TikTok ban would increase ad prices and hurt small businesses

A temporary ban of TikTok in January caused advertising prices on Meta platforms to increase by 10%, according to a new study published just three days ago by researchers from Columbia Business School. The findings suggest that a permanent ban would disproportionately harm small businesses while benefiting major tech platforms through increased ad revenue.

Researchers Dante Donati and Hortense Fong leveraged the temporary TikTok outage that began on January 18, 2025, as a natural experiment to measure how removing a major advertising platform affects the broader digital advertising ecosystem. The study, released on March 14, analyzed publicly available data from Meta's Ad Library covering approximately 30,000 advertisers.

The ban created a perfect testing environment because it affected only the United States while leaving other countries unaffected. This allowed researchers to use international markets as a control group in their analysis.

"When TikTok went dark for about 14 hours, we observed immediate changes in advertising behavior across Meta platforms," noted the researchers. Their difference-in-differences analysis revealed that advertisers quickly shifted budgets to Facebook and Instagram, creating intensified competition for available ad impressions.

While both the demand for ads and the supply of ad inventory increased during the outage, the demand side effects were stronger, pushing prices upward. The cost per thousand impressions (CPM) rose by approximately 10% on average, representing an absolute increase of about $2 USD over typical rates.

Larger advertisers adapt, smaller ones struggle

One of the study's most significant findings concerns the disparity between how different-sized businesses responded to TikTok's absence.

Larger advertisers demonstrated greater agility in shifting their advertising strategies. According to the data, major advertisers increased their number of ads on Meta platforms by nearly 21% and boosted their ad spend by a substantial 66% during the outage.

In stark contrast, smaller advertisers showed a much more modest response, with only a 7% increase in ad volume and a 26% increase in spending. This difference suggests that Meta platforms are a better substitute for larger businesses than for smaller ones.

"Smaller advertisers often have more limited capabilities—expertise, experience, platform knowledge—and smaller advertising budgets, which make them more sensitive to switching costs and price increases, especially if they are budget-constrained," the researchers explained.

The study further revealed that when TikTok services began to be restored, smaller advertisers that had temporarily moved to Meta platforms were significantly more likely to reduce spending or stop advertising on Meta platforms altogether. This pattern was especially pronounced for advertisers targeting younger demographics (18-34 year-olds) and those using Instagram exclusively.

Long-term implications

The January incident was brief—TikTok went dark on the evening of January 18 and began restoring services the following day after then-President-elect Trump announced he would delay the ban. However, the study provides valuable insights into what might happen if a permanent ban were implemented.

According to the researchers, "These prices could remain elevated for some time if it is more challenging for advertisers to switch to other platforms than users."

The U.S. digital advertising market is already highly concentrated, with Meta and Google accounting for roughly half of all digital ad revenues. A TikTok ban would further increase this concentration.

"While critics of the ban have highlighted that banning TikTok would remove a revenue channel particularly for small businesses, we call attention to another mechanism that would adversely affect small companies," the researchers concluded.

Shifting user behavior

During the outage, internet traffic data showed that users quickly migrated to alternative platforms. Traffic at TikTok alternatives spiked when the app went dark, with levels remaining elevated compared to baseline for at least a week afterward.

According to figures cited in the study, TikTok has approximately 170 million monthly active users in the U.S. who spend an average of 53.8 minutes per day on the platform. A ban would redirect substantial user attention to other platforms.

Survey data referenced in the paper suggests that if TikTok were banned permanently, Gen Z users would most likely shift to Instagram and YouTube, millennials to Facebook and Instagram, and older generations to Facebook and YouTube.

Timeline of events

• April 24, 2024: President Biden signs legislation requiring TikTok's parent company ByteDance to sell the app to a U.S. company or face shutdown by January 19, 2025
• December 6, 2024: A U.S. appeals court upholds the TikTok ban law
• January 18, 2025, 10:30 PM ET: TikTok goes dark ahead of the January 19 deadline, removing its app from Google and Apple app stores
• January 19, 2025, 12:30 PM ET: President-elect Trump announces he will delay the ban; TikTok begins restoring services
• January 19-26, 2025: Traffic to TikTok remains below pre-outage levels while traffic to alternative platforms remains elevated
• February 14, 2025: TikTok returns to Google and Apple app stores
• March 14, 2025: Columbia researchers publish their analysis of the outage's impact on advertising costs

The study provides timely evidence for policymakers continuing to evaluate the economic impact of potential platform regulations in the digital economy.