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TikTok’s Challenges Are Bigger Than TikTok
On the surface, TikTok CEO Shou Zi Chew's testimony in front of the US Committee on Energy and Commerce showcased an unprecedented level of bipartisan opposition to TikTok. Below the surface lies two realities that are bigger than TikTok; First US-China tensions are increasing, and second, short-form video platforms including TikTok appear to be addictive and dangerous to the youth.

Key Takeaways

In terms of the hearing, it was an intense 5.5 hours of TikTok bashing
US-China tensions were center stage at the hearing, begging the question of escalation
Short-form video's impact on mental health is becoming a hot-button issue
Other companies that can be impacted include Tesla, Apple, Nike and more

The hearing

What surprised me most about the hearing was the clear bipartisan opposition to TikTok. To put it into perspective, there are 52 members of the US Committee on Energy and Commerce. All of the 49 members I counted that addressed Mr. Chew were strongly in opposition to either the company’s potential ties to the CCP or the toll TikTok is taking on the mental health of the youth.

As for the ties to Chinese leadership, Mr. Chew made it clear that TikTok is an independent company and does not take direction from the CCP. That position was called into question when Mr. Chew reported both TikTok and its parent, China-based ByteDance, share legal teams, suggesting ByteDance had a distant role in Chew’s preparation for the hearing. Separately, just before the hearing, Chinese leadership announced it opposes a forced sale of TikTok given that Chinese intellectual property is embedded in the company. These two factors strengthened Congress’ belief that TikTok will always answer to ByteDance and the Chinese party.


The political picture

In the end, the learning was largely theater. It’s clear the topic of US-China relations is top of mind in Congress, likely elevated by recent geopolitical events.

There was surprisingly little mention of a ban on TikTok during the hearing while that potential appeared to be the most likely recommendation of the committee. The topic is a delicate one; banning TikTok this year would be a measurable escalation of US-China tensions. Because of that dynamic, I believe the Biden administration will allow TikTok to remain available this year. Eventually, I believe it will get banned.

It’s worth noting a ban on TikTok may open a commerce Pandora’s box in that if TikTok gets banned, do all China-based apps in the US get banned? That’s a dynamic that would further escalate tensions between the superpowers.


Short-form video on trial

While on the surface, TikTok issues would appear to be positive for Meta, as the company’s Reels product may be the biggest beneficiary of a TikTok ban, the reality is that Congress sees the current generation of social media as increasingly dangerous to the mental health of the youth. This is based on time spent metrics suggesting the format has additive mechanics and reported negative effects on self-esteem. The topic of social media’s impact on self-esteem is not new. What is new is a greater sense of urgency from Congress to act on the topic.

Meta and Snapchat shareholders should take note, it’s a function of time before the regulator spotlight turns back to them. In the end, however, there is likely little lawmakers can do to curb the negative effects of these platforms.


Other impacts

I suspect there were other companies besides Meta and Snapchat that were watching the hearing. Given the geopolitical undertone of the meeting, companies like Tesla, Apple, Nike, and others that have significant business in China were likely concerned about the messaging of the hearing. This dynamic is a wild card that has been in play for the past year. Eventually, I believe these three companies will successfully navigate the storm, given they play an important role in the Chinese economy and their treatment by Chinese leadership is a bellwether for western investment in China.



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