From The Information:
“The cost of TikTok’s online shopping expansion in the U.S. is beginning to add up.
“TikTok Shop, the app’s nascent shopping service, is expected to lose more than $500 million in the U.S. this year, according to a person with direct knowledge of the matter. The loss reflects TikTok’s heavy investment in hiring, building a delivery network and subsidizing merchants that offer double-digit–percentage discounts and free shipping.
“The company can easily afford it: TikTok’s parent company, ByteDance, last year earned $18 billion in operating profits … Still, the enormous investment shows how the Chinese tech giant is continuing to pour money into a U.S. expansion despite the longstanding threat of a government ban. While the prospect of a ban may have receded from the headlines, the threat hasn’t disappeared. The expansion, particularly if it succeeds in making TikTok a retailer with the scale to compete with Amazon, is likely to reinforce anxieties about ByteDance’s influence in the U.S.”
The Information also reports that “TikTok has drawn up plans to bar links to outside e-commerce sites, such as Amazon, as part of an effort to force people to use TikTok Shop if they want to buy something they see on the app … that would stop creators from promoting furniture, clothing or kitchen items available on Amazon and other sites. TikTok’s plan to bar external ecommerce links is a page out of the playbook of TikTok’s Chinese sibling app Douyin, which has become a shopping powerhouse. In October 2020 Douyin barred links to other Chinese e-commerce sites such as Alibaba’s Taobao.”
KC’s View:
I still think it is entirely possible that TikTok gets banned in the US, or is at least forced to spin off the US operations in a way that draws a line between US and Chinese operations. There’s a really good argument that TikTok is a national security threat that needs to be taken seriously, though I’m honestly not sure how the politics of the situation will play out.
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