Advertisers are increasing their spending on TikTok, despite the threat of an imminent US ban of the Chinese-owned viral video app over national security concerns.
Advertising on TikTok in the US grew by 11 per cent in March, with companies including Pepsi, DoorDash, Amazon and Apple among the top spenders, according to data from app analytics group Sensor Tower.
Brands largely plan to continue spending on TikTok, owned by Beijing-based ByteDance, while leading advertising agencies, including WPP’s GroupM and Omnicom, have held back from advising their clients to lower their investment, according to several ad executives and agency leaders.
The continued enthusiasm from advertisers comes amid mounting security concerns from governments and regulators around the world, and US government calls for a ban or divestiture of the short-form video app.
“There’s unlikely to be an executive order resulting in an immediate ban that would impact advertisers,” said Joshua Lowcock, chief media officer of UM Worldwide, an ad agency. “Even with bipartisan support the legislative process will be protracted — giving marketers ample time to plan alternative strategies.”
Last month, TikTok’s chief executive was grilled by US legislators over national security fears linked to its Chinese ownership. Beijing has said it would “firmly” oppose any move to separate TikTok’s US arm from its Chinese owners.
Ahead of the hearing, a survey by software group Capterra of 300 US marketers found that 75 per cent planned to increase spending on TikTok over the next 12 months.
Still, the political furore has led some brands to line up contingency plans — such as moving spending to rival platforms such as Meta and Google — in preparation for a potential US ban.
One big media agency had urged clients to use force majeure language in their contracts with the platform and look closely at the cancellation terms of various ad slots before committing to them, according to one person familiar with the matter.
“Rather than being spooked by the prospect of a potential ban, we’ve actually seen brands ramping up their investment in TikTok,” said Edward East, chief executive of global influencer marketing group Billion Dollar Boy.
However, he added that advertisers might have committed some of the March spending before the US congressional hearing.
Digital advertising is the main source of TikTok’s $10bn global revenues. Over the past year, it has fought for market share by offering cheaper advertising rates than Meta and Google, as well as delivering a higher return on investment with newer advertising formats, industry insiders say.
TikTok is forecast to book $14.15bn in revenues in 2023, up from $9.89bn in 2022, according to estimates by research group Insider Intelligence.
TikTok has made attempts to assuage brands’ concerns in recent weeks. Its ads sales teams have been reiterating the claims of TikTok chief executive Shou Zi Chew that it is a global, rather than a Chinese, company.
TikTok has argued that 60 per cent of its shares are owned by global investors, while 20 per cent are owned by employees and 20 per cent by its founder Zhang Yiming.
In a memo titled “Myth vs Fact” sent to advertising agencies, TikTok pointed out that Los Angeles and Singapore were its headquarters. The memo, first reported by The Information, also touted its $2bn partnership with cloud software group Oracle, dubbed “Project Texas”, which is designed to ensure American user data is held in the US.
“TikTok has taken unprecedented steps to build trust by securing US user data and systems on US soil, and we’re confident that our efforts address all national security concerns,” said TikTok.
As a result of China’s refusal to countenance a sale, there have been no serious prospective buyers circling, one person familiar with the situation said. When the Trump administration tried to ban the app in 2020, Microsoft, Oracle and Walmart were among those who emerged as potential acquirers.
“I don’t think anyone’s responding in a panic or pulling advertising from their plans, but they are watching and waiting, making contingency plans in the case of a ban or of government action,” said Phil Smith, director-general of the Incorporated Society of British Advertisers.
Additional reporting by Lauren Fedor in Washington