The Rundown - Deep Dive: Can Trump Save TikTok? Winners & Losers of the Ban

Episode Date: January 19, 2025

On this weekend’s deep dive of The Rundown, we tackle the TikTok ban. With over 170 million U.S. users, TikTok's potential disappearance raises massive questions about its impact on the economy, culture, and social media landscape. Who stands to gain from the fallout, and how might Donald Trump use TikTok as a bargaining chip with China? We unpack the winners, losers, and what’s next in this unfolding drama.The content of the video is for general and informational purposes only. All views presented in this show reflect the opinions of the guest and the host. You should not take a mention of any asset, be it cryptocurrency or a publicly traded security as a recommendation to buy, sell or hold that cryptocurrency or security. Guests and hosts are not affiliated with or endorsed by Public Holdings or its subsidiaries. You should make your own financial and investment decisions or consult respective professionals. Full disclosures are in the channel description. Learn more at Public.com/disclosures.Past performance is not a guarantee of future results. There is a possibility of loss with any investment. Historical or hypothetical performance results, if mentioned, are presented for illustrative purposes only. Do not infer or assume that any securities, sectors or markets described in the videos were or will be profitable. Any statements of future expectations and other forward-looking statements are strictly based on the current views, opinion, or assumptions of the person presenting them, and should not be taken as an indicator of performance nor should be relied upon as an investment advice.

Welcome back to the rundown for a weekend deep dive. Today, we are talking about TikTok. The TikTok ban is set to go into place in the U.S. on January 19th. Or is it? See, there's a lot of confusion around the ban. So in today's episode, we dive deep into the TikTok ban. We tell you why the app is being banned in the first place, the impacts that it will have on the economy,

the winners and losers of this ban, and how Donald Trump might save TikTok and use it as a negotiation pawn with China. There's a lot to unpack here, so let's get into it. Let's start with a quick recap on how we even got here. Why is TikTok being banned in the U.S. in the first place? Well, there's been security concerns about TikTok for years now because of its Chinese ownership. TikTok's parent company is bite-dance. They're based out of China.

And U.S. officials have been worried for years that the Chinese government could use TikTok to access U.S. user data, or worse, manipulate the algorithm. Basically acting as a digital Trojan horse that's in the pockets of hundreds of millions, of Americans. And this concern goes back to 2019 when the U.S. military banned TikTok on government devices. Then in the summer of 2020, President Trump tried to ban TikTok entirely with an executive order. But TikTok was able to successfully sue to block that ban. Now, fast forward to April of 2024. This time, Congress passed a law that required TikTok to divest from its Chinese ownership or be banned. And this law received overwhelming bipartisan support, which is pretty rarely.

these days. The law was officially signed by President Biden in April and TikTok had 270 days to either divest or face a ban. But just like the first time TikTok faced a ban with Trump's executive order in 2020, they sued to block this ban. The company argued that this ban violated their free speech rights. But unlike the first time, they weren't successful in court. And went all the way up to the Supreme Court. And the Supreme Court ruled on Friday, January 17th, in a unanimous decision to uphold the law that banned TikTok. So that means that TikTok ban officially goes into place on January 19th, but maybe not, because there's still a lot of confusion and uncertainty of TikTok's future in the U.S.

Now, we're going to talk about some scenarios that might save TikTok in the U.S., but let's first talk about the economic impact and winners and losers if a TikTok ban actually happens. Because if TikTok does disappear permanently, and that's still a big if, it's going to leave a massive hole in the social media space. TikTok has over 170 million U.S. users and millions of people. millions of creators, musicians, and small businesses rely on it. TikTok is the forefront of culture now, especially for young people.

According to Pew Research, a majority of people under the age of 30 say they use TikTok. So if TikTok disappears, the economic impact of that will be significant. There are tons of small businesses that rely on TikTok for customers. It's going to have an impact on the music industry. TikTok has become the discovery platform for new artists and musicians. And not to mention the millions of content creators that. relied on TikTok to earn a living. If you add all that up, it's a pretty significant impact.

According to an Oxford economic study, a TikTok ban could result in $24 billion in loss to the US GDP and in a loss of over 224,000 jobs. But there are going to be some winners, specifically Meta and Google. Meta has Instagram Reels and YouTube has YouTube shorts. These platforms have been around for years now as an alternative to TikTok, and they'll be ready to capture the attention of TikTok refugees, and if the audience comes, the ad does will follow. To put some numbers to this, TikTok was projected to generate $12.6 billion in 2025. But if TikTok is out of the picture, roughly half of that money will now have a new home.

Research firm e-marketers says that Instagram will be the biggest winner, grabbing 22% of the highly coveted U.S. ad dollar. And meanwhile, Wall Street's Moffat Nathanson predicts that Meadows could get a 3 to 5% boost, and YouTube's ads earnings could increase by 10 to 15%. So that's a pretty significant bump for a company that size. I think the most likely winner is going to be Instagram. Instagram Reels is the closest thing we have to TikTok. And I don't think people realize how massive Instagram already is. In fact, Instagram is expected to make up more than half of meta's U.S. revenues in 2025.

If you break down Instagram's business, the majority of the revenue comes from ads on stories or in the feed. But if Reels becomes more popular, that could be a huge boost to Instagram's revenue moving forward. And I don't want to discount YouTube here, okay? YouTube is already a juggernaut. Every creator wants to be a YouTuber. Morgan Stanley estimates that every 10% of TikTok's audience time that shifts to YouTube shorts could mean a $750 million revenue boost. I just don't think that the YouTube Shorts algorithm is that great.

Or maybe I'm just biased because none of my content on YouTube shorts has ever worked. But again, not a YouTube hater. I even pay for YouTube premium because I'm a psycho. But I like watching long form videos on YouTube, not YouTube shorts. And I feel like I need to mention Snap as a potential dark horse winner of a TikTok fan. Not many people know this, but Snap also has a short-form video feed. They call it Spotlight. And Snap says they reached 500 million active users in Q3.

And Snap's demographic tends to lean younger, which overlaps with TikTok's audience. So Snap might end up being the biggest winner here. And you know what? They might need this because their U.S. daily active users has been stuck at 100 million for two years now. So if TikTok goes away, Snap might end up being the biggest beneficiary. Now, by the time you're listening to this episode, TikTok might have already gone dark. the ban is set to go into effect on January 19th. But that's not the end of the story.

This law that bans TikTok doesn't make using TikTok illegal. This law requires app stores like Googles and apples to remove TikTok from the app store. On top of that, it restricts TikTok service providers like Oracle and AWS from working with them. So effectively, it forces TikTok to go dark. Because if these companies don't comply, they can be faced with billions of dollars and fines. Now, here's where things get interesting. The Biden administration has said they won't enforce. force this ban and instead they'll leave it to the Trump administration. And Trump has said

multiple times that he wants to save TikTok. Now, there aren't that many options for him to save TikTok. I guess theoretically, he could choose not to enforce the ban, but that would set a pretty bad precedence of a president not enforcing the law. And I don't think anybody really wants that. What's more likely is that Trump extends the deadline of the ban to allow TikTok to find some sort of divestiture that meets the requirements of the law. There are some stipulations in the current law that allows the president to extend the deadline by 90 days if TikTok is working towards a divestiture. In fact, Trump has come out and said that he does indeed plant to grant TikTok a 90-day extension once he becomes president on Monday. So TikTok might go dark for a day or two

until Trump becomes president and then officially signs the extension. But that's just kicking the can down the road. Because per the law, TikTok still has to divest or face a ban. And what makes this complicated is that TikTok's parent company, ByteDance, has said multiple times they don't play to sell TikTok. And even if they wanted to, selling TikTok's algorithm, which is TikTok's secret sauce, would require permission from the Chinese government. And who knows if they end up giving that permission? As far as how to value TikTok, Wall Street analyst Dan Ive says the U.S. operations without the algorithm could still fetch between $40 to $50 billion in a buyout. So it's a lot of money. Now, a lot of people are saying that Trump is probably using TikTok as a bargaining chip

for a broader negotiation with China. By holding the ban over Bight Dan's head, he might push for concessions on a trade or intellectual property or even stricter rules around how Chinese companies operate in the U.S. I mean, in a classic Trump fashion, this could all be part of a larger game of 4D chess. So there's still a lot of uncertainty on what will ultimately happen to TikTok. And with Trump's involvement, there's a whole new layer of chaos on an already messy situation. Now, I do want to point out, TikTok CEO, Shochu, will be at Trump's inauguration on Monday. So maybe they'll talk about the future of TikTok after Trump gets sworn in at the Capitol. So that is the deep dive on the TikTok ban. There's still a lot of moving pieces,

and this could play out in many ways. But I just wanted to take a second to talk about my personal experience with TikTok because I owe a lot to that app. It kind of changed my life. I first started posting on TikTok more than five years ago. I started posting silly videos about business and finance, and that opened up so many opportunities for me. And because of TikTok, I get to talk about the stock market on this podcast today and do a lot of other cool stuff. So I'll always be grateful for TikTok, and if it does get permanently banned, I'm gonna be pretty sad.

Well, that's it for today's deep dive. Hope you guys enjoyed today's show. If you did and you have like 15 seconds, consider giving us a five-star rating on Apple, on Spotify. Check us out on YouTube. We also have an Instagram account where we post a ton of clips of this podcast. So go check us out there.

All that engagement really does help us out and it helps other people find this show. Thank you guys so much for listening. Shout out to Mike and the incredible team at public for all the work behind the scenes. And we'll see you guys back here on Tuesday.