Deep Dive
Shownotes Transcript
This episode is brought to you by OutSystems, the AI-powered application generation platform that combines the speed of Gen AI with the power and completeness of the market-leading low-code platform. Visit OutSystems.com to learn more. Welcome to Tech News Briefing. It's Wednesday, January 22nd. I'm Julie Chang for The Wall Street Journal.
Meta CEO Mark Zuckerberg has taken a page out of Elon Musk's playbook and ended internal fact-checking on its platforms. And while that turned out to be a costly move for X, Meta will probably be okay. We'll explain. And then, after going dark for US users on Saturday night, TikTok is back online. For now. We'll look at the role that TikTok plays in the US economy and what's at stake for creators and businesses.
First up, Meta CEO Mark Zuckerberg announced earlier this month that he was ending the company's internal fact-checking program and replacing it with a user-based system. He said that Meta would continue to tackle illegal and high-severity violations. But for the most part, the company is relying on its users to flag problematic content.
This is similar to what Elon Musk did after buying X, then Twitter, in October of 2022. Advertisers fled the platform, and a year after his purchase, Musk said that X was worth about $19 billion, less than half of what he paid for it. So could Meta suffer the same fate? WSJ Heard on the Street columnist Dan Gallagher says, That is unlikely. Dan is with me now. So Dan, how...
How have advertisers and investors reacted so far to Zuckerberg's announcement to end internal fact checking and meta? Well, I would say that 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.
One is that compared to what was one called Twitter, now called X, Facebook, Instagram, all the platforms Meta owns are much, much, much bigger. They're much more vital to advertisers. Twitter was always seen as kind of almost a more experimental ad format. Some brand advertisers found it useful. Others committed like very small parts of their budget to it. So frankly, it was actually a lot more disposable. So when there became concerns about, you know, what was going to happen to Facebook,
quality of content and moderation and all those things, it was actually a very easy decision for a lot of advertisers to say, ah, this is a little too risky for us. That's a much harder decision to make when you're talking about essentially Facebook, Instagram, because you're talking about something like a quarter of the world's population checking in daily on at least one of these apps. For context, how does ad revenue between X and Meta compare?
In terms of total ad revenue, they're not even close. And if you go and remember, we haven't had Twitter's advertising numbers since 2022. But based on those last reported numbers, Twitter was getting about less than $5 billion in ad revenue annually at that time, at the time it was bought.
Instagram was estimated to be getting more than $8 billion in ad revenue per quarter by that period. And Instagram is actually, at the time, a smaller platform than Facebook in terms of its ad base. So that's just one point to see the numbers are so much phenomenally bigger for Meta than they ever were for Twitter. Going back to Zuckerberg's announcement to end internal fact-checking, there still has to be some risk associated with that, right? There is. There
You're going to see some advertisers be a little cautious about it. And it's not to say that they wouldn't lose any advertisers. There might be some that say, hey, this may be a little too risky. Where Meta has an advantage is that they are not reliant on a few big advertisers to really make their numbers. They actually have a very wide base of small and mid-sized businesses that
advertisers from all over that spread that risk out a lot. So even if you have like really big brand advertisers decide, "Nah, maybe we're not gonna spend as much there." It really doesn't hurt them nearly as badly. I don't see a risk of a major investor flight. There is some risk though because Meta's ad revenues have been growing so much
You know, Google's a much bigger platform even than Meta, but Meta's been outgrowing Google by quite a bit over the last five, six quarters. You could see some risk at least to Meta stock because maybe if that growth slides just a little bit, I don't know that we're going to see that yet, but that would be the kind of thing we could see at Meta. If there were enough advertisers to make a small dent, you might just make a small dent in the growth rates and scare out some of the momentum investors. Overall, I think the company's business is going to be pretty solid.
That was WSJ's Heard on the Street columnist, Dan Gallagher. Coming up, TikTok is back in the U.S., but its future is still uncertain. After the break, we'll take a look at the TikTok economy and what's at stake.
This episode is brought to you by OutSystems, the AI-powered application generation platform for enterprises. Unlike simple Gen AI code suggesters, OutSystems lets you generate modern, governable enterprise apps in minutes, then automates the whole DevSecOps lifecycle. From a prompt. The generative software cycle is here. Learn more at OutSystems.com.
President Trump signed an executive order this week, giving TikTok 75 more days to work out a deal to prevent it from going offline in the U.S. The social media platform is used by millions of businesses and content creators to connect with customers. In fact, a sizable sub-economy has sprung up around the app, which is used by roughly 170 million Americans.
WSJ tech reporter Sarah Needleman has been looking into the financial stakes of TikTok and the people who depend on it. Sarah, TikTok is back for now, but how would a long-term ban affect the U.S. economy? 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. Last year, TikTok commissioned a study that concluded that the company was
about $20 billion a year to the U.S. economy. That is something the Wall Street Journal hasn't independently verified. You spoke with small business owners who rely on TikTok. Can you tell us more about them and what they said about this potential ban? 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. Many of them also sell goods through the TikTok store, and that's a big source of income for them as well.
Many have said that they have tried building presences on other social media, but it just hasn't been as effective. They say TikTok's algorithm, there's some sort of secret sauce behind it that really helps drive people to their channels. And there's also other influencers who may recommend the businesses. One woman told me an influencer in the food world posted on TikTok a very flattering review of her chocolates. She's a chocolate business.
And she said at that time she was working part-time as a teacher and part-time running the chocolate business. When this post went on a Friday night, it got so viral by Sunday, she handed in her resignation for her teaching job and just started doing the chocolate business full-time. So it's really been especially helpful for her business. And she said that if a ban happens, she anticipates having to lay off four to five part-time workers.
How big of a deal is that TikTok shop you just mentioned? TikTok's digital store, which is relatively new, it came out in 23. That store alone has become pretty important. The gross merchandise value for TikTok's digital store in the U.S. last year was $9.7 billion. This one of their small business, they just built a 2,100 square foot warehouse over the summer for their small business. They sell candles and
detergent, all-purpose cleaners, things of that nature. And so the bank will be particularly painful for them because they just made that investment. And they said they are worried about having to lay off employees depending on how things go. You also spoke with content creators. How much do they make from TikTok? There's a big range in how much they make depending on the number of followers they have. And some say they generate enough money to pay their utilities, but not necessarily their rent.
but it really ranges the gamut. Creators generally make money through TikTok in the form of brand sponsorships, advertising revenue. There's a creator fund that they may be able to get money from directly from TikTok, depending on whether or not they qualify. Oftentimes, it leads to deals outside of TikTok, book deals, even opportunities to be in Hollywood. In addition to small businesses and creators,
Many others would be impacted by a ban, including talent agents, video editors and others that support that work. So are creators moving to other platforms? Creators have been moving to other platforms for several years now because keep in mind, this was something that came up in Trump's first presidency. So since then, when there was concerns back then about the possibility of the app being shut down,
Many creators started diversifying to other platforms. Others didn't do that until more recently when it started looking like the law was going to go into effect. And so they're playing catch up. But as I mentioned earlier, a lot of people believe that these other platforms just aren't as good as TikTok at keeping people engaged and delivering the kind of content that they like.
There's something about that TikTok algorithm that they say is really special. And so they haven't had as much success on other platforms. That's not always the case. Some have. Could creators potentially make as much money on other platforms? These other platforms, some of them do also have creator funds, some don't. But sponsorships where you agree to make a post recommending a product, that's
That's very common. You'll see that in many different platforms. So those types of opportunities are ubiquitous for the most part throughout social media. And the opportunities that you can get offline would still apply here as well.
And what else is at stake here looking at the overall value of TikTok? Many Americans would also lose a significant source of free entertainment, which is a form of value in and of itself. So it would take away something that people have come to spend a good amount of time in. Some people told me they go on TikTok every single day of their lives. There's certainly a value to it because they invest so much of their time and energy into it. That was WSJ Tech Reporter Sarah Needleman.
And that's it for Tech News Briefing. Today's show was produced by me, Julie Chang, with supervising producer, Catherine Millsop. We'll be back this afternoon with TNB Tech Minute. Thanks for listening. This episode is brought to you by OutSystems, the AI-powered application generation platform for enterprises. Unlike simple Gen AI code suggestors, OutSystems lets you generate modern, governable enterprise apps in minutes, then automates the whole DevSecOps lifecycle.
from a prompt. The generative software cycle is here. Learn more at OutSystems.com.