Impact of TikTok Divest-or-Ban on eCommerce Brands

In April 2024, President Joe Biden signed the Divest-or-Ban bill, which mandates that ByteDance, TikTok's Chinese-based parent company, divest its shares to a US-based entity within 9 to 12 months. Failure to comply will result in TikTok being banned and removed from Apple’s App Store, Google Play, and other app stores in the US. This would prevent new app downloads and block TikTok’s availability on browsers in the United States. The potential US TikTok ban would significantly impact eCommerce brands, particularly those that rely heavily on the platform for marketing, customer engagement, and sales. 

TikTok has called the act "unconstitutional," and has already begun to fight back by suing to block the US law that could ban the app. In the meantime, the company continues to invest in platform innovations. In addition, eight TikTok creators have also sued the US government, stating that the Divest-or-Ban bill violates their First Amendment rights. As TikTok and its supporters challenge the new bill in court, it could delay enforcement of the app ban beyond the 12-month deadline.  

The potential TikTok ban in the US would greatly impact everyone on the app, from everyday users to influencers, brands, and advertisers. So, what can eCommerce brands expect and how should they adjust their strategies as the TikTok divest-or-ban situation evolves? 

Implications for eCommerce Brands on TikTok

‍TikTok has undeniably become a major player in the social media landscape, especially among younger demographics like Gen Z and Gen Alpha. The platform's appeal lies in its engaging short-form vertical videos and sophisticated algorithmic content recommendations. With over one billion active users worldwide, 150 million in the US, and a substantial impact on small businesses and content creators, TikTok is a critical social media platform for digital engagement and eCommerce. 

It represents a vital marketing tool for eCommerce brands, particularly those targeting younger generations. According to the company, 7 million US businesses rely on TikTok for discovery and engagement with shoppers. TikTok’s global advertising revenue is expected to reach $18.5 billion in 2024. The potential ban would disrupt eCommerce brands' marketing strategies, forcing them to focus on alternative platforms.

Disruption in Marketing Channels

With TikTok on the rise, more and more people use the platform for product information. According to eMarketer, US adults spend, on average, 54 minutes per day on the platform. Consumers who use TikTok for product discovery and shopping inspiration would need to shift their behavior, urging brands to track the changes and adapt their strategies to meet consumers where they migrate, whether on Instagram Reels, YouTube Shorts, or other platforms. 

The potential TikTok ban in the US raises questions about where its substantial user traffic will go. If TikTok is removed from app stores, platforms like YouTube, Instagram, and Snapchat are well-positioned to absorb its users. YouTube, offering engaging video content and YouTube Shorts format, is already a favorite among younger generations. 

With over 80% of Gen Z spending time on YouTube, the platform could see the most significant influx of new users. Instagram and Snapchat, which have incorporated TikTok-like features, such as Reels and Spotlight, would also benefit from a US TikTok ban. For product searches, platforms like Google and Amazon could regain users who now use TikTok to discover products and services.

Changes in Advertising Strategies & Costs

Brands may face higher advertising costs as they transition their marketing efforts to other platforms like Instagram, YouTube, and Snapchat. The increased competition for ad space on these platforms could drive up CPMs (costs per 1000 impressions), making it more expensive to maintain the same level of reach and engagement. Currently, the average CPM for TikTok ads optimized for conversions is $3.21, around 30% lower compared to similar ads on Facebook. 

The low CPM on TikTok is one of its key advantages, attracting more and more brands to advertise their products on the platform. Faced with a potential US TikTok ban, brands that advertise on TikTok will need to adjust their advertising strategies and increase their budgets to achieve the desired results on other platforms.

Impact on Brand Discovery & Customer Acquisition

TikTok’s algorithm is renowned for keeping users engaged by delivering highly personalized content on their ‘For You’ page. This personalization is driven by analyzing various users’ signals, including likes, comments, follows, watch time, etc. The algorithm is also highly effective at promoting brand discovery and customer acquisition. 

The platform’s ability to deliver content to users most likely to engage with it makes advertising on TikTok particularly effective. Without it, brands might see a decline in organic reach. They will need to invest more in paid advertising to achieve similar results on other platforms, which may not have equally effective algorithms for brand discovery.

Influencer Marketing Shifts

Many eCommerce brands rely on TikTok influencers to promote their products. A ban would disrupt these relationships, requiring brands to identify and collaborate with influencers on other platforms. This shift could entail additional costs and efforts to rebuild influencer networks and establish trust with new audiences. This outlines the importance of having an omni-channel marketing strategy and never relying on just one social media platform for your brand.

Loss of Unique Features

TikTok offers unique features like live shopping events and direct links to products, which streamline the sales funnel. TikTok Shop integrates social engagement with shopping experiences, allowing brands to leverage the power of short-form video content to engage, captivate, and convert their audience into loyal customers. The loss of these TikTok features would require brands to find or develop similar capabilities on other platforms, potentially complicating the customer journey and reducing conversion rates. 

Challenges for Small & Independent Brands

The biggest impact of the US TikTok ban would be seen by small and independent eCommerce brands, which have benefited from TikTok’s low-cost, high-engagement marketing opportunities. These brands might struggle to compete on more established platforms, such as Facebook, Instagram, and YouTube, with higher advertising costs and more saturated markets.

TikTok continues to be an experimental platform for reaching audiences and customers for many large, national brands. Businesses that already benefit from mass awareness and have hefty advertising budgets are better prepared for a TikTok-less future. According to some, their contingency plans include shifting their advertising budget to Google and Meta. 

However, small and independent brands have raised legitimate concerns, saying that the ban is anti-capitalist and undemocratic.

Strategic Recommendations for eCommerce Brands

Seeing as TikTok can bring incredible reach and engagement to a new audience, brands should continue to take advantage of TikTok’s platform benefits as long as possible. With it guaranteed to be a lengthy legal battle, we recommend investing in TikTok while you can, meanwhile, still contingency planning for a ban.  

One way for eCommerce brands to stay ahead of competitors is by diversifying their marketing channels. If you don’t have an omni-channel marketing strategy, now would be a great moment to start building your brand presence on diverse platforms. Using features such as Instagram Reels, YouTube Shorts, and Snapchat Spotlight can help you reach a wider audience and reduce reliance on using only TikTok. 

In addition to your social media marketing efforts, enhance your brand’s website SEO and invest in content marketing to drive organic traffic from search engines like Google. Other ways to improve your eCommerce website experience include using features like live chat, personalized recommendations, and seamless checkout processes.

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While remaining active on TikTok, you should also work on your brand’s email and SMS marketing strategy. Develop strong email and SMS marketing campaigns to maintain direct customer contact and ensure consistent engagement. Collecting and analyzing customer data will help you personalize your marketing efforts and improve customer retention.

Influencer marketing is here to stay. Identify and collaborate with influencers on various social media channels to maintain brand visibility and reach. Many TikTok influencers with a substantial following have accounts on multiple social media platforms. Build long-term partnerships with influencers to foster brand loyalty and aim to grow strong and engaged communities on social media.

As we continue to follow the latest news around the possible TikTok ban, it’s also crucial to continuously monitor changes in consumer behavior and preferences, and quickly adapt your marketing strategy. Use data analytics to track the performance of marketing campaigns across different platforms and adjust strategies accordingly.

Conclusion

The potential US TikTok ban poses significant challenges for eCommerce brands, especially those heavily reliant on the platform for marketing and sales. With TikTok fighting back, it is safe to assume that it will be a lengthy battle in court whether the ban is enacted or fails.

The threat could be existential for challenger brands and TikTok content creators. It’s highly recommended that contingency planning begins now. Brands at risk of losing customers and revenue due to a potential ban should diversify their marketing channels and adapt advertising strategies. This will help them to reduce the impact and continue to thrive.