NEW YORK, NY – When TikTok temporarily went dark in January 2025, advertisers scrambled to reallocate billions in advertising dollars. In recent years, the app has become a vital tool for small businesses and digital marketing. As the White House actively seeks a U.S. buyer to avoid a court-mandated ban, advertisers are bracing for a seismic shift. A new study from Columbia Business School reveals that banning TikTok could lead to a sharp increase in digital advertising prices and impose disproportionate costs on small businesses.
In their paper, The Cost of Banning TikTok: Implications for Digital Advertising, Professors Dante Donati and Hortense Fong examine the short-term consequences of TikTok’s January outage in the United States. During the 14-hour disruption, advertisers and users rapidly shifted to competing platforms, such as Meta-owned Instagram and Facebook, resulting in a 10% surge in digital advertising pricing overnight. The researchers found that while larger advertisers responded by ramping up spending and launching more campaigns, smaller advertisers were far less able to adapt, cutting spending or exiting Meta altogether once TikTok came back online. The findings suggest that a TikTok ban would not only increase platform concentration in an already consolidated digital advertising market and drive up ad prices, it would also impose disproportionate costs on small businesses, which often lack the flexibility or expertise to pivot to alternative platforms.
“In an already concentrated market, removing a major advertising platform like TikTok doesn’t just reduce competition—it amplifies the challenges faced by smaller advertisers that rely on low-cost, high-engagement tools to grow,” said Dante Donati, Assistant Professor of Business at Columbia Business School. “Small businesses depending on TikTok could lose a valuable lifeline for reaching consumers.”
To study the short-term effects of a potential TikTok ban, Professors Donati and Fong leveraged a natural experiment: the platform’s temporary outage in the U.S. on January 19, 2025. Using publicly available data from Meta’s Ad Library, they tracked campaign-level spending and impressions for roughly 30,000 advertisers across the U.S. and 32 other countries. To isolate the impact of TikTok’s absence, the researchers employed a difference-in-differences approach, comparing changes in ad activity in the U.S. to those in countries where TikTok remained online. This method controls for broader market trends and helps estimate how ad prices and behavior would have evolved in the absence of the outage. The analysis found that larger advertisers responded more aggressively, increasing spending by 66% and launching more campaigns, suggesting Meta is a more viable substitute for them than for smaller firms. Smaller advertisers, by contrast, were less able to adjust and often reduced spending or exited Meta altogether once TikTok returned.
Additional Takeaways:
- TikTok is the Go-To App For Targeting Younger Audiences – Advertisers targeting younger audiences (18–34) or running Instagram-only campaigns were most likely to cut spending or stop advertising once TikTok returned.
- Smaller Company Spending – When TikTok went down, smaller advertisers raised their ad count by just 7% and increased spending by 26%.
- Large Advertisers Maintained Elevated Meta Spending Even After TikTok Returned – Unlike small businesses, larger advertisers continued spending heavily on Meta platforms after the outage ended. This persistence suggests they could absorb higher costs and pivot strategies more easily, further reinforcing their competitive advantage in a more concentrated market.
“This outage provides us a glimpse into what could happen if TikTok were permanently banned," said Hortense Fong, Assistant Professor of Business at Columbia Business School. “For advertisers, the study highlights the importance of diversification in ad spend. Advertisers who rely heavily on a single platform face increased exposure to market and regulatory shocks, emphasizing the need for flexible cross-platform strategies.”
To learn more about the cutting-edge research being conducted, please visit the Columbia Business School.
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