Brazil — but the app’s American users are the most valuable, they said. the analysts. TikTok makes money through advertising as well as selling merchandise through its TikTok store, which pays influencers a commission for beauty products, gear, clothes and other items. Social networks typically get the highest “revenue per user” in the United States.
“The US market is the most profitable market of any market,” said Mark Zgutowicz, an analyst at Benchmark Company. TikTok took in about $10 billion in revenue in the United States last year, he said, out of total global revenue estimated at $20 billion to $26 billion.
This is the consequence that ByteDance must now face. The scale of her business conundrum is huge. While Facebook, Twitter and other social media were blocked in China about 15 years ago, that was before many of those apps had amassed large numbers of users there. Perhaps the closest equivalent is what TikTok experienced in India in 2020, when the Indian government banned the app. TikTok lost an audience of 200 million users there, but has since gained users elsewhere.
It is unclear whether TikTok can still escape a US ban. President-elect Donald J. Trump is considering an executive order to allow TikTok to continue operating until new owners are found. It can also direct the Justice Department not to enforce the law, or to delay enforcement for a specified period.
TikTok did not respond to a request for comment. In court documents, it has said that if it is banned, its business in the US will be harmed. “Many current and potential users and creators — at home 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 the ban on TikTok in the United States continues on Sunday, when the law takes effect. The company makes most of its revenue from another product, Douyin, a Chinese social media app. Including TikTok, ByteDance brought in roughly $73 billion in the first half of 2024, according to a person with knowledge of the company. Information earlier reported ByteDance’s earnings.
ByteDance, founded in 2012 by entrepreneur Zhang Yiming and others, is backed by US investors including Susquehanna Capital, which owns about 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. About 85 percent of TikTok’s U.S. revenue is expected to quickly shift to Instagram, which is owned by Meta, and YouTube, which is owned by Google, analysts and advertisers said. Both offer video services and programs to share commission on e-commerce sales or advertising with their popular creators. When India shut down TikTok in 2020, Instagram and YouTube quickly filled the void.
“It’s very easy to take what you’re spending on TikTok and pass it on to Meta and Google,” said Mr. Zgutowicz. The rest could be split between smaller platforms like Snap and Pinterest, he added.
TikTok users and influencers can make a similar difference, even though other platforms don’t offer the same algorithmic personalization that made TikTok so popular. Instagram’s reels tend to reward creators with large followings, while TikTok’s algorithm allows relatively unknown creators to find an audience. YouTube shorts also focus more on established creators.
“There are other platforms where we haven’t necessarily been focused on, where we’ll probably double down,” said Kristin Patrick, chief marketing officer of fashion company Marc Jacobs. She pointed to Instagram Reels, YouTube Shorts and, to a lesser extent, Pinterest. She added that the brand was “preparing for the worst” with TikTok.
A survey of TikTok users conducted late last year by 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 used to spend hours a day on TikTok “are not going to just go away and replace that time with reading a book or something,” said John Blackledge, an analyst at TD Cowen. “They will go to a platform. They will find content.”
TikTok employees and executives have left the company before the ban. TikTok had about 17,000 people working in the United States as of the end of 2024, according to Live Data Technologies, which tracks employment and job changes. But as the ban loomed, turnover at the company rose 38 percent in the second half of the year compared to 2023.
Several top TikTok executives, including the head of North American ad sales and the general manager of the agency’s US business, recently left the company. Sandie Hawkins, TikTok’s head of e-commerce in the United States, is leaving at the end of 2023 to take a break from the company’s fast pace, she said. During the three and a half years she spent at the company, there was a repeated threat to ban TikTok, she recalls.
“Whenever there was a news cycle, we would tell the team to focus on what was in your control,” Ms. Hawkins.
In recent days, speculation has been rife that investors may step in with a last-ditch effort to buy TikTok and save it from a ban. The company has denied reports of deal discussions and said the Chinese government would block a sale.
The rumors and confusion echo 2020, when the first Trump administration issued an executive order to ban the app and then tried to orchestrate a sale of the company to US businesses. 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 to the reporting.
