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Snapchat stock rose 9.5% this week as a federal TikTok ban looms.
Snap Inc. shares surged 9.5% on Monday following the news that US Senate Intelligence Committee Chairman Mark Warner plans to introduce a bill this week to allow the US to ban TikTok and other Chinese-based technology companies. Other platforms like YouTube are expected to take home the lion’s share of the gains if the US government should implement a federal TikTok ban — but a rise in Snap stock shows the company performing better than anticipated. Comparatively, Pinterest, which competes with Snap for digital ads, gained 1.1%, while Meta Platforms fell 0.2%.
Snap stock had taken a beating from a rise in competition in short-form video platforms and the dark clouds hanging over the digital ad market. Wall Street analysts have speculated that rivals such as YouTube or Facebook could benefit more from a potential TikTok ban — mainly as Snap had fallen 75% since the end of 2021, compared with a drop of 45% for Facebook parent Meta Platforms and 27% for Pinterest.
YouTube might gain the most user market share among social media platforms if US lawmakers move ahead with a federal TikTok ban. Bloomberg believes that YouTube’s content-recommendation algorithm and its revenue-sharing model for user-generated content could lead to more creators shifting from TikTok to YouTube.
Meta Reels, Snap, and other similar platforms also stand to gain an engagement boost. Still, YouTube has long laid the groundwork for creators to monetize their work through the platform, making it a natural leap for US creators who can no longer rely on TikTok.
Snapchat has recently announced reaching a milestone of 750 million monthly active users, 150 million of which are in North America. The company hopes to reach over 1 billion users within the next three years, as its user base outside North America and Europe has grown more than 80% since Q4 2020.