Money Rehab with Nicole Lapin - Let's Tok About the Ban

Episode Date: April 27, 2023

The U.S. government is very seriously considering banning the hugely popular social media app TikTok. In fact, Montana recently became the first state to pass legislation banning the app. Today, Nicole follows the money trail to investigate what's really at stake for users, content creators and U.S./China relations.

One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that

I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details.

I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. So I was early TikTok, like pre-pandemic early TikTok, so much so that my team was confused and thought I might be having a midlife crisis wanting to hang out with mostly teens who were obsessed with the app at the time. But I saw the numbers. I saw the growth. And I knew back then that there was something big here, that this wasn't a clubhouse type flash in the pan app. This wasn't a Vine situation. This was going to be something big. Now, why I didn't fully lean into it when it popped off during the pandemic is a story for another time, but today I really wanted to code what's going on with the company and what's up with the potential ban. Here's a little background. In case you don't know, TikTok is owned by the Chinese company

ByteDance, and due to the rising economic and political tensions between the U.S. and China, U.S. officials are worried that ByteDance could pull some, well, dirty dancing, sorry, I had to, moves with TikTok's user data, as in potentially sharing the data with the Chinese government. The concern is pretty valid considering China's national intelligence law requires Chinese companies to support national intelligence efforts by any means the government deems necessary. And to keep it a secret, this suggests that if China asked ByteDance to hand over data from TikTok, they would be legally obligated to do so and they would not be legally obligated to make their actions known publicly. So yeah, that is making people very nervous.

On February 27th, U.S. federal agencies were given 30 days to delete TikTok from all government devices. As of right now, the ban only applies to these government devices, but many U.S. lawmakers are pushing for it to go nationwide. And the potential ban is looking pretty serious. About a month ago, TikTok CEO Sho Chu appeared before Congress and faced interrogation from the House Energy and Commerce Committee. before Congress and faced interrogation from the House Energy and Commerce Committee. Throughout the heated five-hour hearing, Mr. Chu fielded accusations about just how cozy TikTok is with its parent company ByteDance and just how likely it is for China to get its hands on the app's data. Accusations were also made about the danger TikTok poses to the mental health and general safety of young people, given tragic accounts of teen suicide and death in

children that have been linked to TikTok use. In response, Mr. Chu promised to invest more to make TikTok safer for young people, and he repeatedly denied sharing U.S. data with China and even talked about his intention to protect American user data by moving it to a company within the United States. But Congress was simply not picking up what Mr. Chu was putting down. California Representative Tony Cardenas called the TikTok CEO a, quote, good dancer with words. So that makes one of them. But Chu's word dances, I suppose, were not as popular with Congress as TikTok's dances are with teens. The hearing left U.S. lawmakers unconvinced of Mr. Chu's motives, and the general vibe was pretty pro-ban.

So let's follow the numbers here. TikTok has over 1.5 billion users, and all those happy scrollers give brands 1.5 billion reasons to increase marketing spend on the app, despite the possibility of a ban. Lo and behold, according to a recent report in the Financial Times, ByteDance brought in almost $85 billion in revenue last year and about $25 billion in profit. That's a record-breaking 79% leap in profits since 2021. ByteDance hit those record profits despite substantial operational losses from growth-related spending on TikTok, which knocked the app's revenue from a projected $12 billion down to around $10 billion in 2022. Still not bad for a year's work.

And the short term is looking even brighter. TikTok is projected to make over $14 billion in profit by the end of this year. But we have to talk about another group that doesn't want to see this ban happen, because it's not just users who want to keep TikTok trends going, it's the many, many US-based content creators who make real money on TikTok. On the app itself, TikTokers can be paid through two main avenues, the Creator Fund and TikTok Pulse. How much you earn depends on how many followers and views creators accumulate, but net-net, the TikTok app doesn't pay creators nearly as much as YouTube does. But there is a plot twist. According to a breakdown in Business Insider, the Creator Fund

is essentially a billion-dollar pot of money that TikTok divvies up between the highest-performing creators on the platform over the span of three years. TikTokers only get paid from the creator fund if they have at least 10,000 followers and got at least 100,000 views within the previous month. In comparison, YouTube paid its creators $30 billion over a three-year period, plus set up a $100 million fund in 2021 to pay creators for shorts. It's the TikTok-esque short form video. Plus set up a $100 million fund in 2021 to pay creators for shorts. It's TikTok-esque short form videos. Then there's TikTok Pulse, the program TikTok uses to share some of its ad revenue with creators who have at least 100,000 followers.

TikTok pays those creators 50% of revenue from an ad if and only if the creator's video happened to appear directly before the ad. Influencers who spoke with Insider reported that earnings from the creator fund generally adds up to only a few cents per thousand views. And their reported payouts from TikTok Pulse range from cents up to about 17 bucks. So nothing really to write home about just yet. But there are other ways TikTokers can make money on the platform, such as virtual gifts from live stream viewers. One creator live streams while he sleeps and he earns $34,000 a month. Honestly, good for him. TikTokers are also paid by music marketers and record labels to promote songs in their videos for anywhere from $20 to thousands of dollars. But the big payday from TikTok influencers comes

from brand deals, which can range from a few hundred bucks all the way up to seven figures. That is a lot of money to lose, which would be the case for those mega TikTok influencers if the app is indeed banned. So what would a national ban on TikTok actually look like? Here are a few possibilities. Congress could pass the Restrict Act, a bill that would empower the U.S. Secretary of Commerce to ban or regulate companies from China and six other countries. If Congress can't pass that bill or a similar one, President Biden could ban TikTok himself with an executive order. Now, that would be a pretty bold move for the president, especially with his fresh reelection announcement. Some states are going rogue with this. Montana became the first U.S. state to pass legislation on banning TikTok on all personal devices, which is proving hard to

actually regulate. Another potential outcome is that ByteDance could sell its shares in TikTok. In fact, the Committee on Foreign Investment in the U.S. privately demanded last month that the app's Chinese owners sell their stakes or face a ban, according to anonymous sources in a recent Wall Street Journal report. Lastly, ByteDance could simply sell the U.S. business portion of TikTok so that it could function as a standalone company entirely under domestic control. This would theoretically protect U.S. user data while avoiding an outright ban on TikTok. But if none of those solutions play out and a ban does happen, it would prohibit ByteDance

from doing business in the U.S., which means that TikTok won't be available for download through Apple or Google's app stores. The app would lose 150 million U.S.-based subscribers, and any U.S.-based creator who relies on TikTok for income would be fresh out of a job. Is that worth the trade-off of increased data security? Well, according to a group of progressive Congress members, a TikTok ban wouldn't actually solve the problem. According to an article in The Hill, this group of representatives is pushing for a more comprehensive approach to improving data privacy across all social media platforms while protecting free speech and the benefits these platforms of course provide to small businesses and political organizing efforts. Many, many countries and governments have already implemented

some form of a ban, including Australia, Canada, Denmark, France, India, New Zealand, Norway, Taiwan, the Netherlands, the United Kingdom, and the European Union. But for the United States, the question still remains, what's the next move in the battle of the ban? Will we save the last TikTok dance? Sorry, again, I had to, there were so many delicious pun opportunities here. But really, the question the government will be asking itself in the coming months or even years, do the pros outweigh the cons or is it the other way around? For today's tip, you can take straight to the bank. If you're spooked by potential threats to your privacy, safety or financial security on TikTok,

here are a few steps you can take to protect yourself. First, set your account to private. No brainer. Second, review all your privacy settings, disable location access, and restrict who can see your posts and contact you. And third, download your own data so you can see what TikTok knows. You can do this through TikTok settings. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid

up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bank Corp. Bank NA or Stride Bank NA. Members FDIC.

SpotMe eligibility requirements and overdraft limits apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Loy. Our researcher is Emily Holmes. Do you need

some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment

you can make.