The Future of TikTok: What Analysts Expect as Biden Signs Bill Into Law
U.S. President Joe Biden signed a bill into law Wednesday that requires ByteDance to divest TikTok within a year through a forced sale or face a ban of the app in the U.S., based on national security concerns. This move has sparked a flurry of speculation and interest from potential buyers and industry analysts.
Possible Buyers and Interest in TikTok
Analysts have listed Microsoft and Oracle as possible buyers for TikTok, as several companies and individuals, including former Treasury Secretary Steven Mnuchin, have expressed early interest in acquiring the popular social media platform. While it remains unclear whether ByteDance is open to selling TikTok, CFRA analysts believe that a sale is the likeliest outcome.
Companies such as Microsoft, Oracle, Walmart, Rumble, and Twitter (now under Elon Musk’s X) have reportedly shown interest in acquiring TikTok. Private equity groups and notable figures like Kevin O’Leary and Bobby Kotick have also voiced interest in purchasing the platform.
Challenges in a Potential Sale
While a sale of TikTok seems likely, analysts have warned that it may not include the platform’s algorithm, which powers the popular “For You” page. The algorithm is a key component of TikTok’s success, creating a unique and personalized user experience. Without it, the platform’s value could be significantly diminished, impacting its popularity going forward.
Legal challenges are also expected to arise as ByteDance is likely to challenge the legislation in court. This could prolong the process of either a forced sale or a ban of TikTok in the U.S. However, UBS analysts suggest that there may be limited opportunities for appeal, as the law is structured to limit legal challenges and send any litigation to the D.C. Circuit Court of Appeals.
Potential Benefactors of a TikTok Ban
If TikTok is banned or sold in a way that alters the user experience, analysts believe that Meta Platforms, Google parent company Alphabet, and Snap could benefit from the situation. Meta is expected to be the primary recipient of redistributed TikTok revenue if the platform exits the U.S., with Google following closely behind. A survey conducted by Wedbush found that a majority of TikTok users would consider using Facebook or Instagram as alternatives if TikTok were no longer available.
CFRA analysts suggest that Snap is poised to be the biggest beneficiary of a potential ban, with Meta coming in second. These companies could see increased user engagement and revenue if TikTok is forced to divest or cease operations in the U.S.
Conclusion
The future of TikTok remains uncertain as ByteDance navigates the requirements set forth by the new legislation signed into law by President Biden. Potential buyers are lining up to acquire the platform, but challenges such as the exclusion of the algorithm and legal battles could impact the outcome of any potential sale or ban.
As industry analysts continue to monitor developments surrounding TikTok, companies like Meta, Google, and Snap are poised to capitalize on any changes that may occur in the social media landscape. The fate of TikTok and its millions of users hangs in the balance as the situation unfolds in the coming months.
