TikTok plans a “large” round of layoffs later this week as it faces a sell-or-be-banned order from the U.S. government.
The stock of owner ByteDance is not traded on any major exchange.
A “large percentage” of its global marketing and operations employees will be let go, according to The Information.
TikTok Boom
President Joe Biden signed a law less than a month ago that will ban TikTok in the U.S. unless it is sold to an American company.
TikTok joins other major social networks like Meta Platforms (NASDAQ:META) and X (formerly Twitter) in laying off personnel. The company sued the U.S. government, trying to stop the sale on First Amendment grounds. It might consider some asset sales but won’t let go of its algorithm that drives engagement. It’s the algorithm rather than the site itself that is TikTok’s key asset.
TikTok and the Department of Justice both want a fast-track decision on the First Amendment suit. China doesn’t allow American social networks like Facebook to do business in China. TikTok itself also does not operate in China. Instead, the company has a Chinese site called Douyin, which follows the government’s censorship and propaganda orders.
TikTok said last year it had 7,000 employees in the U.S. and 150 million users. About 80% of the company’s revenue comes from the U.S., according to the Financial Times.
TikTok will reportedly lay off its global user operations team, which handles user support questions. Other cuts will come in content and marketing.
While TikTok remains under the threat of a ban, rivals like Clapper and Meta’s Reels are pitching its users. Clapper said it now has 2 million monthly users. Meta said during its first-quarter earnings call that Reels now has 50% of its Instagram traffic.
TikTok Layoffs: What Happens Next?
TikTok influencers lobbied unsuccessfully against the ban, many saying it would destroy their livelihoods.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
