WSJ Tech News Briefing: How Important Is the TikTok Economy?

Episode Release Date: January 22, 2025

Host: Julie Chang, The Wall Street Journal

Introduction

In this episode of WSJ Tech News Briefing, host Julie Chang delves into two major topics shaping the tech landscape: Meta's recent changes to its content moderation policies and the burgeoning TikTok economy in the United States. The discussion highlights the potential impacts these developments have on advertisers, businesses, content creators, and the broader economy.

Meta’s Shift in Content Moderation

Overview

Meta CEO Mark Zuckerberg announced a significant overhaul of the company’s content moderation strategy. Following in the footsteps of Elon Musk’s approach with Twitter (now X), Zuckerberg has decided to discontinue Meta's internal fact-checking program, transitioning instead to a user-based system for flagging problematic content.

Key Points:

• Zuckerberg’s Announcement: Meta will continue to address illegal and high-severity violations but will primarily rely on users to report content issues. This mirrors Elon Musk's strategy with X, where moderation became more community-driven.

• Comparison with X (Twitter): Unlike Meta, X saw a mass exodus of advertisers after its acquisition by Elon Musk, leading to a significant devaluation of the platform.

• Dan Gallagher’s Insights: WSJ’s Heard on the Street columnist Dan Gallagher shares his perspective on why Meta might weather the storm better than X.

Notable Quotes:

• Dan Gallagher [02:06]:

  "There's been a little bit of worry, but it's not been nearly to the scale that we saw with X. There's a few reasons for that."

• Gallagher on Ad Revenue:

  "The numbers are so much phenomenally bigger for Meta than they ever were for Twitter."

Ad Revenue Comparison:

• X (Twitter): As of its last report in 2022, Twitter generated less than $5 billion annually in ad revenue.

• Meta Platforms:

  • Instagram: Estimated over $8 billion in quarterly ad revenue.
  • Overall: Meta's combined ad revenue from Facebook, Instagram, and other platforms vastly outpaces Twitter’s, providing a more robust financial cushion.

Risk Assessment:

• Advertiser Confidence: While some advertisers may express caution, Meta benefits from a diverse base of small and mid-sized businesses, reducing reliance on a few major advertisers.

• Stock Implications: Although Meta has shown strong ad revenue growth, any slight dip could impact investor confidence. However, the overall business outlook remains solid according to Gallagher.

The TikTok Economy: Impact and Stakes

Overview

Following a recent executive order signed by former President Trump, TikTok faced potential shutdown in the U.S., but the platform is currently operational with an additional 75-day period to secure its status. This uncertainty has significant implications for millions of American businesses and content creators who rely on TikTok as a primary marketing and revenue-generation tool.

Key Points:

1. Economic Contribution:

   • TikTok’s Impact: According to a TikTok-commissioned study, the platform contributes approximately $20 billion annually to the U.S. economy. While the Wall Street Journal has not independently verified this figure, it underscores TikTok’s substantial role.

2. Impact on Small Businesses:

   • Primary Marketing Channel: Many small businesses depend on TikTok to drive traffic to their websites and physical locations.
   • TikTok Store: Launched in 2023, TikTok’s digital store alone facilitated a gross merchandise value of $9.7 billion in the U.S. last year.
   • Case Studies:
     • A chocolate business owner shared how a viral TikTok review allowed her to transition from part-time teaching to full-time entrepreneurship, highlighting the platform’s capacity to transform business trajectories.
     • Another small business expanded by building a 2,100 square foot warehouse, emphasizing TikTok's role in enabling business growth and investment.

3. Effects on Content Creators:

   • Revenue Streams: Creators earn through brand sponsorships, advertising revenue, and potentially TikTok’s creator fund. Successful creators may also secure deals outside the platform, including book contracts and opportunities in film and television.
   • Income Variability: Earnings vary widely, with some creators earning sufficient income to cover utilities, while others may struggle to meet larger expenses like rent.

4. Shift to Alternative Platforms:

   • Migration Trends: In anticipation of potential bans, many creators have already begun diversifying their presence across other social media platforms. However, TikTok's unique algorithm continues to offer superior engagement and content distribution.
   • Challenges on Other Platforms: Despite efforts to move, creators often find other platforms lack TikTok's ability to sustain their reach and engagement levels effectively.

5. Broader Economic and Social Implications:

   • Job Security: A long-term ban could lead to layoffs not only among creators but also among supporting roles such as talent agents and video editors.
   • User Experience: Beyond economic factors, TikTok provides significant value as a source of free entertainment, which many Americans incorporate into their daily lives.

Notable Quotes:

• Sarah Needleman [06:02]:

  "Even though this is a very popular app, it's not really going to dent the economy overall, but certainly it will have an impact on the many, many small businesses and creators that rely on it."

• Needleman on Small Businesses [06:31]:

  "They rely on TikTok because it's in many cases their main marketing channel, meaning it drives the most traffic to their business's website or foot traffic."

• Needleman on TikTok Shop [07:36]:

  "The gross merchandise value for TikTok's digital store in the US last year was $9.7 billion."

• Needleman on Creator Earnings [08:14]:

  "There's a bigger range in how much they make depending on the number of followers they have."

• Needleman on User Value [10:15]:

  "Many Americans would also lose a significant source of free entertainment, which is a form of value in and of itself."

Conclusion

The episode underscores the pivotal roles that both Meta and TikTok play in the current tech ecosystem. While Meta navigates changes in content moderation with a strong financial backing and a diverse advertiser base, TikTok stands as a critical platform for small businesses and content creators, contributing significantly to the U.S. economy. The potential instability of TikTok introduces risks for those dependent on its platform, highlighting the intricate ties between social media platforms and economic livelihoods in the digital age.

Produced by Julie Chang with supervising producer Kathryn Millsop. For more insights, stay tuned to WSJ Tech News Briefing.