Friday, Jul 10th 2020

Tick tock, TikTok


What opportunities and threats do tech bans bring?

We've gotten so accustomed to using US-based tech, like Google or Netflix, it's almost foreign to think of something gaining mass adoption that wasn't produced here.

Insert TikTok.

Have you downloaded this app yet? Nearly 1 billion people on the planet actively use it. It has 2-3x the influencer engagement vs. Instagram. The product is frictionless - just download it and a stream of viral videos appear. No need to follow friends (or anyone for that matter).

The wrinkle: this beloved product used by nearly a billion isn't American. It's from China. 

As mass consumer tech has grown in societal importance, so too has the industry increasingly been caught in the crosshairs of political tensions.

Banning apps has become the new political chess move.

Google, Facebook, and Twitter have been banned in China for nearly a decade. But in a reversal of that historically one-sided dynamic, the Trump Administration said this week that the US was considering banning China's star, TikTok. India, home to the second largest population on Earth, has already banned it.

Here's what we're pondering: if the tech economy becomes more geographically fragmented, what opportunities (or threats) does that present for us as investors?

Opportunity: If one company previously dominated a market, but then is banned, this leaves room for a new company to step in. For example, since India’s ban of TikTok, Facebook (a Titan Co.) has already launched its replica in the country called Instagram Reels. It is poised to capture this market share void.

Threat: Netflix (also a Titan Co.) has had several countries require it to change its offerings to adhere to local culture laws vs. just distributing predominantly American content. Could there be a European Netflix in the works? ""

Fascinating to watch and debate. Your move, governments.

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