TikTok could be banned in the United States, and Meta Platforms (NASDAQ: META) could stand to benefit immensely. Meta, formerly known as “Facebook,” is the biggest social media company in the world. TikTok has been giving Meta’s Instagram app fierce competition in recent years, but U.S. lawmakers have voted to boot the app off U.S. servers. In this article, I will explore what a TikTok ban would mean for Meta/Facebook, and for Canadian investors.
Increased revenue
Facebook and Instagram would likely see an uptick in revenue were TikTok banned. TikTok is essentially a video-only version of Instagram that competes with Instagram for advertiser dollars. If TikTok gets banned in the United States, then the platform’s advertisers have to go somewhere else if they want to target similar customers. Instagram, being the app most similar to TikTok, is the logical place to go. So, Meta will probably capture some TikTok advertising dollars if TikTok is banned in the United States.
Higher margins
In addition to collecting higher revenue in the scenario where TikTok gets banned in the U.S., Meta would also likely enjoy higher margins. In Porter’s Five Competitive Forces model, suppliers gain power relative to customers when there are fewer suppliers in the market. This phenomenon is called the “bargaining power of suppliers.” Similarly, in economic theory, markets with fewer competitors generally enjoy higher margins than those with more competitors.
Higher market share
A logical consequence of Meta gaining revenue and margin post-TikTok ban is the company enjoying higher market share. Market share means a share of revenue and/or profit in a market. With TikTok out of the picture, Meta would gain extra revenue and profit and, by definition, have a higher market share.
A Canadian stock that could gain if TikTok doesn’t get banned
One Canadian stock that could gain in the scenario where TikTok doesn’t get banned is BCE (TSX: BCE). BCE owns a news division (Bell Media), and Canadian news is currently banned on all of Meta’s platforms. The reason is that the Federal Government passed a law saying that social media companies have to share revenue with news publishers. TikTok is generally more generous with sharing ad dollars with creators than Instagram is. It pays a full 50% of revenue to creators who publish videos directly on TikTok.
As part of my research for this article, I looked for Bell Media accounts on TikTok. I found that BCE itself has a corporate account and that CTV News has a popular account with 1.3 million subscribers. Given its high follower count, CTV is likely generating some ad revenue from this account.
CTV News is a Canadian news platform, but social media news can be seen all around the world. TikTok being allowed to remain in the U.S. would likely financially benefit CTV News and, by extension, Bell Media. Also, if the U.S. courts strike down the TikTok ban, then Canadian politicians might feel less compelled to ban It in Canada. So, BCE stock will probably benefit to a small degree if TikTok wins the coming court battle over the U.S. ban effort.
