After TikTok CEO Chew Shou Zi’s Congress showdown, what’s next for Meta and other social media stocks?

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By Beansprout • 25 Mar 2023 • 0 min read

TikTok could face a potential ban in the U.S. We analyse how it could impact other social media stocks such as Facebook's parent Meta.

TikTok CEO Chew Shou Zi Congress

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0 min read

What happened?

Everyone's talking about TikTok CEO's Chew Shou Zi's grilling in the US Congress this week.

TikTok, the popular social media app owned by Chinese parent Bytedance, now has more than 150 monthly active users in the U.S. 

That's close to half of the population of the entire country!

However, with growing national security concerns, the Biden administration is now demanding that TikTok's Chinese owners sell their stakes or face a potential ban in the US, according to the Wall Street Journal

Here’s how the uncertainty about the future of TikTok could benefit other social media platforms like Snap, Instagram, and YouTube.

How a potential TikTok ban could impact social media stocks

#1 – Content creators could move to other social media platforms 

The uncertainty could push some content creators on Tiktok to focus more on other social media platforms. This could also push their audience to these platforms. 

This shift could accelerate if a ban is approved and enforced. 

This will potentially lead to higher user count and advertising revenue for Snap, Instagram, and YouTube will increase.

#2 – TikTok’s powerful algorithms may have to be rebuilt

While there are talks about selling its Bytedance's U.S. operations to an American company, China may not approve of the sale. 

A TikTok spokesperson has said that a sale would not address national security concerns because it would not lead to new restrictions on access to the app's data. 

There are also questions about whether TikTok's powerful algorithms can be used after the sale.

As a recap, these algorithms were developed by engineers at Bytedance, and there is a possibility that they will have to be re-written. 

Once again, TikTok’s creators and users could move to other social media platforms should there be any fall in its ability to provide engaging content for its users. 

#3 – Meta could face less regulatory pressure

Between the social media companies, Facebook and Instagram's parent Meta is expected to benefit the most from the continued scrutiny of TikTok. 

This is because the regulatory pressure on TikTok could lead to lower antitrust concerns about the company. 

More importantly, Meta’s users have continued to grow even with the competition from TikTok. 

Screenshot 2023-03-25 at 10.18.34 AM.png
Source: Meta

What would Beansprout do?

Chart, line chart

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Source: Google 

Meta’s share price has risen by more than 60% than year as investors cheered a number of positive developments. 

On a macro level, the fall in bond yields had led to an outperformance of tech stocks against bank stocks. 

Meta was able to improve on its financial performance and report better than expected fourth quarter results with higher engagement amongst users. 

The company has also announced significant headcount cuts as part of CEO Mark Zuckerberg’s ‘year of efficiency’. 

Should the US government proceed with a ban of Tiktok, sentiment towards Meta and other social media stocks could get a further boost. 

Find out more about Meta (META), Youtube's parent Alphabet (GOOGL), and Snap (SNAP) before you decide whether to invest in these US social media stocks. 

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