Looks like 2020 has struck again — this time causing turmoil in TikTok.

The popular mobile app is getting banned in the United States (technically, a new presidential executive order prohibits U.S. citizens from doing business with it over security concerns, after a 45-day window expires). In essence — for TikTok to continue existing in the U.S., it will need a new owner. Last week, Microsoft emerged as a rumored acquirer. And over the weekend, Twitter reportedly threw its hat in the ring, expressing interest in a merger.

While the app's fate will be determined over time, a lot could change over the coming months.

First, there’s no denying the value in owning TikTok. It’s growing fast — and is just scratching the surface of its revenue potential through its self-serve ad machine. With the U.S. president attacking TikTok, the noise just makes the platform even more popular — especially to young audiences who may feel a sense of rebellion in using it.

That said, TikTok is now more mainstream than it is counterculture. It was already becoming a hub for information and organizing gen-Z activists and politically-minded people. In its NewFronts presentation this year, TikTok highlighted its community that’s leveraging the app to organize around social injustice, the pandemic and many other issues. Those users will be fighting for the app to stay alive and stay true to what it is today no matter who owns it.

Advertiser Benefits

If Microsoft acquires TikTok, the draw for advertisers is how it could leverage user data to tweak features on other properties to appeal to a broader audience. For example, having an integration with Xbox opens possibilities such as a user being served TikTok videos of people playing the new Halo release, and then being able to immediately download/play herself. Then she can share clips back to her own TikTok audience. And it would be easy for people to make TikToks of themselves doing Fortnite dances and share those with friends. That alone makes gaming and content creation very powerful. But seamless integration is a monumental task especially in the middle of a pandemic that has stunted the economy.

Twitter may be an even greater long shot. Although it could face less scrutiny through the acquisition, pulling together the capital to outbid Microsoft within the 45-day deadline will be a hurdle.

But I’m assuming way too much, and both of these billion-dollar deals can easily collapse. Although TikTok reassures users and advertisers that it plans to stick around for years to come, what happens if the deal falls through and the app gets shut down. Will its users go to Instagram, Snapchat or YouTube? Or somewhere else entirely?,

This year, a lot of user growth on TikTok has come from more mature generations. As with Snapchat when it was first coming up, for TikTok to maintain a stronghold, it has to also attract the 24-to-35-year-old crowd (not just 13-to-17-year-olds). But with Facebook launching a competitive feature called Reels, and those mature TikTok users likely already spending time on Instagram/Facebook, it’s plausible that’s where they’ll turn. TikTok, if banned, has already done Facebook’s job of orienting young adults to this style of short-form video consumption.

Of course, there are other established alternatives such as YouTube, and many smaller new apps that are attempting to lure popular TikTok content creators. Although TikTok is pushing back by supporting influencers with large followers through its Creative Fund, some creators are already promoting the alternatives.

Building a Base Takes Time

But it will be a while until they match TikTok’s user base, and even longer before they can compete with the likes of Facebook. If the audience isn’t there, there simply isn’t an incentive for marketers to pay attention. And it would be foolish to bet that TikTok’s users will organically follow their favorite influencer to a new platform as opposed to turning to something that’s more familiar. Not even TikTok was able to accomplish that — it initially won its U.S.-based users through the 2018 acquisition of Music.ly, and grew that through aggressive ad spend (which has paced as high as $3 million per day).

And TikTok is reportedly challenging the presidential order in a California court. That could pause all of this activity before it gets started.

TikTok’s business operations could look radically different by the end of the year. What won’t change is how it generates value through the mobilization of data from its massive audience. Keeping up that scale amid its corporate changes (whether it is losing operations in the U.S. because of a ban, or maintaining its status through a sale) is the key for its continuation. It’s what makes the app’s video recommendations interesting, and what keeps users, creators and advertisers coming back. 

Amy Rumpler is VP of paid social at Centro, a provider of advertising technology to unify programmatic and direct media buying with workflow automation.

"Despite reasons to be wary, Quibi’s leadership knows they’ll have to pivot dramatically if subscription numbers don’t grow significantly and soon. For the service to thrive past year one, their shows must be so good that people will pay a monthly fee to watch programs they can’t find elsewhere." -Noor Naseer, senior director, media and innovations, Centro

Quibi wants to solve a problem that millennials don’t claim to have – the need to fill short breaks in their day with 8- to 10-minute segments of highly produced video content. The new app asks marketers to believe that mobile-only, short-form video will command massive viewership that won’t mind seeing ads. Now a month after launch, it’s still not clear why. That’s due to misunderstanding the role of mobile in the lives of their intended audience.

Quibi offers a library of premium, original content portioned into snack-size episodes. A-listers have signed on to star in 7,000 pieces of content planned to release this year. Attached high-profile talent includes Jennifer Lopez, Zac Efron and Chrissy Tiegen.

The service bundles celebrities, high-end production, and viewing times more common for user-generated content. What makes the programming uniquely suited for mobile devices? Quibi claims it’s the full-screen vertical and landscape viewing options. Beyond that, there is no unique mobile functionality.

The Short Break Wars

Quibi founder Jeffrey Katzenberg said he doesn’t see the platform competing in the streaming wars. Rather he sees it up against Instagram, mobile games and other apps that people turn to when taking short, daily breaks. Consumers probably won’t see it that way. After a 90-day trial period, Quibi costs either $4.99 (ad-supported) or $7.99 a month (ad-free).

The average American household is already subscribed to 3 streaming services, and a 2020 report of US subscription habits found that consumers don’t want to pay more than $30 per month to stream. And the market is only getting more crowded with the recent release of Peacock and the debut of HBO Max.

A Misguided Quest for Millennials

It’s likely that Quibi’s plan to launch as a mobile-only offering was correlated with an ongoing quest by marketers to reach millennials. Long touted as an audience tethered to their phones, Quibi may have used the trait to rationalize restricting access to a single device as opposed to what millennials really use their phones for –expanded access to more screens and democratized socialization with other users. But the service doesn’t offer those things.

This is a miss by Quibi because it isn’t the first service to attempt reaching the elusive millennial through mobile-only video. Verizon made a similar attempt in 2015 with the now defunct Go90. The streaming service was quickly marred by an inability to draw audiences. Go90 was shuttered in July 2018. The similarities put a heightened expectation on Quibi to not make the mistakes of a predecessor it draws comparisons to. Company CEO Meg Whitman has since announced the acceleration of plans to allow viewers to stream content to TVs.

Perspective for Advertisers

Upon launch, Quibi arrived prepared to share an advertising success story. The platform sold out its first year of ads totaling $150 million in revenue before the April 6th launch. It features national TV buying heavyweights including Progressive, P&G, Discover, Pepsi and Google.

Most alluring about Quibi for advertisers is the low ratio of ad loads per hour. It will run 2.5 minutes of non-skippable ads for every hour of content while traditional TV runs approximately 16 minutes of ads across the same time frame.

Despite the lack of ad availabilities this year, brands may hesitate to place ads even when given the option for numerous reasons.

• With the economy in recession, marketers want to bet on sure things. As brands pull back on ad spending, unproven investment options likely won’t make media plans.

• It’s a tall order to ask users to pay yet another subscription fee when company executives themselves describe the platform as competing with free and cheaper options like social media and mobile games.

• There’s no ad-supported free tier, a path that more streaming competitors are offering.

• The ads look like regular TV commercials that can also be viewed in a cropped vertical format.

• Unlike social apps like Snapchat and TikTok, Quibi has yet to give users the opportunity to engage or enrich their viewing experience.

Keep an Eye out for Pivots

Despite reasons to be wary, Quibi’s leadership knows they’ll have to pivot dramatically if subscription numbers don’t grow significantly and soon. For the service to thrive past year one, their shows must be so good that people will pay a monthly fee to watch programs they can’t find elsewhere. If Quibi pivots quickly enough to make their content available on every device, and also showcase distinct ways that ‘Turnstyle’ video brings life to storytelling, there may be a fighting chance to persuade Millennial viewers and the advertisers that seek to reach them.

Centro provides advertising technology to unify programmatic and direct media buying with workflow automation.