Several ad agencies have been seeking assurances from TikTok, the Chinese-owned viral app that has popularized short-form videos across social media, amid concerns about a potential ban in the U.S. over national security risks. Advertisers are closely watching the testimony of TikTok’s CEO, Shou Zi Chew, before Congress, scheduled for Thursday. With an expected ad revenue of $6.83 billion this year, up from $780 million in 2020, TikTok’s popularity among younger users has surged, with 150 million monthly users in the U.S.
While TikTok has been assuring ad buyers of its commitment to U.S. data security by separating the user data of Americans and storing it in the country through a new division called U.S. Data Security (USDS), concerns persist. Even though TikTok provided an overview of Project Texas in recent discussions, an executive at a major ad firm said TikTok representatives were unable to answer detailed questions about blocking U.S. user data from the Chinese government.
TikTok, however, has launched a new website for USDS, which includes answers to frequently asked questions about the initiative, and claims that it would not share U.S. user data with the Chinese government. Despite the concerns over the potential ban, most advertisers have not changed their spending plans on TikTok, as discussions of a ban have been ongoing since 2020 without any outcome.
TikTok’s CEO Chew plans to testify that the company has never, and would never, share U.S. user data with the Chinese government. However, the renewed concerns over TikTok seem to have escalated quickly in recent weeks, catching some brands off guard.
According to an executive at an ad firm who requested anonymity, at least one major ad firm held a call this week with TikTok sales representatives to inquire about its data security practices. While TikTok provided an overview of Project Texas, it was unable to provide more detailed information on how it would prevent U.S. user data from being accessed by the Chinese government.
However, on Tuesday, TikTok sent an email to advertisers announcing the launch of a new website for USDS, which includes answers to frequently asked questions about the initiative. In the email, TikTok stated that Project Texas “prevents inappropriate access to that data, including no approval mechanism by which U.S. data would be shared with the Chinese government.” Despite concerns about a potential ban, most advertisers have not changed their spending plans on TikTok, according to media buyers, as discussions of a ban have lingered since 2020 without any result.
However, some clients who are publicly-traded companies have been hesitant to purchase ads on TikTok since 2020, and their wariness has only increased. Hershey Co’s head of media and analytics, Vinny Rinaldi, said on Wednesday that the Reese’s Cup maker has developed a contingency plan if TikTok is shut off in the U.S. While some smaller brands with a niche audience are hesitant to experiment with ads on TikTok, advertisers that are using the platform and seeing strong results are advised to stay the course.