The legal battle between TikTok and the United States government has the app’s partners reeling. According to the Financial Times, ad agencies are drawing up contingency plans that will go into effect if TikTok is banned in the U.S. or spun off from its parent company ByteDance.
The Financial Times report cited higher-ups at several agencies that represent brands on TikTok. Those firms are figuring out what they’ll do if the Protecting Americans From Foreign Adversaries Act (PAFFAA) is upheld in court. Per the terms of the new U.S. law, ByteDance must divest TikTok within 270 days, or else the app will be restricted in the U.S. TikTok’s Beijing-based parent has indicated that it has no plans to divest, and it is mounting a multi-pronged legal challenge against PAFFAA.
Some agencies are protecting against PAFFAA by seeking “kill clauses” that will release financial commitments if the TikTok ban goes through. Others are considering budgetary shifts that would allocate more resources for operations on social platforms other than TikTok.
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“If a ban is triggered, we would expect ad revenue to move to other social-video platforms, such as Meta’s Reels and YouTube’s Shorts, as well as other digital media owners, and the creators and influencers currently active on those platforms,” reads a GroupM report published earlier this month.
At the Cannes Lions festival in Southern France, TikTok execs got a chance to advise agencies about their investments on the app. TikTok Global Head of Brand Marketing Sofia Hernandez told Campaign that advertisers should consider TikTok as an entertainment platform, not just a social media service. That’s a familiar line for TikTok and its reps.
“In general, agencies and others feel like TikTok is social media, when really it’s entertainment,” Hernandez said. “There’s still this old-school concept of virality and that’s not really what this is about. It’s about, ‘How do we really make something that we think people are going to enjoy and connect with?’ And that, in turn, makes it.”
Despite TikTok’s reassurances, some of its partners are concerned about how a potential ban could impact the bottom line. The app itself, on the other hand, is proceeding as if PAFFAA has little chance of holding up in court. It is continuing to aggressively expand its TikTok Shop infrastructure, and it recently leased more office space in the Seattle area.
