It looks like TikTok will live to fight another day after all.
Last Thursday, a consortium group, lead by enterprise computing giant Oracle, submitted its proposal on a takeover of the US operations of Chinese-owned TikTok, in order to address concerns raised by the US Government that TikTok could be sharing data with the Chinese government. The White House said that it would respond to the deal within 36 hours.
On Saturday, US President Donald Trump said that he had agreed to the terms outlined in the Oracle-lead deal:
"I have given the deal my blessing, if they get it done that’s great, if they don’t that’s okay too. I approved the deal in concept.”
That's not exactly the final sign-off required, but it was enough for TikTok to put out an official statement on the new arrangement.
September 19, 2020
As noted by TikTok, the new deal will see Oracle become the 'trusted technology provider' for the app, which will include hosting all US user data, and ensuring that such remains separate from Chinese parent company ByteDance. How, exactly, that will work is not clear - theoretically, while TikTok remains under ByteDance ownership, it's just as likely to share data with the Chinese regime as it was previously. But the technical details have reportedly been laid out in the full proposal, including the separation arrangements.
The full documentation also reportedly states that TikTok will have its own, separate board in the US, which would be approved by the US Government, and that that board will likely include "a former NSA or CIA official with a high-level security clearance".
Essentially, Oracle will become the secure cloud provider for the app, while also taking a 12.5% stake in the company. Walmart is also included in the Oracle deal, and will take an 8% stake in the newly formed 'TikTok Global' entity. TikTok Global, which will operate separate from ByteDance, but will be licensed from the Chinese company, will list for an IPO early in 2021.
Again, the specifics of how it will all work are not clear, but it appears that TikTok Global will be able to utilize all of TikTok's current algorithms and systems, while operating a completely separate user database.
Walmart's interest is in eCommerce and on-platform selling, which has become a key component of the Chinese version of the app.
If Walmart can become the facilitator of the platform's in-app purchase flow, that could help it establish a stronger link into the rising eCommerce sector - which has accelerated significantly in 2020 due to the COVID-19 lockdowns.
For Oracle, the deal will help to further establish it as a key provider of cloud infrastructure. Oracle already provides cloud services to Zoom and other web entities, and through further investment enabled as part of the TikTok deal, it'll not only be able to better showcase its capacity for such, but also boost its capability in line with increased need.
As noted by TikTok, the deal also includes a commitment from TikTok Global to establish a new US base of operations, which will employ 25,000 staff. President Trump says that deal will also include a $5 billion contribution toward an education fund.
Trump had initially called for the US Government to receive some form of payment for facilitating the takeover deal, but was dismayed to find that this was not possible under US law. The $5 billion education fund, however, essentially caters to the same purpose, all be it in a less direct manner. At the same time, Trump has also touted a new 'patriotic education commission' to help re-establish national pride and identity, which will likely be enabled by this new allocation.
So what does that mean for TikTok?
Originally, TikTok was set to be removed from US app stores on Sunday, in line with the initial Executive Order, but in light of the latest developments, the Department of Commerce has now extended the timeline for the ban, giving it till September 27th to finalize details of the Oracle deal.
That means TikTok will likely continue to operate as normal, with users seeing no change as a result of the negotiations, at least at this stage.
In terms of what it means for the future of the app, as noted, it looks like the new ownership group has also avoided another key concern, with the deal seemingly allowing it to continue using TikTok's algorithms, despite the introduction of a new Chinese law which stops the export of technological advancements in foreign trade deals. Licensing the algorithms from ByteDance appears to meet the CCP's requirements, so TikTok should, more or less, continue on as it has been, with theoretically limited disruptions.
But then again, the new investment group will be looking to recoup its costs. That could see a bigger push on ads in the app, while the eventual separation of TikTok Global could see the new ownership group faced with challenges of content moderation and management, with limited assistance from the experienced leadership of ByteDance.
That, eventually, could see TikTok lose momentum, and Walmart's eCommerce push could also change the user experience.
Mostly, these are all 'what ifs' at the moment, and no one really knows what's going to happen once the full separation is in effect.
So, did the process achieve its intended goals?
In the initial Executive Order, the Trump administration raised concerns that TikTok could:
- "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."
- "Censor content that the Chinese Communist Party deemed politically sensitive, such as content concerning protests in Hong Kong and China’s treatment of Uyghurs and other Muslim minorities."
On the first point, it's possible that a separate TikTok Global could ensure database separation and keep US user info out of the reach of the CCP. Without knowing the full technical details, it's difficult to say, but some have already suggested that while it remains under Chinese ownership, the threat level remains here the same.
On the second, if TikTok Global utilizes the same algorithms, there's the same potential for censorship - or potentially, similar censorship by the US Government, which will, as noted, have newfound influence over how the app works.
But again, it's mostly speculative. What we do know, right now, is that President Trump has given the green light to the basis of the deal. Once its officially in place, we should have more insight into its workings.
There are also further questions left unanswered as yet - will TikTok Global be allowed back into the Indian market? Did the fact that Oracle's CEO served in the Trump transition team have anything to do with the deal? Will military personnel be able to use TikTok again?
There's more to come, but it looks like we're moving into the next stage of the process.
Interim TikTok CEO Vanessa Pappas also posted this video clip:
#WeAreTikTok and we are here to stay! pic.twitter.com/AaA8OhpvGx— TikTok (@tiktok_us) September 19, 2020