In a declaration filed with the U.S. District Court for Washington D.C. on Wednesday, Interim Head of TikTok Vanessa Pappas detailed why the Aug. 6 executive order from President Donald Trump and other subsequent punitive actions taken by the U.S. Treasury and Commerce departments are doing irreparable harm to the short-form video app’s operations both here and abroad. The declaration is in support of a lawsuit filed against the Administration in late August, seeking relief from the executive order.
In her filing, Pappas laid out all the damage that actions by the government have had on TikTok in the U.S. including a precipitous decline in users, its ability to secure talent and advertising, and increased competition from similar apps.
First, Pappas said that the TikTok ban will cause its user base to stagnate and then precipitously decline, noting that prior to the Administration’s public comments, it was “one of the fastest growing apps in the United States.”
A removal from app stores will result in a complete elimination of its user base as well, according to Pappas. “When Secretary of State Pompeo first announced that President Trump was considering a ban of TikTok, we saw a significant drop in our user base, with a reduction of over 500,000 daily active users.”
The loss of content created in the U.S. will hurt TikTok’s global market. Content created and shared in the U.S. is “highly exportable” to other English-speaking markets, representing as much as 60% of the content in TikTok’s non-U.S. markets, according to Pappas, who adds that “banning TikTok in the United States will result in a massive decrease in content available globally, which will decrease business and impact both our new users and core user base worldwide.”
When the Commerce Department restrictions go into full effect on Nov. 12, she believes that the erosion of the app’s competitive position will “significantly accelerate.” Pappas predicts, based on data from the Indian government’s two-week ban on TikTok in 2019, that 40–50% of daily active users will not return even if the ban is lifted after two months, and 80–90% after six months. A ban from app stores will also lead users to competing platforms such as “Byte, Triller, Zynn, and the Reels feature on Instagram.”
She also contends that TikTok will lose commercial goodwill associated with the app and limit the company’s ability to form and maintain commercial partnerships, and eliminate revenue from future opportunities. In fact, Pappas claims, the Aug. 6 executive order destabilized relationships with advertisers even before any regulations took effect. After the executive order, companies began pulling back and turning down agreements due to the uncertainty of the app’s future. “Approximately a dozen brands, including some of the largest consumer goods companies in the United States, cancelled or delayed their planned advertising for August,” she said. This, she claims, cost the company $10M USD in revenue for the month of August alone.
A ban would also hurt major content partners including “media conglomerates” and “major sports leagues,” causing “deep, unquantifiable harm to TikTok’s credibility and competitiveness in the U.S. market and worldwide.”
Finally, Pappas said that a ban would hurt its U.S. workforce, and permanently harm its “ability to recruit and retain talent” due to uncertainty. “As the TikTok Ban comes into effect, these problems with recruitment and retention will be greatly magnified, given that the business these employees support would be banned in the United States.”
In tandem with the lawsuit, TikTok is currently hammering out a partnership with Oracle, Walmart, and other U.S.-based investors that includes a service agreement to maintain user data and data centers in the U.S., an initial public offering for a new entity called TikTok Global, and a board made up almost entirely of American investors.
ByteDance has also filed for a special export license to comply with new Chinese regulations enacted by the Chinese Communist Party this month.
The entire deal is tentative, and there is still some confusion on just who will have a controlling interest in TikTok Global after its IPO is complete. Trump has said he will not approve of a deal where ByteDance holds a controlling interest in the company.
The situation between ByteDance’s app and the U.S. government is part of a larger campaign against China, which also includes efforts to look into Tencent Holding’s WeChat, Riot Games, Epic Games, and other game makers with financial ties to the company.
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