April 6th news, despite mounting security concerns surrounding TikTok, advertisers are increasing their spending on the popular short video app. According to data from app analysis group Sensor Tower, TikTok’s advertising revenue in the US rose by 11% in March, with major brands such as Apple, Amazon, PepsiCo, and DoorDash leading the way in ad spending.
Advertising executives and agency leaders stated that they plan to continue investing in TikTok, with leading advertising companies such as WPP’s GroupM and Omnicom Group not advising clients to reduce their investments. This news comes at a time when governments and regulatory agencies worldwide are becoming increasingly concerned about TikTok’s security.
Although the US government has demanded that ByteDance divest TikTok, otherwise it will be banned, the executive order to immediately ban the app, which would affect advertisers, is unlikely to be issued. “Even with bipartisan support, the legislative process will be lengthy, giving marketers enough time to develop alternative strategies,” said Joshua Lowcock, Chief Media Officer of advertising company UM Worldwide.
Prior to the US congressional hearing, a survey conducted by software group Capterra found that 75% of US marketers plan to increase their spending on TikTok in the next 12 months. Moreover, despite the potential ban, some brands have developed contingency plans, such as shifting spending to competitors’ platforms like Meta and Google.
Edward East, CEO of the global influencer marketing group Billion Dollar Boy, expressed his belief that TikTok’s potential ban is not a threat to advertisers. “We are not only not scared by the prospect of a potential ban, but we also see brands increasing their investment in TikTok,” he said. However, he added that advertisers may have already committed some of their March spendings before the US congressional hearing.
TikTok’s Digital advertising is the main source of revenue
Digital advertising is TikTok’s main source of revenue, accounting for nearly $10 billion in global revenue last year. The app has been competing for market share by offering cheaper advertising fees than Meta and Google and providing higher investment returns with updated ad formats.
Research group Insider Intelligence predicts that TikTok’s revenue will reach $14.15 billion in 2023, up from $9.89 billion in 2022. To ease the concerns of brand owners, TikTok’s ad sales team has been reiterating that the app is a global company, with 60% of its parent company owned by global investors. In a memorandum entitled “Mistakes vs. Facts,” TikTok pointed out that its headquarters are in Los Angeles and Singapore. TikTok and Oracle Corporation partnered in Project Texas, a $2 billion initiative that aims to store US user data in the US.
Although some brands have developed contingency plans and some have urged caution, the continued increase in ad spending on TikTok indicates that advertisers are confident in the app’s future, even amidst security concerns and potential bans.