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Will mental health concerns sink social media platforms? A US politician has called TikTok “digital fentanyl”. Some schools are suing social media companies alleging that the platforms have caused a youth mental health crisis. Yet the companies warn that cutting off young people could also damage mental health. A world-first law banning social media for children under 16 was passed in Australia. Other countries could well follow.
Under the law, Australians under 16 will be banned from opening accounts on all major social media platforms including TikTok, Facebook, Instagram, Snapchat and Reddit — even with parental permission. The social media groups will be responsible for policing this, or face fines of up to $32.5mn.
The penalty itself is negligible. Revenues at Meta were $40.6bn in the latest quarter. TikTok parent company ByteDance’s hit $110bn last year.
But there is more at stake. Because advertising revenues are such a large part of social media groups’ sales — more than 95 per cent on average — daily active users and the time spent on the platforms are crucial.
Younger users are key: people between the ages of 18 and 24 were online for an average of six hours per day this year, significantly more than older groups. Those younger people are also more than three times as likely to make purchases at ecommerce units such as TikTok Shop than the average shopper.
TikTok is particularly exposed. Its largest audience is under 34. Among younger people, it has become the main source of news, information and a place to shop. That increases stickiness — how often users return and engage on the platform — longer-term platform loyalty and sales.
Global tech groups including Meta, TikTok and Google have warned that the ban could damage the mental health of young people if rushed, cutting off teenagers from online community support networks.
Enforcement is another issue. Age-verification technology is yet to be fully tested. Using biometrics to estimate age has proved inaccurate until now, even with artificial intelligence enhancements. All options would require more data collection, which also raises privacy concerns.
TikTok’s business in Australia is smaller than important markets such as the US and Indonesia, where it has more than 120mn users each. But it has been growing rapidly, with about 8.5mn users, or about a third of the population, and 350,000 Australian businesses on the platform.
Australia is not TikTok’s only problem. Parent company ByteDance faces a ruling next week on whether it will have to divest TikTok in the US. That business is vital in justifying a private valuation of about $300bn. But the bigger risk to social media revenues is that this ban on younger users sets a precedent that reverberates well beyond Down Under.
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