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TikTok’s attempt to increase transparency—and woo Washington lawmakers and civil society organizations to remain operating in the U.S.—has caught the attention of some marketers.
But the platform’s audience growth and targeting capabilities will continue to be its selling point, rather than any outcomes of these political tensions. Still, more transparency in how its algorithm works will have advantageous ripple effects, sources tell Adweek.
“Transparency provides buyer confidence to marketers,” said Ashley Karim-Kincey, vp of media at Dagger agency. “In the long run, if TikTok continues to focus on transparency and a quality product, the platform could take the place of Meta and live side by side with Google as the new duopoly.”
In a $1.5 billion complex plan to reorganize the video-sharing app’s operations in the U.S., TikTok is hoping to convince Washington to operate independently of its China-based parent company, ByteDance Ltd, and offer algorithm oversight details, per The Wall Street Journal report.
TikTok’s attempt to increase transparency comes after a two-year negotiation with the U.S. government over its data access and storage, posing national security risks to the country. As a result, at least 25 states have issued some form of forbidding the app. Congress is also considering a bill that will ban TikTok in the U.S. Meanwhile, the company has established a trust and safety team in response to the growing regulatory pressure.
However, regulatory pressure has done little to stem the growth of TikTok’s ad revenue, which soared in the fourth quarter of last year. The top 1,000 advertisers in the U.S. increased their ad spend on the platform by 66% to $467 million, from September to October of 2022, according to data from market intelligence company Pathmatics.
Further, social advertising has the highest budget allocation—10.1%—across digital paid channels, according to Gartner’s CMO Spend survey data, illustrating a focus among brands and marketers to potentially shift budgetary dollars accordingly.
Audience growth spurs ad spend
It’s no surprise that as TikTok’s audience has grown, and as the platform has matured, so has its ability to command more ad budgets.
“Ad spend on a platform is a direct correlation with said platform solving problems for advertisers, which can be summed up as finding the right people at the right time, with relevant content,” she said. Around 15% of Dagger’s clients’ budget is allocated to TikTok, and roughly 30% of social spend is directed to the platform. The agency increased its ad spend by roughly 50% on TikTok over the last year.
While Dagger, based in Atlanta, is monitoring the litigations banning TikTok in Georgia—the 11th state to ban the app from government-owned devices—the regulatory posturing hasn’t led to a decrease in ad spend.
For some marketers, especially some consumer packaged goods or direct-to-consumer brands, whose objectives are in the awareness or conversion stages, TikTok has become a critical part of the plan.
“These changes do not happen in a vacuum,” said Bryan O’Loughlin, head of paid social at ad agency Empower, “and updates like this have a ripple effect throughout the digital media ecosphere.”
The agency has seen a 37% year-over-year growth in non-Meta platform spend, which was partially driven by increased investment in TikTok in 2022.
Empower first began buying ads on TikTok when it launched its self-serve ad platform in 2020.
“Since then, our investment with the platform has more than quadrupled, and we’ve since planned and activated paid campaigns for nearly half of our paid social clientele,” said O’Loughlin.
TikTok’s data overhaul
As a part of TikTok’s proposal, software company Oracle, which won a bid against Microsoft to take stewardship over TikTok’s U.S. operations in 2020, along with other third-party monitors, will review the code related to how the video app selects videos to serve people, as well as how TikTok identifies the videos to delete.
The third-party monitors will also check the code to detect algorithmic manipulation or any access by the Chinese government or other foreign actors, per the report.
The provisions also provide a process to flag issues with TikTok in cases where the U.S. government or third-party monitors see anything that concerns them.
The Oracle data center has cost TikTok an estimated $1.5 billion, partly spent on moving code and hiring and paying third-party monitors. If TikTok can reach a deal with U.S. lawmakers, the expected cost to sustain the data center will cost the platform $700 million to $1 billion annually, according to the report. TikTok generated around $10 billion in revenue last year.
If the deal falls through, the U.S. government could either force ByteDance to sell parts of its operations or exit the U.S. market, per the report.