Say Goodbye to TikTok? The Truth About the Possible Ban

[00:00:00] Richard Gaffin: Hey folks. Welcome back to the Ecommerce Playbook Podcast. I'm your host, Richard Gaffin, Director of Digital Product Strategy here at Common Thread Collective, and I'm joined this fine Monday morning by Mr. Taylor Holiday, still in the green earphones, our CEO here at Common Thread. Taylor, going on, man?

[00:00:16] Taylor Holiday: You know, I'm just excited to talk about what my kids are most concerned about for me, which is, “Dad, what are you going to do if you can't watch Tick Tock anymore?” You know? So they're concerned for 

[00:00:31] Richard Gaffin: concerned for you. Yeah. Okay.

[00:00:32] Taylor Holiday: Yeah, they're like, dad, what are you going to do on your phone? If you can't watch Tik TOK,

[00:00:36] Richard Gaffin: There we go. Okay. So that's what we're talking about today is the impending possible TikTok ban. And of course it's impact on e commerce. And so I think like a couple of things we want to talk about first is of course. The sort of general impact on the industry, but also I think we just want to talk about exactly what's happened happening.

And if you haven't been following the news, give you a sense of exactly what's going on here. So, the short story is on Friday, the Supreme Court heard oral arguments over the law that the Biden administration had signed into law. This was a couple of years ago, maybe

[00:01:07] Taylor Holiday: it was, no, it was April, April of last year.

[00:01:09] Richard Gaffin: Okay, right.

The gist of which being that, that ByteDance, which is the company that owns TikTok either has to sell TikTok or it will be banned in the United States. And so, Taylor, let's dig into the look a little bit more about like the specifics of, of this law and maybe its implications on the 19th, let's say, if in fact TikTok does get banned.

[00:01:31] Taylor Holiday: Yeah. So I think it's really important to understand that there, a law was passed Congress and it was like really actually expansive bipartisan support. Like there was, there was a cohesive effort and it's really centered around the idea that this is a national security threat, that, that because ByteDance is a Chinese company that ultimately they are at the women discretion of the CCP in terms of how and what happens with data as all Chinese companies are.

And so there's no way to ensure the privacy and safety of the information of American consumers on the app or even access to people's phones. There's all sorts of conspiracy, conspiratorial theories about the ways in which China could be either intentionally making us all dumber by watching brain rot content or eavesdropping into our conversations or whatever it might be.

So that's why this is a conversation. Now, what was brought as an appeal that made it to the Supreme Court was the contention that this would impede on the First Amendment rights of Americans that this was a violation of their freedom of speech to take this platform from them. And following the hearing, if you listen to it, I would say that one, the lawyers in both both sides were really articulate and thoughtful.

And the questions being asked by the Supreme Court judges were also super interesting to go through, but they basically weren't buying it. They were like, Look, if this is a national security threat, We don't really care about this idea of an imposition on people's rights. And so there was nothing in that hearing that made it seem as if this appeal was going to be to prevent the ban and So that was sort of signaled by poly market, which is sort of, the crystal ball of culture, I guess these days, or the best opinion about the future is this market where people are using their money to make votes about what they believe will occur.

Jump from a 30 percent likelihood that tick tock would be banned before May to, and it peaked at like 83 percent during the hearing that this was going to occur and it was going to be upheld. And I'll tell you the reason why I agree. Is because I still believe what the U. S. Government wants is divestiture is that they want a U.

1. Company to own tick tock and they want to talk to exist. I think that's in the best American interest, but by dance and the C. C. P. Has shown no interest. No interest in participating in that transaction. And so the ban is really just a negotiating leverage point to force divestiture is that Intel bite dance and the, and the Chinese government see that the U S is actually willing to go through this step.

They don't believe that they'll be forced to divest. And so really my sense of it is let that tick talk is going to disappear forever. Now, unless the Chinese government is really dug in their heels, that they're not willing to sell this at all. But that The ban in the United States and the market will be such a financial impact to the platform that that will actually force the process of selling it, however long that takes.

And whether it's Kevin O'Leary, who's going to buy it or not, which I don't know if you've seen him out there yelling about it, is that this is just a negotiating tactic to get forced the divestiture so that TikTok can persist.

[00:04:42] Richard Gaffin: Right. And so on top of that, not only is, does it feel likely given our conversation that once the ban goes into effect, ByteDance will, in fact, sell the platform it's also sort of, I think it's important to point out that on the 19th, the app won't disappear. It'll continue to exist. It may, you know, We actually don't really know much about how the government plans to enforce it, if at all.

So that's one kind of factor to it, but also like, the, the sort of quote unquote worst case scenario would be that the app store sort of boots or bans it or whatever. So new users can't download the platform, but all current users will still be on it. So I guess like the, the, the sort of scenario of, of TikTok just vanishing, that's not going to happen on the 19th, but

[00:05:25] Taylor Holiday: Well, so I would just say that it's very ambiguous and even, so Noel Francisco was the lawyer for TikTok in the hearing, and he was even sort of saying, I'm not really sure what happens because if you think about the technical enforcement of the idea of a ban, you brought up, they could tell Google and Apple that you have to remove them from the app store.

But that doesn't prevent web access. That doesn't prevent everybody who already has it on their phone from accessing the app. It prevents future updates, but it could just create a bunch of like buggy technical issues for users or even security threats. To the app from hackers, et cetera, but the web access would have to come from ISP providers, but there's just like endless amounts of those.

So the exact technical enforcement, and then there's obviously this other big sort of You know, variable in all of this, which is that there's a new president coming in on January 20th. And so there's also this perspective that he being Donald Trump could just choose to not enforce the law and signal to Apple and Google that it would be fine.

And they wouldn't be subject to a fine. But then there's this question of whether Apple and Google would believe that and choose to neglect the law. So I think the dynamics of Even if the ban occurs, what are the specifics that happen on the other side of that are really ambiguous still for everyone? 

[00:06:44] Richard Gaffin: Yeah. So let's talk then about, so you tweeted out on the 10th, which was Friday when the Supreme court hearing happened sort of five effects of potential band would have on the e commerce industry. And so let's, let's dig into those a little bit. So, obviously for the general user, we're suspecting that the experience may not change that much, but for e commerce users and for particularly advertising, how, how do you foresee the effects?

Yeah.

[00:07:11] Taylor Holiday: I think what I see is that there's enough risk here that both creators and people with dependencies on the platform are going to begin hedging that reality. And so if I'm a creator and my entire livelihood is predicated on TikTok, I'm sure as heck going to start building out my Instagram account right now.

And so I think that's going to be like A natural suppression of the engagement in the channel from both brands and creators generally. But here's, here's what I sort of believe about Tik TOK. Let's, let's look at it from two perspectives. One, the ad network. Where you're buying ads on Tik TOK for the sake of driving transaction to.

com for your e commerce business. And this is going to be a little bit of a bold statement, but I think the elimination of that ad product is actually maybe a net positive. I don't know. Anyone who is spending a ton of money on Tik TOK ads to drive. com revenue in a way that's like, this is a critical function of my acquisition funnel and would be a massive loss if it disappeared.

I think there's probably a case that in almost every bit of allocation that I saw, I posted that it's about a 4 percent share of wallet. So it's a lot of money still. That if that went away, everybody would, might be better off for it. That's my general perspective. That's a bit cynical, but I have not seen TikTok be a massively important acquisition funnel for a lot of e commerce brands.

[00:08:33] Richard Gaffin: Yeah. Okay. So then let's, let's talk about the potential benefit towards. So this is the second point you make that tertiary platforms like snap pins and app love in, in theory should see benefit, but not really how ad dollars flow. So the reduction in share of wallet for Tik TOK may not necessarily equal an increase for those other platforms.

[00:08:53] Taylor Holiday: Yeah, I think, I think at larger enterprise companies, there tend to be. Much more commonly fixed budgets where there's like a media allocation that has to get spent regardless of whether or not it happens on Tik TOK or not, but for most DTC brands, that's not how this works. Ad budgets are a function of performance.

And so it's not like, well, I was spending 30, 000 a month on TikTok. So I'll just take that and put it into Pinterest and spend it no matter what, or put it into meta. No, if meta could absorb 30, 000 more dollars positively, you would have already spent it. Like you would have already been pushing the budget in that direction.

And TikTok going away doesn't make Pinterest better. Incremental tick tock going away. It doesn't make Snapchat incremental. So there may be some exploratory movement of those budgets. And for enterprise companies, I've, I had some people in the thread saying like, I don't want to lose my budget. I'm going to figure out where to spend it.

And so the dynamics are different relative to the size of the organization. But for the most part in DTC brands, e commerce brands, budgets are subject to incremental positive impact, and you don't just get to move them without an obligation to create that. Does it make Pinterest work?

[00:10:08] Richard Gaffin: Right. In other words, saying it's not necessarily a zero sum game. It's just wherever, wherever the ad dollars make sense is where you'd want to spend them. So, okay. So I, your point number three, I think is interesting. Cause that, that feels to me real impact of this, which is the effect on agencies.

So the idea that like, there's so many service providers that are tied to Tik TOK as a platform. actually the potential impact of their revenue is much greater than the impact of those. To e commerce brands generally or advertisers or whatever. So let's talk a little bit about what you kind of, what you foresee the impact there being.

[00:10:37] Taylor Holiday: Yeah, look, I mean, we had to go through and pull, okay. What is our MRR related to monthly recurring revenue related to the management of Tik TOK media spend on behalf of our customers for us? It's not very big, but it is. Enough that we would feel it and we would need to find some way to try and go out and substitute for that loss.

And that is just magnified across businesses whose concentration is more and more on Tik TOK. And there are entire agencies that exist around Tik TOK shops. I know Jordan West on Twitter. He like very recently pivoted. Most of his entire agency to support TikTok shops deployment on behalf of customers.

And there are entire agencies that exist to support with TikTok creator affiliates and content on those platforms that yeah, this is like a very direct threat to their livelihood as a business that I think there are a whole set of surrounding services and software that exist on top of an ecosystem like that, that if they go away.

Are directly threatened for sure.

[00:11:31] Richard Gaffin: Hmm. Okay. So let's say you, you mentioned Tik TOK shops. So I think that's interesting. Cause it leads right into 0. 4, which is that 9 from Tik TOK shops disappears in the U S and brand margin dollars are unaffected. Unpack that a little bit.

[00:11:45] Taylor Holiday: Yeah, that's me being a smart ass and basically just saying that that money is not profitable. I think a lot of the tick tock shops revenue that I've seen is subsidized by discounts covered by tick tock or shipping fulfillment or gets basically whittled down to zero between tick tocks fee.

The affiliate creator fees that you're paying in the marginal result that I just don't on that 9 billion in GMB. I don't think there's a lot of profit there. Now there are edge cases. I'm sure Paul at BK beauty is yelling into the mic right now, talking about how important this channel is to him. And he's right.

I got, there are brands for who that is not true, that I'm wrong about that. And they are making a lot of. There. I mean, box ball and has to be making money with how many ads I see from them on Tik TOK. I'm trying to think of some of the other like Tik TOK specific products that are just like everywhere.

So there's definitely people for whom it's beneficial. And that's going to come at a dramatic impact and to change their business. But it's also so novel that I can't imagine that there aren't other channels that surround those businesses. But for, for for a certain amount of customers, that 9 billion in GMB is going to be really a substantial loss to their business that you just, it's worth acknowledging for sure.

[00:12:55] Richard Gaffin: Yeah. Well, so I feel like that kind of like, there's, it seems like a little bit of an undercurrent. So maybe both like, number one and number four here on this list and in the thread in general, that like TikTok as a channel for e comm generally is actually maybe not that valuable. And so the impact here is sort of, maybe not negligible, but on the whole, like this just isn't, doesn't make that much of a difference.

[00:13:19] Taylor Holiday: I genuinely believe that I think TikTok could disappear and the e commerce industry would absorb that loss so fast that it would be. Entirely inconsequential. I really think that again, that's not true for every business. I'm speaking in generalities there for the industry as a whole, I think the attention, the media dollars all get absorbed into the other social platforms so quickly that we like, we wouldn't even notice TikTok.

It's gone. Even when my kids ask me like, dad, are you going to be sad when TikTok goes? I'm No, like all of that content exists in basically the same form factor in so many other places that I'll just go watch it. He reels. I'll just go watch YouTube shorts. I'll just read more Twitter. Like I, like, it just won't be something that actually causes like, I'm going to spend less time on my phone.

Like, it's just not, I like, I don't, you know, it didn't exist before. And I looked at my phone all day. So I just, I think it's a. It's a pretty easy absorption of content.

[00:14:19] Richard Gaffin: Yeah, and that segues perfectly into your last point, which is around increases to like IG Reels inventory in the short term. Maybe talk a little bit about the opportunity there.

[00:14:31] Taylor Holiday: Yeah, I think this is an interesting one. That's, that's sort of challenging to figure out a couple of data points. So right now, in terms of short form video content consumption by time, Iggy reels is third it's behind Tik TOK and YouTube shorts. And so I think that if you assume some of that time and I put it in that thread, what is it like 50 minutes a day is the average user time spent on Tik 

[00:14:53] Richard Gaffin: about,

[00:14:54] Taylor Holiday: An hour. Yeah. So if you just assume that again, like I don't think people suddenly take that hour and go back out and walk more or something. We just assume that that gets absorbed into the phone in some other form factor, then I think there are beneficiaries to the most specific content format that matches that same YouTube shorts and Iggy reels are the most obvious ones.

I think Tik TOK. I mean, Twitter and X are going to try and play in that space. And they're doing a little bit more around it, but I still don't see video as the, as the primary medium there that you're going to get some of that time consumption in Taiji reels, which in theory equals more ad inventory that I think there's a question always of, does that increase supply lead to better outcomes at cheaper prices, or does the price get artificially inflated by Meta's algorithm for their own monetary benefit?

And then that answer is like sort of, anybody's pontificating on that because it's not like a pure and honest marketplace such that if the supply increased, the, the, the price would therefore decrease, like medic can put their thumb on that scale. Like they can control that. So I don't, I don't imagine that they're just going to allow the CPM to drop and everybody arbitrage it.

And even if it does, what happens in this marketplace is that. It's so perfectly capitalistic that people will just increase their spend until the price gets modified again. Right. Now that may lead to some more volume for some people in the short term. If they have really good content on edgy reels, I think that's possible for a period.

There could be a little bit of an arbitrage there. I think there's not that many brands that are actually set up to effectively take advantage of YouTube shorts right now. And YouTube is an ad product. Interesting note that I won't share the source of this yet, but I know that YouTube has a creator content platform.

That's actually not too dissimilar from some of the stuff that's available on Tik TOK, but that the reps aren't incentivized to sell it. And so it's adoption is really low. So I think you could see some energy start to pick up around that and go from there.

[00:16:50] Richard Gaffin: nice. Cool. Well, I mean, I think that kind of covers our basis here. I mean, is there any, if anything, what's, what's the takeaway from, from this? Thanks.

[00:17:00] Taylor Holiday: I just think that if I'm, if I'm a brand right now, If there is any part of my business that feels like Tiktok is an imperative, I'm hedging it. I've got to create,. I think that is the best indication that we have. Polymarket today is sitting at. 73%. Yes, that it will be banned. And so I'm going to hedge that and then agencies, if you provide services here, get out in front of this, have conversations with your customers, let them know that you're aware, here's what we're going to do in the event that that happens, here's where we could either reallocate those dollars and you could make suggestions.

I would check out YouTube and the creator platforms there. And then keep an eye out on IG Reels in the event that that happens. And let's watch the user behavior emerge to see what we can learn from that dynamic. And of course, we'll see an inauguration day and all the rhetoric that comes from the new president and how that affects us as well.

But we live in a very dynamic market. This is just another indication of that and why we have to be prepared to shift and pivot at all times.

[00:17:58] Richard Gaffin: Sorry, folks. All right. Well, I think that'll do it for us for this week. Appreciate y'all listening and we'll talk to you again next week.