A TikTok Ban Would Raise Ad Prices on Meta and Harm Small Business

What is it about?

Digital advertising in the United States is highly concentrated, with just a few major platforms competing for advertising dollars and user impressions, potentially raising antitrust concerns. We analyzed the effect of the TikTok ban on advertising spending and prices in the US by examining spending and impressions among larger and smaller businesses in the two weeks surrounding the January 19 outage. We compared the differences between spending of advertisers running ads in the US and those running ads in 32 other countries where TikTok availability remained unchanged. On the day of the outage, Meta ad spending rose 22.4% without a corresponding increase in ad impressions, and costs per thousand impressions rose 12.1%. Shifts in demand were three times greater for larger advertisers, suggesting that Meta and TikTok are more interchangeable for larger advertisers compared to smaller ones. This natural experiment during the TikTok outage suggests that a permanent TikTok ban would impose greater challenges on smaller businesses and that policymakers should weigh unintended consequences when regulating the digital space.

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Photo by Zulfugar Karimov on Unsplash

Photo by Zulfugar Karimov on Unsplash

Why is it important?

As lawmakers weigh a potential TikTok ban, the big question is how its disappearance would reshape the digital ad market. Our study shows that advertisers would shift budgets to Meta, raising ad prices and leaving small businesses struggling the most. Beyond the current policy debate, our work provides rare causal estimates of how advertisers substitute across platforms, with important implications for competition policy and the future of digital advertising.