With the U.S. Department of Commerce’s bombshell announcement on Friday, ordering app stores to remove ByteDance’s TikTok and Tencent’s WeChat on Sunday, it looks like time’s running out for the apps. And for the partners that rely on them.
The essential details in the latest techno-political drama: Current users won’t see the app disappear from their handsets, so they can still use them. But they won’t get software updates for new features, changes to the operating system or security enhancements. And new users won’t be able to download the apps at all.
In WeChat’s case, the move immediately prohibits transactions or “any provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments within the U.S.,” according to the department. TikTok can continue to function until Nov. 20, a deadline set by President Trump for ByteDance to reach an acquisition deal. The Chinese company is in talks with Oracle about a potential joint venture that would own TikTok in the U.S.
It’s akin to kneecapping, but not immediately killing these apps — though, barring other factors, it still would lead to their demise over time.
For TikTok, the news throws cold water on its recently ramped-up efforts to court brands. A spokeswoman recently told WWD that the business sees fashion as part of its “strategy to further our place in culture,” and as if to prove the point, the company launched a new spate of Fashion Month programming, which is still ongoing.
Burberry RTW Spring 2021
Fashion and beauty’s interest in the platform goes back more than a year, but 2020 was shaping up to solidify its place as an essential social channel for brands of all sizes. After stuffing the app’s coffers with anywhere from an estimated $200 million to $300 million in revenue last year, it’s on track to score $500 million in the U.S. alone this year. Or at least it was.
Second-quarter sales for Aerie by American Eagle saw skyrocketing sales of 100 percent after its launch of the #AerieRealPositivity challenge with Charli D’Amelio, the app’s most popular influencer. The project nabbed some 2 billion impressions.
In April, Levi’s proclaimed that a key TikTok project — a collaboration with creators Callen Schaub, Cosette Rinab, Gabby Morrison and Everett Williams to design custom denim using its “Future Finish” 3-D laser tool — was a success. One of the first retailers to use TikTok’s “Shop Now” button, the denim giant reported that the effort stoked digital sales, which doubled over the previous year and now accounts for 15 percent of total revenue.
Brady Stewart, managing director of Levi’s U.S. direct-to-consumer division, described TikTok as “the perfect platform for us to expand our efforts in social commerce,” and it’s not alone. LVMH Moët Hennessy Louis Vuitton brought its men’s wear runways to the short-video network early this month, effectively kicking off the app’s monthlong fashion programming.
There are no shortages of other places to turn to, of course. In fact, rivals have been kicking into high gear, hoping to capture some of TikTok’s mojo.
In August, Instagram debuted Reels, a short-form video feature with an expanding music catalog. While critics noted great video quality, they still panned the app for being confusing and complicated. The same month, Snap introduced 2-D body tracking, a tool designed to soup up things like online dance challenges, a highly popular activity on TikTok. American Eagle was the first brand to use the tech in a back-to-school promotion.
Some peers like Instagram have spoken out over the Trump administration’s targeted attack on TikTok, fearing it will set a bad precedent for social apps in general. But there’s blood in the water, and competitors have obviously begun circling.
Whether they can fill TikTok’s shoes remains to be seen. Skeptics don’t believe these networks can, pointing to the authentically motivated and highly enthusiastic engagement of its Gen Z users, which account for more than half of TikTok’s 100 million U.S. users and drive faster growth than its peers.
Those details matter more than ever now, as retailers still battle for survival amid the pandemic.
The news rattled brands like Peace Out Skincare, a newcomer to TikTok this year. The beauty company has only begun to see what the platform can do — this summer, one influencer’s demo of its Peace Out Pores sold out the product, the company told WWD — but that was enough.
“TikTok allows Peace Out Skincare to communicate authentically with a large segment of our customer base,” said Junior Pence, Peace Out’s chief marketing officer. “Removing the platform will impact our business and many others at a time when the economy is already struggling.”
The company isn’t pulling up stakes yet. For now, it plans to continue setting aside marketing budget directly for TikTok. But what happens next could make all the difference.
App stores are required to act because Trump’s first executive order in early August set a timeline of 45 days for the ban, which expires on Sunday. This order was followed up by another requiring ByteDance to divest from TikTok in 90 days, which arrives in mid-November.
For its part, TikTok posted that it would sue the Trump administration, calling its actions unconstitutional. “Now is the time for us to act,” the developer wrote in its blog. “We do not take suing the government lightly, however we feel we have no choice but to take action to protect our rights, and the rights of our community and employees.“
The developer was still entertaining offers and just recently rejected Microsoft’s bid. Now Oracle is in pole position, with a deal reportedly involving Walmart. Earlier discussions revolved around a minority stake for the big-box retailer and positioning of Walmart chief executive officer Doug McMillon on TikTok’s board.
The proposal is under review, and it could go either way. Oracle chairman, chief technology officer and cofounder Larry Ellison is a Trump supporter, which could improve the odds. And Oracle already supplies secured technology for systems in use by the federal government, which may address the White House’s security concerns.
But according to multiple media reports, officials didn’t like the structure of the software giant’s plan. Oracle (and Walmart), with a mere 20 percent stake, would still have to rely on ByteDance. That structure casts the tech company as more of a cohort than an owner, which clarifies TikTok’s statement describing Oracle as “a trusted technology partner.”
The proposal appears to be evolving. Reportedly dealmakers have been appealing to ByteDance’s U.S. investors — Sequoia Capital, General Atlantic and Coatue Management — to join Oracle and Walmart. If true and it succeeds, this consortium of owners could launch a new TikTok Global organization, with more than a 50 percent stake held by U.S. companies. Assuming, that is, the Trump administration approves it.
As it stands, there’s no telling what may come of the app’s lawsuit. Or if Oracle’s deal, whatever its structure, will get a green light. Even if it does, brands would have to decide if they’re comfortable with Walmart having eyes on their key social media engagement.
And if the app goes away or gets hobbled, they’ll have to figure out how to make up for the loss of a critical link to Gen Z consumers.
That could mean giving other networks like Tsu another look. The platform was once very popular among content creators, with whom it shares revenue. It closed down in 2016, then relaunched in 2019 with new momentum among college athletes and others. The timing could be fortuitous, as it could help bring some freshness to the social media landscape.
That may be needed before long. For TikTok and its brand partners, the countdown timer shows less than two months to go before the next deadline arrives.
Source: Read Full Article