Perhaps the biggest sign of this comes from TikTok, the super-hot video-based social networking app that has taken the world by storm. TikTok is owned by ByteDance, a Beijing-based company, but is headquartered in Los Angeles.
In 2017, ByteDance acquired Musical.ly, a social media app with over 200m users, for $1bn and merged it into TikTok, paving the way for its breakout success.
Last year, the Committee on Foreign Investment in the United States (CFIUS) began investigating ByteDance’s acquisition of Musical.ly, as well as TikTok’s data practices. The CFIUS is tasked with evaluating the national security implications of foreign investments in US companies or operations. According to reports, the US government has been concerned with the possibility that the data TikTok collects on users could find its way into the hands of the Chinese government.
To alleviate these growing concerns, ByteDance began taking action to “ringfence” TikTok’s operations and most recently, the company went so far as to announce its exit from Hong Kong following China’s passing of a controversial national security law in the special administrative region. That law could force companies operating in Hong Kong to hand over data about their users to the Chinese government.
But TikTok’s efforts to show that it’s operating independently of the Chinese government appear to be failing as relations between the US and China continue to deteriorate. US Secretary of State Mike Pompeo recently stated that Americans should use TikTok only “if you want your private information in the hands of the Chinese Communist Party” and reports indicate that the US is exploring banning TikTok and other Chinese social media apps outright.
Such a move could spark a full-on digital cold war, affecting hundreds of millions of American consumers and putting billions of dollars at stake. While US companies like Facebook, Google and Twitter have for years effectively been prevented from entering the Chinese market, allowing homegrown companies to dominate the billion-plus consumer Chinese market, in recent years Chinese companies have become increasingly successful at exporting their apps to the rest of the world. Their continued success is now at risk.
A global trend
Geopolitical tensions aren’t limited to those between the US and China. A deadly border dispute between China and India turned into a boycott of Chinese apps by Indian consumers and now, the Indian government has banned dozens of Chinese apps, citing national security concerns.
Those apps included TikTok, delivering a significant blow to ByteDance as India was TikTok’s largest market outside of China with more than 200m users and 600m total downloads.
While the wisdom of what might best be described as “digital protectionism” can and will be debated, if the trend continues and intensifies, it will likely impact marketers.
Investments could go to waste
Marketers have been flocking to TikTok and if the app’s rise is dented by bans or other government actions, marketing efforts will almost certainly be disrupted. Already, Indian influencers have been urging their TikTok followers to follow them on other social platforms and it’s estimated that the top 100 Indian influencers on TikTok are losing significant amounts of revenue.
If TikTok is banned in the US, or the US government effectively discourages its use, brand marketers who have been making room in their social budgets to reach American consumers would find that a huge segment of consumers they have been targeting are no longer accessible.
Put simply, in worst-case scenarios, marketers’ investments in Chinese platforms that have been gaining traction outside of China have the potential to be severely impaired.
Concentration and fragmentation risk grows
Initially, it appears that digital protectionism is benefitting already-popular platforms outside of China, such as Instagram and YouTube, and not regional upstarts. While this isn’t necessarily a terrible development for marketers, it could reduce choice and further concentrate power in the Google-Facebook duopoly at a time when a growing number of brands are trying to influence how the biggest players respond to social issues.
Longer term, it’s possible that digital protectionism could eventually fragment markets, driving consumers in different geographic regions to use local apps, existing and new. If this happens, marketers could be forced to adopt more regional strategies that are harder to scale and manage.
Marketing becomes political
Even though major American technology firms have been kept out of China, many American and European brands now have significant sales in China, including from Chinese ecommerce platforms.
Brands active in the West and in China, like the NBA, have discovered that it can be very difficult to appease multiple markets when those markets come into conflict with each other.
If geopolitical tensions increase and digital protectionism intensifies, simply being present on a particular platform or selling in a particular market could eventually be seen as a political act. Cancel culture is real and some marketers are likely to find that their brands are pressured to pick sides, resulting in losses.
So what should marketers do?
The ongoing Covid-19 pandemic has already created a great deal of uncertainty for marketers and rising geopolitical tensions, which are probably driven in part by the pandemic, aren’t going to help matters. Since marketers can’t predict the future, it will be increasingly important for them to keep abreast of geopolitical developments and how consumers, governments and other stakeholders are responding to them. And they will need to exercise flexibility and agility as new developments occur – even when doing so requires making hard decisions.
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