TikTok's Advertiser Traffic Drops 21% Amid Shutdown Fears: MikMak

TikTok's advertiser traffic has taken a significant hit, dropping by 21% amid fears of a potential shutdown in the U.S. According to MikMak, a retail media platform, the decline in traffic can be attributed to several factors, including the global economic slowdown, shifts in advertiser preferences, increased competition, regulatory challenges, and a slowdown in online spending.

The global economic slowdown has led to a decrease in advertising spending across various platforms, including TikTok. This is evident in GroupM's prediction of a 6.5% global advertising growth rate in 2023, which is lower than its previous forecast of 8.4% due to economic downward pressure. Additionally, advertisers are beginning to move away from Meta (formerly Facebook) and YouTube, and towards TikTok to reach their vast follower base. This shift is highlighted by Maria Rua Aguete, senior director in Omdia's media and entertainment practice group, who notes that advertisers are attracted to TikTok's huge audience reach and potential.

However, the rise of other social media platforms and the increasing number of advertising options available to businesses have led to a more competitive landscape. This competition may have contributed to the decrease in advertiser traffic on TikTok. Furthermore, regulatory challenges and potential bans in various countries, including the U.S. and India, may have deterred some advertisers from investing in the platform due to uncertainty about its future.

The slowdown in online spending, particularly in the second half of 2023, has also contributed to the decrease in advertiser traffic on TikTok. This is evident in the almost 7% year-on-year growth in ad revenues, which is lower than the growth rates observed in the previous three years.

TikTok's internal issues, such as overspending and restructuring, have also contributed to the 21% drop in advertiser traffic. The company has faced challenges in meeting ambitious revenue goals and has had to cut targets by 20% in late September. Additionally, TikTok has undergone a restructuring of its U.S. operations and has experienced hundreds of staff exits globally over the past three months.

The potential shutdown of TikTok in the U.S. has also significantly impacted its ad revenue and user base. A one-month shutdown could lead to nearly $300 million in lost earnings for almost 2 million U.S. creators. The ban would also impact TikTok's overall ad revenue, which amounted to around $8 billion in the U.S. last year. While some of these dollars may be redistributed to other platforms like Meta and Google, dollars spent on TikTok for commerce, particularly through TikTok Shop, may not transfer as easily.

The potential shutdown would impact 170 million U.S. users, which is roughly half of the country's population. Many content creators rely on TikTok for income, and a shutdown would sever their livelihood without a fallback. This includes both full-time and part-time creators. Small businesses that have benefited from TikTok's marketing reach are also bracing for potential losses. For instance, Paulina Hoong, who runs an Asian American and Pacific Islander-inspired art business, has seen significant growth thanks to TikTok. She fears sales will drop once TikTok is gone.

TikTok's competitors have employed several strategies to capitalize on the platform's turmoil. Meta (Facebook and Instagram) has stepped back its content moderation efforts, which could potentially attract advertisers who are looking for alternative platforms to TikTok. Google is likely to benefit from redistributed ad dollars, particularly for ad dollars spent on performance marketing and search, which may not transfer as easily to other platforms. Snapchat has launched a TikTok-like feature called "Spotlight," which allows users to create and share short videos set to music. This move is an attempt to attract TikTok users and creators. YouTube has been gaining popularity among young consumers, particularly those who are looking for alternative platforms to TikTok. TikTok's competitors have also been investing in their own platforms to improve their offerings and attract more users.

In conclusion, TikTok's advertiser traffic has dropped by 21% amid fears of a potential shutdown in the U.S. The decline in traffic can be attributed to several factors, including the global economic slowdown, shifts in advertiser preferences, increased competition, regulatory challenges, and a slowdown in online spending. The potential shutdown has also significantly impacted TikTok's ad revenue and user base. TikTok's competitors have employed several strategies to capitalize on the platform's turmoil, including Meta's stepped-back content moderation efforts, Google's potential benefit from redistributed ad dollars, Snapchat's launch of a TikTok-like feature, and YouTube's growing popularity among young consumers. As TikTok's future remains uncertain, advertisers and users alike must adapt to the changing landscape of social media.