What you need to know

• Western governments are increasingly implementing bans of TikTok in sensitive areas and on government issued staff devices.
• Bans are being considered in the US, Australia, Singapore, and Canada. India banned the platform outright, despite having 200 million users.
• A ban would not be unprecedented – just ask Huawei.
• Legislation is being drafted in the US to give President Joe Biden the power to ban the platform permanently.
• Analysts say the Chinese government has not been shy about its desire to use platforms like TikTok as influence and propaganda channels.
• TikTok denies the Chinese government exercises undue influence over the booming platform.
• But analysts say ByteDance, TikTok's Beijing-based owner is so tightly integrated with the Chinese Communist Party and the People's Republic of China that it should not be considered a private company.
• Cybersecurity and and corporate affairs industry leaders say companies need to understand the risk and consider a wider "China contingency plan" if TikTok bans presage a wider crackdown.
• Chair of the Australian Influencer Marketing Council and CEO of The Influence Group's Social Soup, Sharyn Smith, said TikTok was the "number one request from brands at the moment. This isn't creating any hesitation from people using the platform. If the people are there brands will play a role and participate."
• TikTok announced earlier this month it would limit teen users to one hour screen-time per day. 

Clock ticking for TikTok?

The prospect of a TikTok ban on devices in government departments is growing rapidly as a Senate Select Committee on Foreign Interference through Social Media has been told that the Chinese Communist Party (CCP) and People's Republic of China (PRC) state agencies have extended their ties into ByteDance, TikTok's Beijing-domiciled parent, to the point commentators say it can no longer be accurately described as a private enterprise.

TikTok is booming in Australia and big brand advertisers, which a year ago were keeping a watching brief on the emerging social platform now pile in – tech advisory firm Telsyte estimates TikTok users here at 4 million, although 8 million is a figure circulating within media agencies. 

Media industry analysts say TikTok is streaming circa 50bn monthly video views and last year wrote Australian revenues of $120-$140 million. TikTok would hit "north of $175 million if they can" this year, one media agency trader told Mi3. Others suggest $200m is not unrealistic at current rates. Globally revenues are surging – TikTok banked $855m in 2020 and will top $15bn this year, according to the latest forecast from WARC. It was the most downloaded app worldwide for the third year running, according to Sensor Tower.  

But that success is drawing greater scrutiny from the federal government, which is considering banning the use of TikTok by government employees in sensitive departments, as the US has already done.

Ban looming?

Britain, Canada, the executive arm of the European Union and New Zealand's parliament all have forms of TikTok bans in place and India has a complete ban. India was ByteDance’s largest non-Chinese market – it had 200 million users before it was banned outright from the country. (Hundreds of other Chinese apps were also banned in retaliation for what India saw as Chinese military aggression on its northern border in 2020, which led to the deaths of 20 Indian soldiers.) Indonesia and Bangladesh have also banned the app.

The primary concern around TikTok is that the app is explicitly being used to manipulate opinion in the West, and that ByteDance, which owns TikTok, is effectively owned and run by the Chinese Communist Party. That takes it a step beyond something like the UK's BBC World Service which is government funded but operates an independent editorial policy. And as an app, TikTok generates a vast data pool.

The geopolitics surrounding TikTok is a rising risk for those brands and marketers piling into the platform – but they were unlikely to care, said Shane Allison, National President of the Public Relations Institute (PRIA) and Chair of Phronesis Consulting. The allure of a new mass audience of under 35-year olds on a fast-growing new video-based social platform was too much for brands to pass up, he told Mi3.

"Brands are addicted to platforms that drive demand generation and aren't wary of the reputational cost when they can drive easy revenue through some social platforms. They call PR and corporate affairs to patch things up when they have gone wrong. The best place to fix the issue is before they become issues. It's much easier in 2023 to destroy brand value than it is to create it."

News Corp Executive chairman Michael Miller said brands and marketers had asked Meta for greater responsibility and it had responded "which is a good thing". They now need to do the same with TikTok, he said. "We're staying close to it," he told Mi3. "The position I take is that we need to take government advice. What I'm seeing as a disconnect is the government is advising their employees not to have TikTok on their phone, so do they know something which they're not advising consumers for why we shouldn't be having TikTok on our phones? That's a question which I'd love to get an answer to. For me I'm seeing countries taking more of a, I suppose, limit on consumption. But our government has been slow on that when traditionally they are known to move quickly."

Pressure cooking

More pressure is likely coming for brand owners as geopolitcal pressures intensify, the PRIA's Allison said. "The reputational risk of brands being caught up in geopolitical struggles has never been greater as governments ask companies to take sides. We are seeing this everywhere – governments are asking companies to take sides, whether it where their factories are located, you’ve had the microchip struggle, AUKUS … it is now a cost of doing business to take sides." 

It's a point echoed by Ray Wang, Founder, Chairman & Principal Analyst at US-based Constellation Research, who said the US government could ban TikTok once the current review by the Committee on Foreign Investment in the United States (CFIUS) is complete.

“Once CFIUS finishes the review, it’s done,” Wang told Mi3.

Wang has a very clear view of what he regards are the way forward. “We should say look, we will keep your apps, we will keep your social surveillance apps if you let us put ours in your country. Let's just get to this reciprocity. Everything is a waste of time. I don't care about all the other arguments about the data's here. Can we look at it? Can we parse it? Can we hold it? It doesn't matter. If you won’t put our apps in your country, then we're not going to take your apps.”

Last week the SMH reported reported on a submission to the parliamentary inquiry into social media foreign interference that "TikTok’s greatest risk to Australia is that the Chinese Communist Party could use it to influence public discourse to suit its interests, on top of the application’s controversial data-gathering technology". The SMH quoted the chair of the Senate’s select committee on foreign interference, Liberal MP James Paterson, who said that the "Albanese government must urgently remove the app from government devices and rapidly develop a plan to protect the millions of other Australians whose privacy and security is at risk from TikTok today”.

The submission, cited by the SMH, and co-authored by former journalist and government official John Gaurnet said: “But our findings do support a conclusion that when searching contentious topics related to China and, separately, to U.S. elections, the average TikTok (and Twitter) user is more likely to be exposed to pro-CCP content and misinformation in search results than the average Instagram and YouTube user.” The authors suggested it may have significant implications for young users who increasingly use TikTok as a search engine to learn about political issues. TikTok dismissed the report's assertions outright in a statement sent to Mi3:

"This egregious report, written by authors with a known agenda and close links to our competitors, is filled with factual inaccuracies, misleading innuendos and unsubstantiated conclusions that undermine its credibility and the research it draws upon," TikTok said.

Joshua Lowcock, an Australian expat, Chief Global Media Officer at IPG Mediabrands-owned UM and a board director of ASX-listed Cash Rewards, said Chinese law gives the government the right to own what is effectively a “golden share” in the company, providing it with management control. “The concept of a golden share means the government basically has full control to request data, change management, and basically set the direction of the platform," he told Mi3. "The golden share undermines management's independence and the belief that what management tells you is fully trustworthy and transparent."

In an OpEd for The Drum this week, Lowcock wrote: "To be clear, while each of these platforms may be in the advertising business, at their core, they are in the data collection business in service of their advertising business. There are no other entities on planet earth that have ever existed in the history of humankind that have collected the amount of data on each of us as these big platforms. Using this vastness of data, plus ever-more-sophisticated algorithms to determine what content users see – whether it’s content from another user, a friend, or an activist group or an advertiser – needs governance."

"All of this is not to downplay the potential national security risks of a platform like TikTok – one that sits on a wealth of first-party user data, a social graph and intimate content insights on each user. A platform that is owned and originates from a country with a different understanding of freedom, transparency, governance and world order than our own," Lowcock continued. "But unless we anchor the conversation about TikTok in a real discussion about data collection for advertising and the potential for data use, misuse, abuse and weaponisation, we are doing it wrong." 

Push, shove

Michael Daniel, the former cyber security czar for Barack Obama and now CEO of the US-based Cyber Threat Alliance told Mi3: “One of the big issues for the US and China in the relationship going forward is how much of each other's technology are we going to let into the country. And that goes both ways: China is constantly trying to push out American technology. They would dearly love, for example, to have their own operating system and not be dependent on Microsoft. We get worried when we have things like TikTok in our ecosystem, Huawei (its telecommunications equipment is banned in the US and Australia over cybersecurity fears). I think that is going to be a fundamental part of the relationship between China and the US and by extension that's going to drag in Europe and Australia and Japan.”

Incoming rule change

Sydney-based Telsyte Principal Analyst, Foad Fadaghi, said businesses must prepare for a new set of operating rules when it comes to using Chinese apps or other technology: “For the last 30 years, most Australian organisations have followed the public line of outreach and engagement with China. And any change in strategy and policy will take a long time to unwind.”

He said if western governments take a more robust approach to limiting the expansion of Chinese digital players as a way of mitigating the influence of the Chinese government, brands will need to understand and manage the consequences.

"Organisations will have to balance the risk of being seen as working with undemocratic organisations or countries,” he said. Many companies could experience unfavourable brand consequences if they were still following the China engagement policy, after informal rules have changed, he suggested.

Crisis, what crisis?

Australian brands are so far showing no sign of restraint, according to Sharyn Smith, chair of the Australian Influencer Marketing Council and CEO of The Influence Group's agency Social Soup.

"Brands are not pulling back, they're jumping in more and more," Smith told Mi3. "It's the number one request from brands at the moment. TikTok creators and TikTok content is powering growth for the influencer marketing industry. Brands will be where the people are. This isn't creating any hesitation from people using the platform. If the people are there, brands will play a role and participate." 

Chief Investment Officer at Australia's biggest media buying group, Kristiaan Kroon, with a broad portfolio of blue chip brands including Telstra and McDonald's, said his group hadn't recommended any contingencies to clients "at this stage".

"But ad spend can move very quickly. Have we suggested contingencies for TikTok? No. As far as we're aware, no government advice has been given to any business. If the Australian government or any government made recommendations to reconsider what we're doing, we'd be having serious conversations."   

TikTok Australia was approached for a response.  

Update – TikTok AUNZ General Manager, Brett Armstrong, has provided the following statement: 

"Claims that TikTok poses a security risk to Australians are wrong.

"We know there’s no finish line when it comes to protecting our community, and that the tech industry as a whole faces dynamic and ever-evolving challenges. That's why we are proud that TikTok has been a leader on these issues and encouraged to see that other platforms have adopted some of the protections we have pioneered. It's also why restrictions that single out TikTok are fundamentally misconceived. "

"All ad-driven digital platforms collect data in order to offer their users an enjoyable and relevant experience and to connect advertisers with their target audiences. The TikTok app is not unique in the amount of information it collects and in line with industry practices, we collect information that users choose to provide to us. Australian user data is stored in Singapore and the US, not China. The Chinese Government can not compel another sovereign nation to provide data stored in that nation's territory.

"It is regrettable that we are currently being targeted by virtue of our country of origin, as part of the wider geo-political debate. TikTok should not be made into a political football. The millions of Australians who enjoy TikTok every day, whose businesses have boomed, whose creativity and storytelling has exported them to the world, deserve better. All we are asking for from policymakers is for us to be treated fairly, and based on the facts – like everybody else."