The TikTok application for download in the Apple App store on a smartphone arranged in the Brooklyn borough of New York, US, on Thursday, March 9, 2023. The US is moving closer to restricting access to the popular video-sharing app TikTok, with Senate Intelligence Committee Chairman Mark Warner set to unveil a bill Tuesday that the Biden administration is poised to support, according to people familiar with the issue. Photographer: Gabby Jones/Bloomberg via Getty Images
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TikTok is becoming a go-to location for digital advertising for companies – even during live sporting events, the sweetest spots for marketing campaigns.
The social media platform has been under scrutiny from the U.S. government and faces a possible ban. House lawmakers grilled TikTok CEO Shou Zi Chew during a Thursday hearing on Capitol Hill. But the company is nonetheless attracting billions of dollars in advertising revenue as major companies look to reach a younger audience.
It also helps advertisers in some cases bypass hefty TV advertising costs during highly watched events like the NFL’s Super Bowl and NCAA’s March Madness basketball tournament.
During this year’s Super Bowl, State Farm opted out of a TV commercial during the big game, and instead had a TikTok and social media-focused ad campaign. Hyundai prioritized TikTok this year as many automakers bypassed TV advertising during the Super Bowl to preserve cash or spend on ads elsewhere. FedEx also skipped a TV ad in favor of TikTok this year.
TV ads drew more than $7 million for 30-second spots during this year’s Super Bowl on Fox’s broadcast network. While this is more than what TikTok made in advertising revenue in the U.S. this year, if the platform remains available in the U.S., the growth will likely keep coming.
Despite the steep prices and high demand for TV advertising during major live events, the overall ad market has slowed down in recent months due to uncertainty in the economy, weighing on traditional media companies like Paramount Global and Warner Bros. Discovery.
The move toward TikTok come as Gen Z, and even adults, are increasingly spending their time on the platform. Simultaneously, traditional TV bundles have been losing customers at an accelerated clip in recent years as consumers opt for streaming services.
TikTok’s advertising revenue in 2023 is projected to hit $6.83 billion, up from more than $5 billion in 2022, according to data from Insider Intelligence. While this makes up about 2% of overall digital advertising spending, the growth of the spending for the platform has been rapid. Insider Intelligence expects TikTok’s U.S. advertising revenue to surpass $8 billion in 2024.
With March Madness under way, deodorant brand Degree said it is using TikTok as its major marketing channel to reach consumers during the event. It also employed NBA star Giannis Antetokounmpo as its spokesperson for the event.
“TikTok has really moved from an experimental play to a must-buy for many advertisers. At this point we’re seeing many advertisers rely on TikTok, some maybe too much with what’s going on,” said Jasmine Enberg, a social media analyst at Insider Intelligence.
The perils of TikTok
Despite the outpouring of advertising dollars for the social media platform, TikTok is at risk of being banned in the U.S. if its Chinese parent company, ByteDance, doesn’t sell its stake.
The Biden administration and bipartisan members of Congress have raised numerous concerns about TikTok. U.S. officials say TikTok presents a national security risk, alleging that American user data on the app could fall into the hands of the Chinese government.
A TikTok spokesperson wouldn’t comment beyond the company’s statement regarding the possible ban.
“If protecting national security is the objective, divestment doesn’t solve the problem: a change in ownership would not impose any new restrictions on data flows or access. The best way to address concerns about national security is with the transparent, U.S.-based protection of U.S. user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing,” a company spokesperson said.
Some creators, influencers and lawmakers who oppose a prospective ban held a rally on Capitol Hill this week, arguing other social media platforms pose similar threats.
The companies that advertise on TikTok didn’t comment on the possibility of a ban in the U.S.
Enberg, of Insider Intelligence, said some advertisers may be relying too much on the platform. Even though TikTok is the choice of platform for Gen Z and young users, advertisers should be “prepared to get cut short if TikTok is banned or there is a significant change to how it operates.”
“Being overly reliant on one platform can be dangerous,” said Enberg. “Advertisers should be diversifying their platforms.”
During the Super Bowl, T-Mobile not only ran multiple spots on TV during the game, but also had a major TikTok campaign.
While T-Mobile ran two TV ads during the Super Bowl, Chief Creative Officer Peter DeLuca said it was also key for the brand to have a moment on social media, specifically TikTok. The company decided to play off its TV advertising about home internet with “Come to Your Fences,” a campaign that allowed a TikTok user to use a fence filter – conjuring thoughts of neighbors chatting through a backyard fence.
“We leaned into what TikTok audiences use,” said Deluca, meaning they created this filter to drive engagement. It did just that. While heightened awareness due to the Super Bowl often causes T-Mobile website traffic to go up, the company said its TikTok campaign drove 15% of total traffic to its website between Feb. 9 and 15.
When T-Mobile launched its home internet ad on TikTok on Feb. 10, ahead of the Super Bowl, it drove 50% of all of its web traffic that day. “We did leverage the platform and not just run a 60 second spot for the game, but a longer version of the home internet spot on TikTok,” DeLuca said.
“I think part of how we like to think about it is we want to win the entire consumer engagement on game day, and not just have all the eyeballs on the TV spot,” Deluca said.
