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
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.
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
The TikTok app collects information such as location data and
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
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
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
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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