Social networks were originally designed to connect people with friends and family online. Meta Platforms' (META -4.99%) Facebook is a great example of this. But the concept has evolved over the years, with other apps like Instagram more focused on content than connection.

But that evolution took a giant leap forward when China-based ByteDance released its TikTok platform to the Western world six years ago. It's not really a social network at all -- instead, users focus on entertaining each other with short-form video content curated by artificial intelligence (AI). In other words, an algorithm learns what you like to watch and shows you more of it.

TikTok has become the fastest-growing mobile app in history, and American lawmakers are concerned that sensitive user data the app gathers to operate could find its way into the hands of the Chinese government. There have been calls to ban the platform in the U.S. entirely, and the state of Montana just took matters into its own hands.

Two people laughing while watching a video on a smartphone.

Image source: Getty Images.

The first domino has fallen

Consumers have grown accustomed to sharing their personal data with technology companies. They typically use it to sell highly targeted ad spots to businesses, but in TikTok's case, many global leaders believe something more sinister is at play. That's because the Chinese government has a unique power over companies based in China, which theoretically means it can reach out at any time and demand access to sensitive information for political purposes.

So what information does TikTok collect? It's no worse than any American social media platform -- it likely knows a user's name and date of birth, and it could also access the live GPS location of its users who opt in to sharing that information. The latter appears to be of most concern to U.S. lawmakers.

In February, the White House ordered all government employees to delete the TikTok application from their government-issued devices, citing security threats, joining France, Britain, New Zealand, Australia, and the European Union, which had already made the move. After all, any risk that China could be tracking the government officials of other countries isn't worth taking.

But data security isn't the only grievance. Some members of Congress have questioned how TikTok deploys its AI-powered algorithms, suggesting the platform feeds inappropriate, harmful, and even propagandistic content to some of its youngest users. Since the app has an estimated 150 million users in the U.S., lawmakers are worried it could be used to distribute misinformation on behalf of the Chinese government -- or even sway critical elections here at home.

Calls are growing louder for a nationwide ban. The state of Montana, however, isn't waiting. From Jan. 1, 2024, app stores won't be allowed to make TikTok available for download inside state lines. The state's governor said this decision would protect Montanans' private data from the Chinese Communist Party. The ban is being challenged in court by a group of TikTok users living in Montana, so we will have to wait and see if the ban will actually go into effect.

Meta Platforms could feast on TikTok's misfortune

Meta's Facebook and Instagram apps will far and away be the greatest beneficiaries of a widespread U.S. TikTok ban. The company's CEO, Mark Zuckerberg, said recently that AI is the company's single largest investment, and he plans to integrate it across its product portfolio.

Up until late last year, Meta's primary focus was virtual reality and the metaverse, so this is a major strategic shift, and it came about because of TikTok's dominance. In 2020, Meta released its short-form video feature, Reels, which is now live on both Facebook and Instagram. The company's goal is to continue improving its AI recommendation engine so that it becomes more accurate at feeding users content they'll like.

Meta is making significant progress, and in the first quarter of 2023, it told investors that AI was responsible for a 24% year-over-year increase in the amount of time users were spending on Instagram. Plus, it says 20% of all content across both that platform and Facebook is now being curated by AI, and the technology is driving a large increase in monetization efficiency for Reels.

If TikTok were to exit the American market, Reels would be the next best thing for all its displaced users.