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TikTok advertisers stay with the app under fear of U.S. ban

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A smartphone with a projected TikTok logo is placed on a computer motherboard in this image shot February 23, 2023. REUTERS/Dado Ruvic/Illustration/

May 4 (Reuters) - Advertisers are determined to continue spending on TikTok owing to its great popularity with consumers despite worries of a future ban in the U.S. over national security concerns, ad specialists said.

The stance comes as TikTok, which is owned by Chinese tech giant ByteDance, is seeking to avert a ban in the U.S. after senators filed a measure that would empower President Joe Biden's administration powers to block applications that pose security dangers. The short-form video software has already been prohibited from government-issued phones in various nations.

TikTok is expected to conduct a presentation for advertisers on Thursday evening in New York as part of NewFronts, an annual week of events when social media and streaming video platforms announce new content and capabilities for marketers.

Despite the worries over its Chinese ownership, TikTok's ad sales is set to rise 36% to $6.83 billion this year, according to research company Insider Intelligence.

Ryan Detert, chief executive of Influential, an influencer marketing business, claimed that of the firm's customers "none are saying 'don't spend money on TikTok,'" he added.

"There's no contagion that we're seeing," he continued. Influential has worked with businesses like Pepsi and the NFL.

Two media buyers at two separate large ad agencies told Reuters that Washington's investigation over the app had yet to damage their customers' plans on TikTok. The two purchasers spoke on condition of anonymity to discuss contacts with TikTok.

At its presentation on Thursday, TikTok will reveal a new ad model that would enable marketers display advertisements next to content from publishers like BuzzFeed, Dotdash Meredith and NBCUniversal, and will offer a 50% part of the ad income to those publishers.

"TikTok is irreplaceable unless and until (advertisers) have to replace it," said Mark DiMassimo, founder of creative firm DiMassimo Goldstein, which has worked with companies such as Hello Fresh and Samsung.

Still, numerous media buyers recognized the potential of a U.S. ban will be the "elephant in the room" during the advertising pitch.

On Tuesday, TikTok announced its director of U.S. trust and safety will exit the firm next week, leaving the app without a senior executive who handled content moderation and the creation of safety solutions for the division that stored U.S. user data.

"There's a lot of uncertainty combined with uncertainty in general about the economic situation," said Stephani Estes, chief media officer of digital marketing firm Goodway Group. "You have to consider the what-ifs."

TikTok said it is addressing advertising concerns "head on in an open, fact-based and ongoing dialogue."

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