TikTok's Oracle Deal Could Open Up the Floodgate' For Ad Dollars

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TikTok-Oracle Deal Could ‘Open Up the Floodgate’ For Ad Dollars

Data concerns have major brands hesitant to “put both feet in” on advertising with TikTok, one marketing expert tells TheWrap

If the U.S. Government gives the green light to Oracle’s bid to run TikTok’s U.S. operations — a decision that’s expected to come by the end of the week — American brands will likely start pouring more ad dollars into the wildly-popular video app, according to industry experts.

The proposed Oracle-TikTok deal isn’t necessarily a slam dunk. Bloomberg reported on Wednesday the bid may not go far enough in addressing the U.S. Government’s concerns the app poses as a data collection tool for China’s communist government.

At the same time, major companies are waiting on the sidelines, waiting to see if TikTok is safe for business, according to Ryan Detert, chief executive of Influential, a firm that specializes in digital marketing. The intrigue is obvious for marketers: TikTok has a massive American user base, and its users are young and engaged.

“[American advertisers] all know how powerful 100 million monthly users in the U.S. are. This should open up the floodgate of their ecosystem, where now brands can’t say, ‘We have to wait and see what happens here,’” Detert told TheWrap. “Once it’s officially approved by the government, that will inherently open up Fortune 1000 brands [to market more on TikTok].”

Both TikTok and Oracle did not respond to TheWrap’s request for comment on the scope of the deal.

The holdup, Detert said, for many top advertisers has been the lingering concern over TikTok’s data security. President Trump last month signed an executive order, saying TikTok’s parent company, Beijing-based Bytedance, needed to offload the app’s U.S. operations or end up getting banned; the president pointed to “credible evidence” TikTok “might take action that threatens to impair the national security of the United States” as his reason for the order. For many brands, that looks like a scarlet letter attached to TikTok’s name.

“The moment the government, the [Committee on Foreign Investment in the United States], makes a claim that there might be harvesting of data to any foreign entity — regardless if its China or otherwise — that’s going to raise eyebrows and make brands go ‘Well, I can’t go all-in yet,” Detert said.

And those security concerns appear justified. TikTok has denied ever sharing user data with Chinese authorities, but Stratechery’s Ben Thompson recently pointed out TikTok’s privacy policy explicitly says it “may share” user information “with a parent, subsidiary, or other affiliate of our corporate group,” which, based on how companies operate in China, means data can be sent to government authorities.

“It is important to note, this would be the case even if the privacy policy were not so honest. All Chinese Internet companies are compelled by the country’s National Intelligence Law to turn over any and all data that the government demands, and that power is not limited by China’s borders,” Thompson explained. “Moreover, this requisition of data is not subject to warrants or courts, as is the case with U.S. government requests for data from Facebook or any other entity.”

(Microsoft was initially viewed as the favorite to land TikTok’s U.S. operations. But those ambitions were derailed when Bytedance denied Microsoft’s request to takeover the code for TikTok’s algorithm, which determines what goes viral on the app.)

Compounding matters for U.S. advertisers is the fact many Americans have soured on China this year. Polling from Pew Research Center recently found 73% of Americans had unfavorable views of China – the highest in 15 years. The 1-2 punch of data security concerns and TikTok’s ties to China’s Communist Government has made brands wary of aggressively advertising on the app.

“For brands, brand safety is the number one consideration, especially since so many brands have been burned in the last few years,” Peter Csathy, head of Creatv Media, said, before pointing to the bad headlines companies like Facebook have had the last few years. (Facebook even weathered a brand boycott earlier this year, with major advertisers like Honda, Levi Strauss, and Pfizer pausing advertising due to its moderation policies.)

Having the U.S. government stamp its approval on Oracle’s bid, Csathy said, would give brands peace of mind to do more business with TikTok.

“TikTok has been a hands-off game for brands, as everybody waits to see what happens. No brands like ‘The Great Unknown,’” he said. “But if there’s certainty, and the stigma is removed, then that’s a major win for the U.S. version of TikTok.”

To be sure, American brands haven’t completely shunned TikTok. But they’ve kept the app at a distance. Detert said brands like American Eagle, for example, have partnered with big-time influencers like Addison Rae to produce TikTok dance videos. The goal is to go viral on TikTok by having other users join in — making their own user generated content, or UGC — around a dance or “challenge” your brand is promoting. That way their brand name is in the user’s head, without coming across as a full-blown advertisement.

Others, like Netflix and Apple, have run ads on TikTok. But Detert said these brands haven’t been willing to “put both feet in,” and have shied away from doing much else; Apple hasn’t even grabbed the @apple handle on TikTok, for instance.

TikTok made $17 billion in revenue last year, Bloomberg reported in June. And The Information recently reported the app is on pace to pull in $500 million in revenue this year from the U.S.; that figure could easily surge 50% next year, if not more, if TikTok’s deal with Oracle gets approved.

That remains an “if” for now, as the government looks over the TikTok-Oracle arrangement. Details on the deal are still hazy; Oracle confirmed it had reached an agreement to become TikTok’s “trusted technology partner” in the U.S., which doesn’t sound like an outright sale of TikTok’s U.S. operations.

As TheWrap reported in late August, Oracle had become the front-runner to land TikTok’s U.S. business, thanks in part to founder Larry Ellison’s ties to the White House. If the deal is approved, Detert said it’s safe to assume brands, including several Fortune 100 companies, will “go both feet in” — meaning that $500 million in annual U.S. ad revenue is primed to jump substantially.

Sean Burch