What a TikTok ban could mean for Meta, Snap, and advertisers

TikTok is in court on Monday for a key hearing in its ongoing battle to block a US law that could ban the app. Seana Smith and Madison Mills examine how a ban could play out with Roth Capital Partners managing director Rohit Kulkarni's perspective on competitors like Meta (META) and Snap (SNAP), while Rachel Tipograph, the CEO of e-commerce analytics company, MikMak, shares insights about the advertising side.

Kulkarni tells Yahoo Finance that the odds of a TikTok disruption, either through a ban or a sale, are rising. Looking at Snapchat and Meta stock, the analyst says “There is an implied probability there that TikTok disruption is more likely than not in the next four months, and I feel that could manifest into either a complete sale, complete ban, or somewhere in between.” He says this means “eyeballs and money move away from TikTok” which helps Meta and Snapchat.

Tipograph says that MikMak data instead suggests that advertisers are still spending on the platform despite the looming possibility of a ban. "TikTok has become a household name in advertising and brands,” and advertisers “don't seem to be scared about a ban at all” as “they continue to invest,” Tipograph tells the Catalysts team.

Watch the video above to hear what businesses Tipograph says would be most impacted by a TikTok ban.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Naomi Buchanan.

Video transcript

Back in court today for a key hearing, the Chinese social media company seeking to block a law that could ban the app in the US.

If the ban were to go into effect, it could impact more than just the users potentially benefiting other social media names and hitting advertisers here to talk about this and more.

We want to bring in Rachel T as she is the CEO of Mac and that is an Ecommerce Analytics platform.

We also want to bring in Roj Kulkarni, managing director of Roth Capital Partners.

It's great to have both of you, Roj, let me start with you.

Uh I guess for investors out there, they're trying to figure out the odds that tiktok prevails in the DC circuit.

And then ultimately, what that would mean for the broader sector?

What's your early reading on that?

I think the odds of disruption in tiktok again, whether it gets banned, whether it gets sold or this is a prolonged kind of path of pain for Tik Tok.

The odds of either of those three things are rising, in my opinion, the way I would portray that is you look at uh Snapchat stock or you look at uh Facebook stock, there is an implied probability there that tiktok disruption is more likely than not in the next four months.

And uh I feel uh that could manifest into either a complete sale, complete ban or somewhere in between, which could still mean that eyeballs and money move away from tiktok and Rachel.

Give us your perspective because on your platform, Knick Mac, I know that you have a lot of insight into uh ecommerce trends and the degree to which a lot of the huge tickers that we talk about all the time here at Yahoo Finance could potentially be negatively impacted if there was a disruption to tiktok.

What are you seeing in the data on your end about the potential impact to some of these e commerce uh big box retailers?

Yeah.

So our data actually indicates the opposite.

We've seen a 60% year over year growth in tiktok traffic on any given day at Micmac tiktok is our second most traffic channel meta being.

Number one brands love tiktok.

It has the power of television in terms of its ability to capture mind share with an algorithm that supercharges conversion that acts a lot like Amazon Tik Tok has become a household name in advertising and brands don't be, don't seem to be scared about a ban at all, they continue to invest.

So Rachel, if brands are continuing to invest, that are kind of the bigger box brands here.

Do you have any information about maybe some of these smaller mid size businesses and how this could potentially impact their bottom lines?

I think about the degree to which I at least see a lot of those smaller mid size retailers on my for you page and how they could be impacted moving forward.

Yeah, absolutely.

If a ban were to occur, the brands that would be most impacted are the small medium businesses.

Why?

Because tiktok is one of the last places on the internet where organic content can rain in all the other platforms.

It's a play to it's a pay to play environment.

And so if you're an up and coming brand or retailer tiktok is a place where you can get traction with just your blood, sweat and tears.

And so if you look at that opportunity, married with tiktok shops, which is really becoming one of the fastest growing marketplaces worldwide and including the US, it would be a real detriment to the small medium businesses.

If tiktok were to go away, Rohit, how much of this has already been priced into some of the competitors when you take a look at Snapchat and Meta, going back to your previous comment there.

And, and then if not, I guess in the long term, how big of a catalyst do you then see this being to some of these names?

I think it is still very early days.

I wouldn't say it is priced in anywhere close to the levels that there is clear certainty as to what the future of future holds for tiktok.

I think all, all I would say is it's rising in a way that people are increasingly focused that this is a bipartisan issue.

There is a political will and there is something to something for either of the parties to get something done in the first month in office no matter who wins in November.

So that, that's one part of thinking that Wall Street is having right now.

And the second is uh how that unfolds it is going to be just a long process.

It may not happen in January.

It could just be drawn out for a very long time.

And the longer the period, the more it benefits for some a large company like Facebook where there would be just a slow bleed away from people uh investing in tiktok.

We have already heard some, some sellers on Amazon who are these exact small businesses who are trying to create content on Tik Tok because Facebook was getting too expensive.

So those people who are right now trying to cut costs, they would be the first people to slowly go away from tiktok and go into existing channels.

So that's, that's how I think it would unfold.

It won't be a one single turn off the tap and that's uh the next day everything moves over to Instagram and Snapchat.

But the slow bleed helps Facebook a lot more.

And then Snapchat, those two platforms would be the most to own.

And um and one more thing I would point out is perhaps like even 10% move to Snapchat helps Snapchat by almost more than 25% of the revenue.

So that whereas if 50% of uh tiktok moves to Facebook, it is just 3% of the revenue.

So the the asymmetric benefit to a smaller company like Snapchat would be much, much higher than uh than a lo a lot of proportion going to Facebook.