A double bind is happening for Direct-to-Consumer (DTC) companies as they face losing their best marketing channel on the one hand (TikTok ban) and their lifeline on the other (upcoming financial contagion). TikTok has become an amazing alternative to Instagram (Meta) and YouTube (Google) as a platform for media consumption, eCommerce, and product discovery. However, the platform is plagued by a reputation that makes governments wary due to its close ties to China.
TikTok has launched an ad campaign to battle this before its CEO has to testify on Capitol Hill. The company bought OOH ads in the Washington Metro system and at Union Station. Print ads in the Washington Post and even digital sponsorships with Politico’s Playbook and Axios’s tech-focused Login newsletter; to highlight its impressive usage stats: 150 million monthly active users in the US and over 1 billion monthly users globally.
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TikTok's popularity even has the current administration wary of banning the app, despite privacy concerns. US Commerce Secretary Gina Raimondo warns that banning the app could cause cataclysmic political ramifications that the current administration would lose "every voter under 35, forever." The company has been meeting with advertisers and government officials to discuss how it has invested $1.5 billion in data security, including a four-page color ad in the New York Times explaining its security investments.
And yet, in the face of this pressure, many startups such as Flourish, Kinship Milk Tea, and Fishwife refuse to alter their strategies despite the possible ban in the U.S.
The direct-to-consumer (DTC) brands that had thrived on TikTok and venture funding now find themselves in a bind when political and financial crises threaten their marketing and funding lifelines. The US government wants to ban TikTok over its Chinese ownership. At the same time, funding for startups only grows more complicated as contagion fear across financial institutions have caused startup funding to dry up like a desert mirage. This means brands, especially DTC brands, will struggle to secure the financing they need to grow.
A perfect storm is coming for many DTC businesses that have raised billions from venture capitalists believing they could disrupt entire industries. Those brands and companies have finally found an alternative to the duopoly of Meta and Google to drive traffic and exposure to their brand through TikTok. But the current political climate has caused TikTok, a Chinese-owned app, to find itself at the precipice of being banned and removed from the country. On top of that, another crisis was brewing in the financial sector when a group of venture capitalists triggered a bank run on Silicon Valley Bank (SVB), one of the primary lenders to startups and DTC brands, causing a contagion effect across the entire financial sector. The DTC dream is fading fast as brands are facing a double whammy of losing customers and funding at a time when they need both more than ever.
As we scrutinize TikTok with our magnifying glasses, we might fail to see the forest from the trees. TikTok's true value lies in its success in changing consumers' media habits. By utilizing its discovery algorithm, which is not powered by any social graph, TikTok created a new type of mindless media consumption unseen by any other platform.
TikTok is everywhere. Even if you don’t have the app on your phone, you can’t escape its influence. It’s not just a platform for viral videos and catchy songs. It’s a cultural phenomenon that has reshaped how we consume and create media.
Many people don’t want to download the app due to privacy concerns or are worried about the addictive nature of the app but they still want to watch TikTok videos. They still want to laugh at the jokes, learn from the tips, and dance to the tunes. So they find other ways to access them without downloading the app. They watch them on Instagram Reels, where nearly one-third originated on TikTok. They watch them on YouTube compilations, Twitter threads, and Pinterest boards. They watch them anywhere they can find them.
And by doing so, they prove something remarkable: TikTok content can stand on its own. It doesn’t need the algorithm to make it popular or relevant. It has a quality that transcends platforms and formats. It has a style that appeals to millions of people across ages, backgrounds, and interests.
TikTok has changed the game for good. It has raised the bar for what we expect from media content. It has shown us what is possible when creativity meets technology meets psychology. And it has made us all unwitting participants in its experiment.
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