Investing.com- The debate over whether Tiktok should be banned in the United States has reached a critical juncture, with developments raising the stakes for the popular Short-Video platform.
The US Supreme Court recently upheld a law requiring Tiktok to divest from its Chinese parent company, Bytedlance, or face a ban from US operations.
Although this ruling is pivotal, the situation remains highly uncertain due to the complex interplay of legal, political and corporate factors.
According to analysts at Moffett Nathanson, the prospect of banning tiktok is not as simple as it may appear.
Prediction markets like PolyMarket put the probability at 80%, reflecting sentiment largely driven by national security concerns.
However, other factors complicate the picture. President-elect Donald Trump has voiced opposition to the measure, potentially signaling a softer approach by the incoming administration.
In December, Trump requested a pause in enforcement of the law to explore alternatives, though that effort was overturned by a Supreme Court ruling.
If the ban were to continue, its enforcement mechanisms would rely on key players in the technology ecosystem, including App Store operators such as Apple (NASDAQ:) and Google (NASDAQ:) and Internet Service Providers (ISPS).
Apple and Google are expected to comply by removing Tiktok from their platforms, making it inaccessible to new users.
Even for existing users, the app may become inoperable over time as ISPs and service providers stop supporting updates and maintenance.
Reports from ByTottance suggest the company may shut down Tiktok’s US operations entirely if the ban is upheld.
Despite these potential outcomes, Moffett Nathanson emphasizes the fluidity of the situation.
The incoming administration may issue an executive order delaying the ban or even seek to repeal the law entirely.
Tiktok executives seem to share this optimism, confident that any disruptions could be temporary. This scenario leaves room for the platform to re-emerge, potentially after a layoff or sale.
For competitors like Meta (NASDAQ 🙂 and YouTube, banning tiktok could provide opportunities.
Meta’s Instagram reel and YouTube shorts are well positioned to absorb displaced users and advertisers, potentially increasing their revenues by 3-5% and 10-15%, respectively.
Snapchat, while less equipped with short-form video offerings, could still benefit by capturing a portion of Tiktok’s user base, especially among the younger demographic.
However, the market’s initial reaction to the Supreme Court’s ruling suggests skepticism about the ban’s durability.
Shares in Meta and SNAP fell shortly after the announcement, reflecting broader uncertainty about how long Tiktok’s absence will last and whether competitors will significantly benefit. This reaction may be a warning of the volatility ahead in this unfolding saga.
