Marketplace Briefing: TikTok’s rocky U.S. transition gives brands pause after outage hits sales
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
TikTok’s new U.S. owners have gotten off to a rocky start, drawing scrutiny from brands.
Less than two weeks after TikTok finalized a joint venture transferring parts of its U.S. business to a consortium including Oracle, Silver Lake and MGX, the handoff has already hit turbulence. A prolonged outage disrupted TikTok Shop sales, advertising performance and creator activity, landing just as brands were already grappling with a new fulfillment mandate and broader uncertainty around the platform’s future under new ownership.
The recent disruption is forcing brands to reassess how much they can rely on TikTok at a critical moment for the platform. As TikTok seeks to stabilize its U.S. operations under new ownership and win over larger advertisers and merchants, brands are weighing whether recent outages, policy changes and moderation concerns are merely growing pains or signs of more problems ahead.
For brands, the most immediate disruption was a prolonged outage that triggered widespread technical issues for users, including app crashes, missing video views and failed comments, Digiday reported. The outage began around Jan. 25 and lasted for nearly a week, until TikTok announced a full restoration on Sunday.
“We have successfully restored TikTok back to normal after a significant outage caused by winter weather took down a primary U.S. data center site operated by Oracle. The winter storm led to a power outage which caused network and storage issues at the site and impacted tens of thousands of servers that help keep TikTok running in the U.S. This affected many of TikTok’s core features — from content posting and discovery to the real-time display of video likes and view counts,” the company said in a post on X.
TikTok declined to comment.
The outage sharply curtailed sales across Shop, TikTok’s e-commerce platform. Brandon Fishman, founder and CEO of Prime Time Agency, a consulting firm that works with 100 e-commerce brands, said the disruption brought commerce activity to a near standstill for some brands. On average, sales were down around 80% across Fishman’s client base.
“We’ve seen shops that were doing thousands of dollars a day literally come to a halt overnight,” he said.
Other firms described similar challenges. Warren Jolly, CEO of digital marketing company AdQuadrant, which works with brands like Magic Spoon, said sales plummeted by around 40% during the outage. The outage affected not only TikTok Shop checkout but also the systems brands rely on to operate behind the scenes. “Customers weren’t able to check out,” Jolly said. “Or orders were being placed, and they weren’t being synced into Shopify, so therefore, there was no way to fulfill the orders.”
Analytics disruptions compounded the uncertainty, making it difficult for brands to decide whether to keep spending. “We have no idea what that’s doing in sales,” Jolly said. “So do you pause the ads? Do you keep it going?”
TikTok told brands in an email that has not been previously reported and was reviewed by Modern Retail, “We recommend not pausing or deleting campaigns at this stage, as doing so may negatively impact campaign learning and could create challenges when restarting campaigns while the issue is being resolved.” The company added that, “in cases of ROI under-delivery related to this incident, advertisers will remain eligible for compensation.”
Despite TikTok’s guidance to keep campaigns running, Performance Beauty Group — whose brands include Grande Cosmetics, FlutterHabit and Lilly Lashes — temporarily dialed back its TikTok ad spend after seeing performance deteriorate during the recent outage. The company’s director of performance marketing, Evelyn Valenzuela, said cost per thousand impressions jumped by as much as 60%, while cost per acquisition climbed about 20%. TikTok Shop sales also took a hit, with orders falling 25% week over week.
“With my role, I have to be as efficient with our spend as possible,” she said, adding that the company would resume ad spending once performance “stabilizes a little bit.”
The outage arrived amid other changes that had already put some brands on edge. TikTok recently told brands it would phase out independent shipping for U.S. TikTok Shop sellers, pushing merchants to use TikTok-controlled fulfillment options. Fishman said the shift adds cost and complexity for brands managing inventory across multiple channels. For some brands, the combination of operational changes and technical instability is fueling broader concerns about TikTok’s transition to U.S. ownership.
The handoff was “a complete mess,” Fishman said. “They just took over, and this is what happened.”
TikTok also faces scrutiny over content suppression, including posts about the killing of ICU nurse Alex Pretti by federal agents in Minneapolis. An official TikTok USDS Joint Venture spokesperson previously told Digiday, regarding creators’ frustrations with the platform’s algorithm shifts and moderation policies, “Our U.S. community of users and businesses will be able to thrive and grow on TikTok and continue to have the same experience they already know and love.”
Still, brands said TikTok will need to continue to reassure advertisers and creators amid early signs of user churn. The daily average of U.S. users deleting TikTok has increased sharply since the joint venture was announced, according to Sensor Tower data cited by CNBC.
“It’s really concerning to continue to see the app go through such significant changes,” Valenzuela said. She added that the outage was “a good reminder that you do need to continue investing in other platforms and not have your entire team just focused on this one app, because the algorithm can change completely and cause significantly more disruptions and declines in performance.”
But others were more optimistic about TikTok’s future in the U.S. AdQuadrant’s Jolly called the recent outage “a bump in the road” and said the platform’s fast growth means brands are more willing to tolerate hiccups. Wired reported that TikTok Shop’s quarterly sales now rival eBay.
As Jolly put it, “We don’t have any brand that’s saying, ‘Hey, I’ve lost faith in TikTok.'”
What I’m reading
- Amazon is offering its AI-powered Alexa+ to U.S. Prime customers at no additional cost, while non-Prime users can access a limited free version or subscribe for full features at $19.99 a month.
- Amazon’s plan to build a 230,000-square-foot big-box store in suburban Chicago has drawn local pushback, with some residents fearing the undeveloped concept could function more like a warehouse than a traditional retail destination, per Retail Brew.
- OpenAI is asking select advertisers to commit at least $200,000 to participate in a limited beta rollout of ads on ChatGPT, according to Adweek.