By Sheila Dang and Chibuike Oguh
NEW YORK (Reuters) – TikTok advertisers were in no rush to shift their marketing budgets after a U.S. appeals court on Friday upheld a law requiring a divestiture or ban of the popular Chinese-owned short video app, citing its continued existence from TikTok despite years of threats.
Chinese tech company ByteDance must sell TikTok’s U.S. assets by Jan. 19 or the app used by 170 million Americans will face an unprecedented ban that threatens billions in ad revenue. TikTok and ByteDance had argued that the law is unconstitutional and violates Americans’ right to free speech.
In an email to advertisers on Friday, seen by Reuters, TikTok’s president of Global Business Solutions Blake Chandlee said the company planned to “seek an injunction to prevent TikTok’s ban from will remain in effect until the U.S. Supreme Court has the opportunity to rule on it.”
With TikTok’s future in the US uncertain, advertising executives say brands are continuing their activity on the app while ensuring they have a plan B.
“Advertisers have not withdrawn from TikTok, although several are developing contingency plans for possible reallocation of investments if a ban comes,” said Jason Lee, executive vice president of brand safety at media agency Horizon Media.
Horizon is working with customers to prepare for various scenarios if the app is sold or banned, Lee said.
Meta Platforms (NASDAQ:), owner of Facebook and Instagram, will capture the largest share of TikTok’s ad revenue if the app is banned, followed by Alphabet’s YouTube (NASDAQ:), says Erik Huberman, CEO of marketing agency Hawke Media . Both companies have introduced short video features in recent years to compete with TikTok.
Still, there is “no decision to be made until a decision is made,” he said.
The app still has an active audience, making it unlikely that brands will abandon it prematurely. “Ultimately, advertisers won’t abandon ship unless their customers do first,” said Lance Wolder, chief strategy officer at digital ad agency PadSquad.
TikTok’s U.S. ad revenue is expected to reach $12.3 billion this year, according to estimates from research firm Emarketer. By comparison, analysts on average expect Meta Platforms ad revenue to reach approximately $159 billion by 2024, according to LSEG data.
“The loss of TikTok in the US would cause a major shake-up across the social landscape, benefiting Meta, YouTube and Snap, while hurting content creators and small businesses that rely on the app to make a living” , says Jasmine Enberg, chief analyst at E-marketeer.
The potential boon for rivals pushed shares higher on Friday.
Shares of Meta Platforms rose to an all-time high of $629.78 earlier on Friday, and were up 2.3% to $622.85 in regular late afternoon trading.
Alphabet shares rose 1.1% to $176.21. Trump Media & Technology, which operates the Truth Social app and is majority owned by newly elected President Donald Trump, rose 3% to $34.78. Shares of Snap, owner of the messaging app Snapchat, rose 1.89% to $12.40.
