President Trump signed an executive order forcing the owner of TikTok, ByteDance, to sell to a U.S. company if they wanted to continue operating in the United States. While TikTok is challenging the order, they’re also considering complying with it. The order itself may or may not be legal, but TikTok has been considering selling for some time. Some U.S. users feel that TikTok’s close ties to the Chinese government mean the service is unreliable. If TikTok could put up a barrier between itself and the Chinese government by selling to an American company, they could win over these users.
However, the Chinese government doesn’t want to let their data hog go.
ByteDance has assured users that it’s not giving data to the Chinese government, however, ahead of a sale, a new Chinese law may prevent ByteDance from selling off TikTok. It seems China is trying to protect their data pipeline after all. It could halt a sale, or at least break down TikTok into smaller sections, ones that could be sold, and ones that will keep their data and technology in China. The pipeline of user data, facial recognition technology, and machine learning would stay in China. This may not appease Trump.
The fate of TikTok lies between the Chinese government, eager to hold on to as much data as they can, the U.S. government, looking to flex muscle, the courts, who may decide that the entire executive order is illegal, and TikTok, who’s still trying to find a U.S. buyer anyway.
What’s going to happen to Gen Z’s favorite social network?
China’s New Law
China unveiled a new law that could stop exports of AI technology. Specifically, content suggestions, text analysis, and voice recognition. These are the technologies that make a company like TikTok valuable to buyers. The content-driven platform is based around suggesting videos from people users aren’t following. This allows trends to spread rapidly, and helps predict what people will be interested in. From a sales, advertising, or branding perspective, that’s incredibly valuable data collection. China may have made the most attractive aspects about TikTok a Chinese exclusive.
This wasn’t unintentional. Government adviser Cui Fan spoke to the government-owned Xinhua News Agency. He advised ByteDance stop sales talks for TikTok altogether. He stated that, even if ByteDance sells to a U.S. company, the transfer of their technologies would fall under this new export rule, and would be illegal unless approved by the Chinese government. China may hold on to their data pipeline.
While ByteDance searches for a U.S. buyer to follow U.S. law, Chinese law may make that sale illegal. TikTok could face charges, damages, or banning in two of its largest markets.They’ve stated that they will “strictly follow” the new Chinese export laws, though that could stop or delay their sale to a U.S. buyer. Even if they sell off TikTok, the parent company, ByteDance, would still own the technology used to make suggestions and collect data. That would fall squarely under the new law controlling exports of data collection and analysis software.
Possible Buyer Selected
Despite these new requirements, TikTok is continuing talks. In fact, they may have selected one, and could announce a sale this week. The top buyer we’ve heard so far has been Microsoft. However, Oracle and even Walmart have made offers. Walmart would partner with Microsoft on a deal worth as much as $30 billion to be a partial owner in the service. The reason is obvious: data collection and advertising. Walmart may want to challenge Amazon in the online sales space, and to do so, they’re going to need a lot of data to improve their online offerings.
The deal is immanent, and Trump initially gave TikTok until mid-September to complete the sale, though may give the company more time.
What Happens Now?
To be honest? We’re not sure yet. TikTok’s buyers may not be interested in a deal if it doesn’t include their data collection features. The U.S. government may not be okay with a deal that leaves the Chinese government open to continue spying on American users. TikTok may not be legally allowed to do what anyone wants them to do, though it does seem like the company still wants to sell. It’s possible that TikTok doesn’t care about specifics at all. They could just want to sell to sanitize the brand so ByteDance can continue providing data collection and analytics.
Even after a deal, TikTok may not become a “safe” social network to use for those concerned about giving data to the Chinese government. If what we’re hearing is true, TikTok has selected a buyer and we could hear details as early as this week. What that will mean for the company between two nations at odds with each other is another story.
Sources
- Joe Fingas, Engadget
- Rita Liao, TechCrunch
- Jody Serrano, Gizmodo
- Dan Thorp-Lancaster, AndroidCentral