By Bowdeya Tweh 

The battle over the future of TikTok -- the fast-growing short-form video app -- is continuing as ByteDance Ltd. and its investors, the Trump administration and tech giant Microsoft Corp. discuss outlines of a deal that would change the ownership of TikTok.

President Trump said he is open to a deal in which Microsoft or another U.S. company buys TikTok after initially signaling opposition to it. But he said the government should receive payment for clearing a purchase. On Thursday, Mr. Trump issued a pair of executive orders that would impose new limits on Chinese social-media apps TikTok and WeChat, effectively setting a 45-day deadline for an American company to purchase TikTok's U.S. operations.

Here is a look at the state of play.

Why is TikTok potentially being sold?

TikTok parent ByteDance Ltd., a Beijing-based company, has mulled a range of options in recent months to assuage concerns from officials in the U.S. and other countries about the service's ties to China. Secretary of State Mike Pompeo last month raised the possibility of banning TikTok in the U.S., following a similar action taken by authorities in India in June.

Before Mr. Pompeo's announcement, ByteDance senior officials had discussed creating an independent management board and other actions to distance the app's operations from China, The Wall Street Journal reported last month. ByteDance in May hired Walt Disney Co. executive Kevin Mayer as TikTok's chief executive.

Concerns about a potential U.S. ban, in part, drove discussions to explore a deal. Though ByteDance has had multiple suitors for TikTok, CEO Zhang Yiming zeroed in on Microsoft.

The Redmond, Wash., software giant has confirmed its interest in buying TikTok's U.S. business -- as well as the app's service in Canada, Australia and New Zealand. The company said it would address White House's concerns, though it warned that it would walk away from talks by Sept. 15 if a deal isn't completed.

What exactly are the security concerns around TikTok?

U.S. officials have said they are concerned TikTok -- which has hundreds of millions of users world-wide, and about 100 million in the U.S. -- could provide data collected from American users to China's authoritarian government. TikTok has said it would never do so. Officials also worry that the app could be used to spread Chinese propaganda and that the platform's moderators are censoring content to appease Chinese government leaders. TikTok has also said the Chinese government hasn't asked TikTok to censor content and that content-moderation rules aren't influenced by any government.

The TikTok app collects information such as location data and your internet address, according to its privacy policy, and it also tracks the type of device you are using to access the platform. TikTok also stores your browsing and search history as well as the content of messages you exchange with others on the app.

The TikTok executive order formalizes Mr. Trump's earlier calls for shutting down the app should no American buyer complete a deal within 45 days. Contracts agreed to before the 45-day period elapses aren't subject to the prohibitions in the order.

"This data collection threatens to allow the Chinese Communist Party access to Americans' personal and proprietary information -- potentially allowing China to track the locations of federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage," the order says.

Why might Microsoft buy TikTok?

The purchase of TikTok's U.S. operations, a deal that would likely cost billions of dollars, would bring a huge pool of mostly young users to a company that has thrived during Microsoft Chief Executive Satya Nadella's tenure largely by focusing on corporate customers. By only buying a piece of the company, Microsoft would have to rewrite software and ensure data is entirely stored in the U.S. among other challenges. That said, buying a larger chunk of TikTok -- or the whole business -- would likely up the purchase price by billions of dollars.

TikTok globally isn't profitable though Microsoft has deep pockets to invest in the platform. Microsoft would likely invest to grow the app's user base as well as its relationships with advertisers as it competes with the likes of platforms owned by Facebook Inc., Twitter Inc., Snap Inc. and others. Microsoft could leverage its pool of TikTok's mostly younger users to bolster its Xbox videogame business and its advertising business, which currently centers on its Bing search engine.

How is news of the potential sale being received in China?

The potential sale is hardening suspicions of some in China that the U.S. is trying to sabotage efforts to nurture homegrown technology enterprises, with TikTok being among the country's first apps that is a global smash hit. The partial or complete sale of TikTok has also raised concerns about the precedent a deal could set for Chinese companies with global ambitions as U.S.-China relations unravel. Mr. Trump's executive orders late Thursday threaten to further sever the internet ties between the world's two biggest economies, intensifying harsh condemnation from Beijing.

What do TikTokers make of it?

It has been a mix of the platform's typical irreverence, impassioned pleas to preserve the app and TikTokers urging followers to follow them on other platforms. But largely, users have said they aren't quitting the app. Some offered tips on how to use a virtual private network to mask the country where the app is truly being accessed, while others pretended to relocate to a TikTok-permitting country.

Despite the commitment of TikTokers to the current platform, other companies are circling its users. Facebook has been courting users to join the new short-form video option Reels within Instagram Stories, which recently made its U.S. debut. Apps including Zynn, byte, Triller and Clash have also been working to gain users in the social-media space.

Write to Bowdeya Tweh at Bowdeya.Tweh@wsj.com

 

(END) Dow Jones Newswires

August 07, 2020 19:11 ET (23:11 GMT)

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