How a temporary U.S. ban could destroy TikTok

FILE PHOTO: A person holds a smartphone as TikTok logo is displayed behind in this picture illustration taken Nov. 7, 2019. REUTERS/Dado Ruvic/Illustration/

(Reuters) - TikTok, owned by China’s ByteDance, has been racing to avoid a crackdown on its U.S. operations after being at loggerheads with the U.S. government, which has expressed concerns over the handling of personal data by the video app.

While ByteDance is still in talks with U.S. investors, the White House and the Chinese government over how to structure the deal, the Trump administration had sought to ban new downloads of the app from U.S. app stores from Sept. 27. A U.S. judge has temporarily blocked that order.

TikTok, in a court filing dated Sept. 23, provided an analysis of how even a temporary ban could affect its business.

Here are a few details:

** The ban will harm the company irreversibly by first stagnating and then declining its user base. TikTok’s interim head Vanessa Pappas said the app, which was earlier adding about 424,000 new U.S. users daily, saw a drop of over 500,000 daily active users following Secretary of State Mike Pompeo’s announcement that Trump was considering a ban.

** Pappas estimated that if the ban is in place for six months, 80% to 90% of its daily users would not return, citing TikTok’s previous experience of a two-week ban by the Indian government in 2019. If the ban is lifted after two months, 40-50% of daily active users would not return.

** The ban would also have a major impact on TikTok’s global growth as content made in the United States is highly exportable to other English-speaking markets like the United Kingdom, Canada and Australia, Pappas said. U.S. content can comprise as much as 60% of the content in TikTok’s non-U.S. markets. It will result in a massive decrease in content available globally, where TikTok has more than 689 million active users, as of July.

** The blow to TikTok’s reputation in the United States also affects relationships with its advertisers. U.S. advertisers are often the most successful at generating revenue for TikTok because they typically pay better rates for views of their ads than advertisers in other markets, Pappas said in the filing.

** TikTok’s ban would also devastate its U.S. workforce, permanently harming its ability to recruit and retain talent. Pappas said since July 1, 52 candidates have declined offers of employment with ByteDance and TikTok due to the perceived uncertainty.

Reporting by Tiyashi Datta and Ayanti Bera in Bengaluru, David Shepardson in Washington D.C.; Editing by Maju Samuel