The End of TikTok?

At the time of writing this article, TikTok is on the verge of being banned by the US government. ByteDance, it's Chinese based parent company, has been left with two choices that will determine the fate of it's prized possession: to sell it or discontinue its operations in the US. With Microsoft stepping in to acquire the US segment of the company and Facebook preparing to launch its version of TikTok, it's difficult to determine the fate of this viral app. But to understand what is exactly going on, we must look back at the brief history of the application.

Quick Summary

Have you ever heard of musical.ly? Probably not. (But if you do, good on ya!) Essentially it was the earliest form of TikTok before it got acquired by ByteDance. Founded in 2014 by Alex Zhu and Luyu Wang, the app was intended to be a social network app with 3-5 min educational videos. Pretty crazy, huh? Well, as you expect, this didn't gain much traction and ended up being a flop. However, with the little investor money left over, they decided to shoot their shot in the entertainment industry.

So instead of short video content teaching you about the Pythagorean theorem's application, they decided to focus on short music videos. They believed that there was a high demand for people willing to watch these types of videos, but a short supply of them. They hypothesized that it was a hassle to edit and incorporate music in small videos and they wanted to simplify the process as a whole. Little did they know, this was the holy grail to what would bring billions of users and dollars into the company.

When it was released in August of 2014, the majority of downloads came from American teens, which ended up being their target user base. By the summer of 2015, it became the number one downloaded app in over 30 countries. This increased growth and user engagement incentivized companies to advertise on the platform. Soon enough the first major ad posted was Coca Cola's #ShareACoke campaign.

Fast forward to the Fall of 2017, and there was a knock on Musical.ly's door. It was Bytedance with a $1 Billion check in its hand. After some talks and negotiations, they sealed the deal and officially merged in August 2018 under the name "TikTok."

Lot's and Lot's of Ads

After the merger was complete, ByteDance was ready to make it rain. And you know the saying, "When it rains, it pours." They launched a highly aggressive ad campaign across multiple platforms like Youtube, Snapchat, Instagram, etc. On top of that, they have paid major celebrities like Offset and Awkwafina to post their videos on the app.

At one point it became inevitable to not see an ad branded with a 3D looking half-note, but it makes sense once you see the numbers. In 2019 alone, it is reported that the company has spent $3 Million per day on ads. That equates to just about $1 Billion that year alone on advertising with no revenue! It seemed a little risky because the level of competition and high barrier to entry in the social media industry.

But clearly, it paid off for them in the end, because it is reported that the app is valued at $50 billion as of July 2020.

"Enemies. Got a lot of enemies."

Now, TikTok clearly has the spotlight and is getting all the attention in the world. But of course, not all of that publicity is good.

You see, tech companies have always had this ongoing issue of the privacy of their users' data. The US government and the EU have called up upon the top dogs of Silicon Valley on numerous occasions, to question how protected or how much they utilize their users' data. However, the common denominator of these companies is that they are based in the United States, while TikTok's home turf in China. Now we're not going to go too political here, but it's vital to be situationally aware of what's going on outside of the social media bubble.

As of lately, China and the US have been butting heads with trade wars and countless allegations, with COVID just adding gas to the fire. But one of main concerns is on China's views on data and privacy, where those things aren't necessarily protected.

Thus, this has lead to belief that the Chinese Government maybe utilizing TikTok as an avenue to collect data and spread information. Although the Chinese and International version of the app are separate, this worry has led the following events to occur:

• Amazon and Wells Fargo request employees to delete the app from their phones (Amazon did reverse the order)
• Reddit founder stating that TikTok is "Fundamentally parasitic"
• The Pentagon put out a statement to delete the app
• India bans the app, along with other Chinese based apps (but this was due to different reason)
• Biden's staff is told to remove the app also
• President Trump threatening to ban the app in the US

Not the best situation to be in if you ask me.

So what's going to happen then?

Like I said in the beginning, at this point in time TikTok will either be sold or banned in the US. So it's kind of a lose-lose situation, but we can make logical assumptions on the outcomes of these two choices.

Option A: US Ban

If this occurs, then this could be the nail in the coffin. ByteDance invested $1 Billion to build its Indian user base, just to get banned in the end. Now the company faces losses upwards to $6 Billion from that band alone!

If this happens in the US, it's logical that the results will be detrimental without a doubt given how much of an impact the US has on internet culture.

Option B: Get bought

President Trump gave ByteDance until September 15th to sell their platform. So far, the most prominent and only bidder is Microsoft. They are currently going through talks and should this happen, the outcome will be interesting. The only experience Microsoft has had with social media was through acquiring Skype... well technically its considered a social network. Therefore, should this happen it be a whole new venture for the company, which can be considered added risk.

Oh, hey Mark! What brings you here?

So let's also consider the idea that TikTok doesn't get banned at all. Then they'll be safe, right? Nope. Because on August 5th Instagram will launch its new feature called Reels, which is basically TikTok.

Now you may be thinking what is going to make TikTok users switch to Reels. Let me remind you the same thing happened with Instagram stories, which was the response of the popularity of Snapchat. Releasing stories has impacted Snap Inc. significantly as a result, and I expect the same thing to happen. Facebook secretly launched a competitor app a while ago called Lasso, which didn't result in anything. But let me remind you again, Zuckerberg did the same with Snapchat in releasing an app called Poke and you know what they say, "History repeats itself."

Instagram have tested out Reels in countries like Brazil and even India after the TikTok ban. So, it is safe to assume that Facebook has gathered enough data and done the necessary revisions to give Reels the green light in the states. On top of that, with having access to over 1 Billion users and a release date that couldn't have happened in a better time, it is safe to say TikTok is on the highway to the danger zone.

Sources

• https://www.vox.com/recode/2020/7/31/21350072/can-trump-ban-tiktok-microsoft-sale-bytedance-china-security-concerns
• https://www.forbes.com/sites/zakdoffman/2020/07/04/tiktok-loses-6-billion-as-users-urged-delete-app-immediately/#3315a5701c98
• https://www.cnbc.com/2020/05/27/tiktok-bytedance-profit.html
• https://www.vox.com/culture/2018/12/10/18129126/tiktok-app-musically-meme-cringe
• https://en.wikipedia.org/wiki/Musical.ly