Snap ‘immediate beneficiary’ of a U.S.-TikTok ban, analyst says

Roth Capital Partners Managing Director Rohit Kulkarni joins Yahoo Finance Live to discuss the possibility of a TikTok ban in the U.S., how a potential ban would impact other social media platforms and influencers, and the outlook for Snap.

Video Transcript

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BRAD SMITH: The US is doubling-down on its TikTok threats, urging Chinese owners of the app to sell their stakes or risk a total US ban altogether, as first reported by "The Wall Street Journal." But how will this impact other social media giants? Roth Capital Partners Managing Director Rohit Kulkarni joins us now.

Rohit, great to have you here and get some of your insights on this. It seems like what is old is new again, as TikTok is really being targeted here in the US. What do you expect to come of it? And is there anything different this time around?

ROHIT KULKARNI: Hey, thanks for having me. I think this is probably still we are still very early with the general jawboning that we expect to have over the next 30, 60, 90 days.

I feel based on what CFIUS has been working with TikTok over the last two years, the outcome that CFIUS has concluded that this needs to be escalated. And they are clearly unhappy with the way data restrictions, privacy concerns need to be to some extent satisfied.

So I think we're still very early. I feel TikTok is in the hot seat right now. That cools off some pressure from the peers from a sentiment standpoint. Whether that translates into more fundamental improvement, that remains to be seen. But sentiment drives stocks and that's what's driving Facebook, Snap, and Pinterest today.

JULIE HYMAN: Of course, stocks don't have a lot to do with whether, you know, 15-year-olds are gonna migrate back the Snap from TikTok, right? So I am curious if this assumption that if TikTok went away tomorrow that people would be flooding to Snap and some of these other services, is that right? Is that how we should be thinking about it?

ROHIT KULKARNI: Flooding would be an exaggerated term, Julie. The way I would put it is slow migration back to the influencers that they follow. First the influencers, then the followers.

I think a larger platform like a YouTube that has shorts or obviously Facebook and Instagram that have their own version of their mini TikToks going there, would be able to find those influencers back onto the platform. And then that would lead to some of the usage going back.

Obviously, there is this only so many hours that you can spend in front of the phone to-- while scrolling those videos up and down. And if TikTok is taking the majority share and that goes away, what would the young teenagers do, start talking to their parents? I don't think so.

JULIE HYMAN: Definitely not.

[LAUGHTER]

BRAD SMITH: I mean, look, Rohit, I'm old enough to remember when Kylie Jenner, I think, posted, does anyone else not open Snapchat anymore? Is it as simple as, hey, I guess we're gonna be going back to Snapchat, everybody. Like, at the end of the day, as you mentioned, the influencer move that would probably bring the wave of the other followers.

But at the same time, it's the monetization for some of those-- so many of those influencers as well, who perhaps have changed their entire platform strategy. What does that translate into dollars, as much of the attention now has been focused on in-app purchases for the other platforms, outside of TikTok and TikTok as well?

ROHIT KULKARNI: You're spot on. I think monetization is going to need a change in strategy. And that, I think, as the situation evolves, probably we'll see that strategic focus evolve as well. To some extent, the bifurcation in what the value from TikTok brings, whereas the other platforms bring, has kind of widened over the last 12 to 18 months.

By that, what I mean is TikTok tends to become more of a top of funnel, brand marketing awareness and reach-related kind of ad platform. Whereas, Facebook or YouTube have started to become more of a bottom of funnel, more direct response-oriented platform.

So as more and more advertisers want to reach just younger audience, they probably go towards TikTok and then maybe they go to Snap, maybe as a backup. So I think the first and most immediate beneficiary, I would say, Snap. Given the smaller scale and a slight bump up in some of the advertisers looking at Snap, away from TikTok, could help them more.

As compared to the larger guys, like a YouTube or Instagram, that would need a much bigger needle-moving change in their strategic focus. And that may require some time. So that could be just a tactical way to play on this theme over the next 30 to 60 days.

JULIE HYMAN: Yeah, that's an interesting way-- a good way to think about all of them in perspective. Rohit Kulkarni, Ross Capital Partners Managing Director, good to catch up with you.