TikTok’s US growth stalls amid UMG dispute, competition, regulatory and e-commerce woes (Report)

Social media giant TikTok is seeing stalled growth in the US for the first time as it faces a wave of challenges including a licensing dispute with Universal Music Group, growing competition from Instagram Reels, a potential forced sale of its US operations, and a lukewarm foray into e-commerce.

That’s according to The Wall Street Journal, which cited people familiar with the matter as saying that TikTok’s US user growth has stagnated for the first time since its launch, despite reaching 170 million users in the US.

Data shows a 9% decline in average monthly users aged 18-24 in the US, a core demographic, from 2022 to 2023, the report said, citing mobile analytics firm Data.ai. 

As this generation ages into young adulthood, TikTok’s core demographic might be spending less time on the app. Many young adults are entering their first full-time jobs, and the demands of a new career can leave little room for scrolling through TikTok.

While a company spokesman told the WSJ that “TikTok is and continues to be the premier platform for millions of users, creators and advertisers,” the number of users quitting the app has reportedly grown, leading to a stagnant overall user base. This stagnation could impact advertising revenue, a crucial income source.

Sources told the WSJ that TikTok met its ad-sales growth targets for the second half of 2023, although it did not exceed them.

Adding to TikTok’s woes is a breakdown in negotiations with Universal Music Group, resulting in music from artists like Taylor Swift and Drake being removed from the platform. UMG has also started taking down ‘manipulated’ versions of UMG recordings on TikTok, uploaded by users as ‘Sounds.’ One example of a manipulated track can be seen on the Skibidi Toilet account, an online phenomenon built on a ‘manipulated’ version of Timbaland’s 2007 track, Give It To Me (feat. Justin Timberlake and Nelly Furtado). 

As the war between UMG and TikTok continues, the potential impact pales in comparison to the threat of a US ban on TikTok. 

US lawmakers have recently introduced a bill targeting TikTok. The legislation, titled the Protecting Americans from Foreign Adversary Controlled Applications Act, aims to address national security concerns surrounding the app’s ownership by ByteDance, a Chinese company.

The bill, passed by the House of Representatives last week (March 13), could force ByteDance to sell its ownership of TikTok in the US within 165 days (just short of six months) or face having its platform banned from app stores in the country. 

“This is my message to TikTok: break up with the Chinese Communist Party or lose access to your American users,” Republican Rep. Mike Gallagher of Wisconsin was quoted by Reuters as saying.

The company has repeatedly asserted that it doesn’t share user data with China. The Chinese government has also signaled its opposition to the forced sale of TikTok in the US, with Ministry of Commerce spokesperson He Yadong saying the US should “stop unreasonably suppressing” TikTok.

In addition to regulatory woes, TikTok is also facing growing competition from Instagram Reels, which has recently gained significant traction. While users still spend less time on Reels compared to TikTok, the gap is narrowing, the WSJ indicated. Reels could benefit further from the UMG dispute by offering access to a wider music library.

TikTok’s e-commerce ambitions in the US are also starting to backfire as the TikTok Shop feature has been met with user backlash due to cluttered feeds and intrusive advertising. Some creators fear the focus on shopping detracts from the core video experience.

“How do we opt out of TikTok Shop videos? I don’t want to see them anymore,” Brody Wellmaker, a TikTok creator with 21.4 million followers, said in a video on TikTok. “I’m not going to shop on TikTok Shop. I’m going to shop on Amazon. I want my For You page back to the way that it was.”

Back in January, Bloomberg reported that TikTok is targeting a tenfold increase in its US e-commerce business to as much as $17.5 billion in gross merchandise value this year.

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