How A U.S. TikTok Ban Could Stomp Out 5 Million Small Businesses

TikTok can lazily be dismissed as existing in a kind of ‘Gen Z vacuum’ — home to frivolous dancing videos, funny clips or makeup tutorials. If Joe Biden wants to sign a ban on TikTok, he can, but his signature would derail real people’s livelihoods, stomp out five million businesses and burn down a cultural powerhouse.

This month, Congress passed a landmark bill that could see TikTok banned across the U.S.; either the social media giant’s parent company ByteDance sells up – or the app faces a nationwide shutdown.

It’s no secret that this geopolitical power play would affect some groups more than others: Gen Z has become synonymous with TikTok and a ban would have a significant impact on this highly-prized generation for brands and businesses. The majority (56%) of Gen Z have crowned TikTok their top app, with the average 12-27 year old user spending nearly two hours on the platform every day.

For this cohort, TikTok has become the kind of ‘everything app’ Elon Musk can only dream of creating.

But a ban would go far beyond reducing the scroll time of millions of young people. It has the potential to cause huge damage to the emerging creator economy and the thousands of small businesses that operate within it.

There’s no doubt the U.S. government knows just how much TikTok means to Gen Z. Only last month, leaked plans revealed U.S. political parties had put aside millions to spend on micro-influencer campaigns this year, vying to win over a younger demographic with content tailored to niche audiences ahead of the upcoming November elections.

But Gen Z doesn’t just love TikTok, it literally means everything to them. It’s a cultural powerhouse. It’s a search engine; 64% say they use it as their preferred search engine. It’s a virtual shopping mall. It’s a news source, an advocacy and education tool, and it's a revenue source for tens of thousands for creators.

To understand the impact of the ban on influencers and businesses across the U.S., we need to take a closer look at the complex ecosystem cultivated by what was once known as just a ‘dancing app’.

For creators and businesses, TikTok is an app like no other. Its incredibly powerful algorithm means that it’s easier to build a following than it is on any other social media app.

Let’s unpack that. According to a leaked document from TikTok, the algorithm is built on four main pillars, which ByteDance translates to user value, long-term user value, creator value and platform value.

Anecdotally, users have marveled at the algorithm’s ability to ‘know them better than they know themselves.’ This is no coincidence. TikTok learns what a user likes within a matter of days, and continuously hones this so it is constantly serving up the most relevant, likeable content.

So confident is TikTok in its algorithm, that it primarily serves up content from creators that users don’t follow. But we know that it gets this right because TikTok is by far the easiest place for creators to build a following. Non-followers become followers, and the cycle continues.

Once you’ve reached 10k followers, you can make money on the app via TikTok’s Creator Fund, but SCREENSHOT Media is also seeing a huge rise of nano creators, with a 1k-10k following, landing brand deals before that. In an era where 40% of American Gen Z have a side hustle, an accessible source of income from remote work is not to be sniffed at. In fact, TikTok has better creator payout than other platforms, like Instagram and YouTube.

Of the career content creators making more than $10,000 per year, 29% say TikTok is their primary source of income - only 7% cite Instagram.

But making money on TikTok doesn’t just rely on the app paying creators directly: the bigger opportunity comes from brand sponsorships and affiliate programmes. TikTok Shop allows brands to share product samples with influencers and make them ‘affiliates’, meaning they gain a commission from any stock shifted via their video.

This is not only a lifeline for creators who make a living from the app, but it’s also proven to be a hyper-effective strategy for disruptor brands. Made by Mitchell has seen sales of $2 million in a week from TikTok, Little Moons saw a tasty sales increase of 2000% after going viral, and Lottie London says a third (30%) of its revenue comes from the app.

Herein lies another major problem with the ban. The big businesses aren’t the ones that depend on TikTok for sales, because many of them aren’t getting the app right in the first place.

A lot of the time, we’re seeing big brands recycling content from Instagram or other platforms and shoving it straight on TikTok. The app’s distinctive editing style makes this kind of repurposing strategy glaringly obvious, and drives away the digital-native audiences these brands are trying to reach. Many big brands are also guilty of over-scripting influencer sponsorships, making the fatal mistake of forgetting that the influencers know their audiences best.

So it won’t be the big brands that are hit hardest by a ban - it’ll be the high-growth disruptor businesses teetering on the edge of virality. These are the brands that don’t have a huge amount to spend on their marketing strategy, and have come to depend on the kind of low-cost, high impact advertising opportunity offered by TikTok.

TikTok generates a 64% higher yield than alternative digital channels across Europe. For emerging brands growing in success, building revenue and expanding their teams, the ban could slam the brakes on their progress.

Ultimately, we could see a whole generation of promising new businesses fall by the wayside.