Banning TikTok, the tech giant will lose a lot of money

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Impact of TikTok ban on tech giants: Oracle faces significant financial losses

The technology industry has shown a rapid development trend in recent years, and players from all walks of life are vying for market share. Against this backdrop, the controversial TikTok app has not only become the new favorite of young people around the world, but has also attracted great attention from the US government. In April 2024, U.S. President Joe Biden signed a new bill that could have a huge impact on TikTok's parent company, ByteDance, and its partners.

According to the content of the document, if the U.S. government bans the provision of internet hosting services to TikTok, it will have a serious impact on Oracle. Oracle, TikTok's main provider of cloud services in the U.S., has warned investors that its inability to continue providing services to TikTok will negatively impact its revenue and profits. This could not only lead to a decline in Oracle's financial performance, but could also increase its compliance costs.

Analysts believe that TikTok's business accounts for a sizable share of Oracle's overall revenue, and the loss of this important customer will hit it hard. Analysts at Evercore ISI expect that Oracle's annual revenue from TikTok could be between $480 million and $800 million, which is no small amount for a not-so-large business.

Oracle's woes reflect the broader impact of the TikTok ban on the tech industry as a whole. We need to focus not only on the situation of TikTok itself, but also at the risks and challenges faced by other companies in this incident. Let's dive into this question together.

TikTok is on high alert from the U.S. government

TikTok's meteoric rise has put it in the global spotlight. With its unique recommendation algorithm and engaging content, the short-form video app has quickly captured the hearts and minds of young users around the world. With over 100 million active users in the United States, TikTok reportedly dominates the country's teen market.

However, the Chinese-originated app has also raised a high level of vigilance from the U.S. government. U.S. lawmakers have long been concerned about the potential threat TikTok poses to the privacy and security of U.S. users. They are concerned that ByteDance may use TikTok to collect personal data from U.S. users and transfer it to the Chinese government.

To combat this risk, the U.S. government has taken a number of measures. In 2020, then-President Donald Trump ordered a ban on TikTok from operating in the United States and asked ByteDance to sell its American operations to American buyers. While this order ultimately failed to be implemented, it marked the U.S. government's strong distrust of TikTok.

In April 2024, President Biden signed a new bill that states that TikTok must find a buyer within 270 days or it will be banned in the United States. This has undoubtedly put a lot of pressure on TikTok and its parent company, ByteDance.

It's worth noting that TikTok isn't sitting still. As part of its fight against the ban, the company sued to overturn the bill, citing its cooperation with Oracle as a defense. TikTok said it would isolate U.S. user data from its Chinese parent company, ByteDance, through what it called the "Texas Project" to ease the U.S. government's concerns.

However, the success of this strategy is questionable. The U.S. government clearly has deep-seated concerns about TikTok's security, and it's hard to believe that the involvement of a single U.S. company can completely solve the problem. TikTok's ban may be just the tip of the iceberg, and it may encounter more pressure and obstacles from the U.S. government.

Oracle faces significant financial risks

As TikTok's main cloud service provider in the United States, Oracle will undoubtedly be one of the hardest hit by the ban. According to the filing, if TikTok is banned from operating in the United States, Oracle will not be able to continue to provide internet hosting services to it. This will directly result in a negative impact on Oracle's revenue and profits.

Analysts expect that Oracle's annual revenue from TikTok's business could be between $480 million and $800 million. For a small business, this revenue is not a small amount. The loss of this important customer would hit Oracle hard and its overall financial performance would inevitably be a drag.

In addition, Oracle may face rising compliance costs. In order to comply with the requirements of the new law, the company may need to increase its investment in related areas, further squeezing its profit margins.

This negative impact is not limited to Oracle. TikTok's ban will undoubtedly ripple through the entire tech industry, bringing ripple effects to many related businesses. We can expect other tech companies to be forced to break off their partnerships with TikTok under pressure from the U.S. government, which will cause them to lose some of their revenue streams.

It's worth mentioning that Oracle didn't include TikTok in its list of flagship cloud customers, and it has also maintained a cautious silence about its relationship with TikTok. This suggests that even under the pressure of TikTok's ban, Oracle may not be able to easily find replacement customers. The loss of this revenue stream could significantly hamper the company's business growth momentum.

Overall, the TikTok ban is undoubtedly a powerful shot for Oracle. Not only is the company facing significant financial risks, but it may also face many obstacles in its future business expansion. This will undoubtedly shake investors' confidence in Oracle and affect its stock price movement.

Broader industry implications

The impact of the TikTok ban on the tech industry isn't limited to Oracle. Many other businesses will also be affected to varying degrees

Okay, I'll move on to the broader impact of the TikTok ban on the tech industry.

In addition to Oracle, other cloud service providers may also be implicated. TikTok is still using cloud computing services from Amazon and Google, and if the ban finally goes into effect, the companies could lose this important customer as well. This will have a negative impact on their revenues and profits.

More critically, the TikTok ban could disrupt the entire social media ecosystem. As a popular content-sharing platform, TikTok offers a large number of creators the opportunity to showcase their talents and earn revenue. If TikTok is banned in the US, these creators could lose to other social media apps, increasing the competition between them.

In addition, TikTok's ban could also affect advertisers. Many businesses are opting to advertise on TikTok to reach the platform's large user base. If TikTok is banned, these advertisers will lose an important advertising channel and will have to look for alternatives, which will undoubtedly increase their marketing costs.

At the same time, TikTok's ban could also implicate various apps and service providers involved in it. For example, third-party platforms that rely on TikTok for content distribution and monetization may also be affected. Their business models and revenue streams are likely to be put to the test.

In general, the impact of the TikTok ban is widespread, and it can be described as "affecting the whole body". Not only does it affect TikTok itself, but it could also have a ripple effect on businesses across the tech chain. This will undoubtedly intensify the competition and reshuffle within the industry, and bring many uncertainties.

For tech giants on the cusp, navigating the TikTok ban is undoubtedly a huge challenge. Not only do they have to find ways to compensate for lost income, but they also have to find ways to maintain their market position and development prospects. Only with adequate risk assessment and preparedness can these businesses survive this storm.