TikTok CEO defends app to Congress—what brands need to know

TikTok is in a tight spot after U.S. lawmakers seemed unconvinced by CEO Shou Zi Chew’s testimony to Congress on Thursday. At the hearing, Chew advocated for Project Texas, a $1.5 billion effort by TikTok to disentangle U.S. data and operations from China, which is where ByteDance, TikTok’s parent company, is based. Advertisers are familiar with Project Texas because TikTok has been briefing top ad agencies and brands about the program. Chew’s hearing was high-pressure with even higher stakes, and it was one of TikTok’s best chances to lower the heat coming out of Washington, which is barreling toward a potential ban. “TikTok is a weapon by the Chinese Communist Party to spy on you, manipulate what you see, and exploit future generations,” said U.S. Representative Cathy McMorris Rodgers, R-Washington, the chairwoman of the House Energy and Commerce Committee. “A ban is only a short-term way to address TikTok, and a data privacy bill is the only way to stop TikTok from ever happening again in the United States.” The sharp rhetoric was bipartisan, too. “I don’t find what you suggest with Project Texas, and this firewall that’s being suggested to whomever, will be acceptable to me,” said U.S. Representative Frank Pallone, D-New Jersey. “In other words, you know I still believe that the Beijing Communist government will still control and have the ability to influence what you do.” Check out the latest Ad Age events and award programs This was Chew’s first appearance before Congress, and it comes as discord rises between the U.S. and China. Both houses of Congress have advanced bills that would give the president the authority to shut down TikTok and other technology companies that have ties to hostile governments. Chew tried to assure lawmakers that TikTok is run separately from Chinese-based ByteDance, and he advocated for Project Texas, which commits to data safeguards that Chew said would surpass any U.S. social media companies’ level of transparency. TikTok proposed to host U.S. data in Texas, using Oracle as a U.S.-based company to store the data and control access to it. However, there have been reports that U.S. officials are not satisfied with that remedy, and could force TikTok into a sale. On Thursday, the Chinese government said that it would not allow a sale of TikTok, according to The Wall Street Journal. The Journal report dropped at a bad time for Chew, given that the TikTok CEO was trying to convince U.S. lawmakers the company was not controlled by China. “The CCP believes they have the final say over your company,” Rodgers said. Threat assessment Lawmakers took turns going through a litany of alleged privacy flaws with TikTok, and potential national security holes. Lawmakers raised concerns that ByteDance managers could access data about U.S. users. Lawmakers worried about how TikTok programs its algorithm in ways that control media and information for millions of Americans. There were concerns about how TikTok could encourage bad behavior among users with risky hashtag challenges. At one point, U.S. Representative Kat Cammack, R-Florida, played a TikTok video that showed an animated firearm and bullets, with a caption that called out the House Energy and Commerce Committee, implying there could be violence at the hearing. “This video was posted before this hearing was publicly noticed,” Cammack said. Later in the hearing, a lawmaker said TikTok removed the video from the site, after being alerted to it. In recent weeks, TikTok has been assuring marketing partners that it won’t be banned, and it has held a series of “Beyond Brand Safety” events where executives show advertisers all its safety work. TikTok publicly said this week that it has 150 million monthly users in the U.S., and 5 million businesses rely on the app. TikTok has become a cultural force in the U.S. for creators and as a source of entertainment.Related: How TikTok discussed ban threat with brands, agencies “From a brand marketing and agency perspective, TikTok seems to have struck such a chord, and grown such a powerful user base, and it’s cultivated that Gen Z audience,” said one ad agency exec, who was following the hearings and spoke on condition of anonymity. “It seems sort of hard to fathom that TikTok would go away completely.” At an impasse The tone of the proceeding, however, left some advertising insiders, less certain about TikTok’s potential to keep operating. “It appears that there is no way TikTok will be able to persuade Congress that its presence in the United States is positive for the country,” said Brian Wieser, an independent analyst and writer of the Madison and Wall Substack newsletter. “TikTok is also evidently failing to persuade Congress that it is practically separate from ByteDance and Chinese government oversight. At the same time with the Chinese government conveying, it won’t allow a sale, it seems certain that the status quo will not persist.” “If there is a formal effort to shut down, it’s not clear how long it would take to play out while TikTok appeals, presuming they do,” Wieser said. A TikTok ban would majorly affect the digital marketing community, which has been investing in the platform and learning how to create in the signature style of videos on the site. At its best, TikTok jumpstarts trends that help marketers reach new customers. The app is filled with helpful tips on cooking, beauty, cleaning, and all manner of subgenres. “TikTok has eclipsed other social platforms in key engagement areas and has rewritten marketers’ playbooks in the process,” said Claudia Ratterman, director analyst at Gartner Marketing Practice, a research firm. The specter of a ban could loom over TikTok’s advertising negotiations if marketers are worried about the long-term staying power, Ratterman said. “If they invest time, resources and budgetary dollars, for the platform to be banned months later, therein lies the risk.” There are brands that have already been hesitant about working with TikTok given the general concerns about data security and privacy, Ratterman said. Those brands will be “keen to learn any outcomes or next steps from the hearings,” Ratterman said.

TikTok CEO defends app to Congress—what brands need to know

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