TikTok gives advertisers an emergency ripcord in case Trump gets his ban
TikTok does not plan on going anywhere, but just in case, it is giving brands some flexibility should the unthinkable happen—namely, a ban in the U.S. In recent days, marketers say that TikTok started including new terms in its ad deals that cover the company and clients, should the service become “unavailable.”
Advertisers are still planning ad campaigns with TikTok—Old Navy, Eddie Bauer and PacSun, for example, are pressing ahead with back-to-school runs—even though the company is the subject of an international tug of war. President Donald Trump is demanding it be sold from its Chinese owner or be banned in the U.S. Microsoft has emerged as the most likely buyer, and it has until Sept. 15 to complete a deal.
In the meantime, brands and agencies say they are getting guarantees that if the app is banned or sold, their marketing campaigns are covered.
“The TikTok team is highly motivated to drive sales and are super flexible with us in terms of custom programs, pricing and added value,” says Ellie Bamford, VP and head of U.S. media at R/GA. “They have allowed the inclusion of language and clauses in the IOs saying media is 100 percent cancellable.”
Bamford says TikTok, like many digital platforms and TV networks, has given leeway to advertisers in recent months, because of instability from COVID-19, civil unrest, election volatility and economic uncertainty.
“We can cancel media at any time prior to or during the campaign,” Bamford says. “If the platform is sold to another entity, all media IO’s and agreements would need to be re-executed with the new ownership. If the platform is banned then all media campaigns would be voided and monies would be returned for media that has not run.”
There has been a cloud hanging over marketing, tech and media for months because of the pandemic and civil unrest, which has required a more forgiving approach to ad contracts. In June, the Interactive Advertising Bureau hosted its annual digital NewFronts presentations, which is when internet companies show off their video programming to brands. TikTok, YouTube, Snapchat, Hulu and others participated, and “flexibility” was one of the central themes, giving marketers assurances that they could change campaigns mid-stream should there be delays and cancellations, like the kind that the sports world has faced.
But TikTok is dealing with an entirely different kind of wild card: Trump. The president has been pressuring ByteDance, the Chinese company that owns TikTok, to sell its U.S. holdings, claiming the app poses a national security risk. Microsoft has confirmed it is willing to buy TikTok. On Thursday, Financial Times reported that Microsoft was interested in TikTok’s European and India businesses, as well.
Some advertisers have avoided the app while it’s been under such intense scrutiny. But there are plenty of brands that have been dabbling in its ad services, which include hashtag challenges, sponsored videos and influencer collaborations.
“As we’ve seen time and time again, our brand partners play an important role in the TikTok experience, and our community enjoys engaging with the brands they love,” said Blake Chandlee, VP of global business solutions and TikTok, in an email to Ad Age. “We’re committed to being a trusted partner to brands, agencies, and marketers as we build TikTok for the long term. TikTok will be here for many years to come.”
TikTok is still working closely with brands and their agencies to bring them into the platform, but it also is taking into account any potential disruptions that would arise from a potential ban.
There are complications that need to be spelled out in the deals: What if TikTok can’t deliver on the media orders it promised, unable to fulfill ad guarantees? What if Microsoft becomes the new owner of part of the business, while ad buys in other parts remain under the original ownership?
One C-level executive at a top ad agency says that TikTok is giving brands a ripcord to pull if the platform were to get banned. “Advertisers would just stop campaigns and shift spend,” the exec says, speaking on condition of anonymity. “TikTok IO terms have been updated to allow for this.”
Not all the contract terms are about protecting the brands. TikTok also is covering its own liability by outlining that it is not responsible for undelivered media. That means marketers can’t sue the company if it can’t fill advertising orders. There will be no “make-goods,” which is when publishers offer extra ad placements when an original deal fails to reach the agreed amount of people.
The clause could give TikTok some coverage from brands claiming, “consequential damages,” says Andrew Lustigman, an advertising and media attorney at Olshan Frome Wolosky in New York City. TikTok wants to avoid any brands claiming that they were financially harmed because the app was shut down or otherwise disrupted.
“It is common, particularly in the COVID age, for agreements to contain a force majure provision,” Lustigman says, "meaning that a party’s conduct is excused if it is impossible to perform. Such a provision should likely apply if it is illegal for TikTok to perform in the U.S., and if so, there should be no liability to the platform for failure to post advertising.”