The cost of banning TikTok: Implications for the digital advertising market

Social media platforms have become vital channels for businesses to reach consumers through advertising. But in the United States, the digital advertising market in which these platforms operate is dominated by a few major players, raising concerns for antitrust regulators. In such a concentrated market, the entry or exit of a single platform can reallocate billions in ad spending, affecting businesses and users. TikTok's temporary suspension in the United States in January 2025 provides a unique natural experiment to examine how the removal of a major player would shift advertising demand and supply on competitors, specifically Facebook and Instagram, revealing the degree of substitutability across platforms and the intensity of competition. Using a difference-in-differences approach comparing advertising activity in the United States to other countries, we find that Meta ad volume and spend rose by 6.3% and 22.4%, as a result of the outage, without a corresponding increase in ad impressions. Consequently, Meta ad prices, as measured by cost per thousand impressions, jumped by 12.1%. Shifts in demand were three times greater for larger advertisers relative to smaller ones, suggesting that Meta platforms and TikTok are closer substitutes for larger firms and that a TikTok ban would therefore impose greater challenges on smaller businesses.