On Friday an appeals court kept the law that would enforce the parent company of TikTok, ByteDance, to sell their short video based platform. Otherwise they face the trouble of getting banned. The law does not clearly ban TikTok. But the law is implemented in a way to prevent the app distributors such as Apple App Store and Google’s Play Store from distributing the app. This will come into effect if ByteDance doesn’t take itself off from the social network.
Even though it seems like a foot in the grave for TikTok, they have yet to appeal to the Supreme Court. After convening on the matter the Supreme Court will be the decider on the banning law. If the motion against the TikTok succeeds the 170 million user based platform will suffer a major defeat.
On the contrary American social media platforms such as Meta and Google stand to gain a lot from the TikTok ban. Meta has a similar user base when compared with TikTok. They also have similar content structures. Meta brought reels to their platforms with Instagram shorts and Facebook reels. They are a direct counter to the growing short TikTok videos.
Meta has designed their algorithm more effectively to offer their user more enticing reel contents. Their advance implementation of AI is on par with that of TikTok. So they can attract more users and keep them engaged with the app for longer periods of time.
In the Q1 earnings call Meta revealed that users spent 50% of their time watching reels on Instagram. Even though a clear number of the contribution to Meta’s growth from reels is not revealed we can estimate it’s a substantial amount. Now with the impending ban it’s likely that TikTok content creators will move on the Meta platform. This will give a huge boost to the platform. It’s partly why investors feel optimistic for the growth of Meta.
Last Friday Meta closed on 623.05. It gained a total of 14.84$ per stock which was up by 2.44% from the previous closing day. If we look at the one year period Meta share has almost doubled. Over the year the stock price has seen 87.46% increase. This is partly due to the ongoing battle with the law for TikTok that was initiated during the 2020.
The senators passed the law out of national security concerns. As ByteDance has close ties to the Chinese government, US officials fear that TikTok might be used to spy on American users to get valuable data. Moreover the platform can be used to distribute pro Chinese propaganda.
TikTok has denied these allegations. For now all the eyes on the Supreme Court verdict. Even though Trump initiated the law during his first term, he has changed his stance since before the election. So the future president might intervene on behalf of TikTok if the Supreme Court ruling doesn’t go in TikTok’s favor.