What would a US TikTok ban mean for startups?

President Biden has signed a bill into law that mandates ByteDance, the Chinese owner of TikTok, to divest its stake in the app within nine months or face a block in the US.

TikTok has declared its intention to challenge the law that it deems "unconstitutional".

The legislation was enacted amid persistent concerns that TikTok could potentially share user data with the Chinese government, an allegation the company has consistently refuted.

Addressing TikTok users directly, CEO Shou Zi Chew expressed confidence in their legal challenge, reassuring users of the company's commitment to safeguard their rights. "We are confident, and we will keep fighting for your rights in the courts," Chew stated. "The facts, and the Constitution, are on our side... rest assured, we aren't going anywhere."

In a video circulated on TikTok, Chew vehemently criticised the bill and encouraged users to share personal anecdotes about how TikTok has positively influenced their lives. He framed the law as not only a ban on TikTok but as a broader suppression of the user community's voice. "Make no mistake, this is a ban – a ban on TikTok, and a ban on you, and your voice," he remarked.

Further reinforcing their stance, TikTok issued a separate statement asserting that both legal and factual bases favour their position. The company highlighted its substantial investments in securing US data and maintaining a platform that remains uninfluenced by external manipulation. "The fact is, we have invested billions of dollars to keep US data safe and our platform free from outside influence and manipulation," the statement read.

The forthcoming court proceedings will not only determine TikTok’s operational status in the US but also set a significant precedent for how foreign-owned apps are treated based on national security concerns. As the legal battle unfolds, the global tech community, as well as millions of users, will be watching closely, aware that the outcome could reshape the landscape of social media regulations and digital privacy.

According to TikTok, approximately 1.5 million UK businesses utilise the platform.

A potential TikTok ban in the US could have significant implications for small businesses that rely heavily on the platform for marketing and customer engagement.

TikTok has fast become a home for small and medium businesses (SMBs) looking to reach their communities in an authentic way and drive real world results. Research from TikTok, which surveyed the TikTok community and SMB advertisers across European markets including the UK, found that almost half (47%) of users say TikTok is the platform they use most to engage with SMBs. More than three quarters (77%) of those that have come across small businesses on TikTok say they discovered them there before seeing it anywhere else.

The research also found that people are more likely to take action after seeing content from small businesses on TikTok, with 79% saying they have or would look for more information on an SMB after seeing it on the platform.

Here are some potential key impacts if the US banned TikTok:

Loss of marketing platform

Many small businesses use TikTok to reach a younger audience efficiently and cost-effectively. The platform's algorithm allows even small brands to gain significant exposure, often without the need for large advertising budgets. Losing this avenue could limit their ability to reach potential customers.

Need for strategy shift

Businesses that have integrated TikTok into their marketing strategies would need to pivot and strengthen their presence on other social media platforms like Instagram, YouTube, or Snapchat. This shift might require new skills, resources, and investments in content creation and audience building.

Impact on sales

For businesses that directly link their products and services to TikTok through features like shopping tags or direct website links, a ban could lead to a direct drop in sales. These businesses would need to find alternative methods to drive online traffic and conversions.

Change in consumer behaviour

TikTok has influenced consumer behaviour significantly, with trends and viral content often leading to spikes in demand for specific products or services. Without access to this trend-setting platform, businesses might find it challenging to capitalise on viral markets or might miss out on these quick opportunities altogether.

Cost implications

Adapting to a new platform may incur additional costs. These could include increased spending on advertising to achieve similar reach and engagement, professional services for platform-specific content creation, and potential costs associated with learning new digital marketing tools or platforms

Isobel Perl, Founder of Perl Cosmetics in London, told the BBC that she is worried about the possible impact of a ban as a quarter of her sales now come from the US.

Kyle Frank, Founder of Franks Remedies, also markets skincare products on TikTok. He has diligently expanded his customer base through the app, with the US emerging as a significant market for him. Speaking to BBC World Service's Marketplace programme, he expressed that a ban would severely impact his business.

However, while the initial impact might be challenging, the need to diversify could lead businesses to explore other innovative marketing strategies or emerging platforms, potentially finding new audiences, and creating more resilient marketing models.