TikTok, the popular short video app owned by ByteDance, is facing potential shutdown in the United States due to legislation aimed at removing the app from app stores. According to sources, ByteDance would rather shut down TikTok than sell it off if all legal options are exhausted. This is because TikTok’s algorithms are crucial to ByteDance’s operations, making it difficult to sell the app with its algorithms intact.
While TikTok represents only a small portion of ByteDance’s total revenue and daily active users, the company prefers shutting down the app in the United States over selling it to an American buyer. A shutdown would have little impact on ByteDance’s revenue and would not require giving up its fundamental algorithm. In response to reports of a potential sale, ByteDance released a statement denying any plans to sell TikTok.
TikTok CEO Shou Zi Chew expressed confidence in winning a court fight against the legislation signed into law by President Joe Biden. The bill, motivated by concerns over data security and potential Chinese surveillance, passed unanimously in the US Senate. If Biden does not extend the January 19 deadline for a sale, ByteDance will have to find a buyer for TikTok’s US business without including its algorithm.
ByteDance does not publicly disclose its financial performance, but it is reported that the majority of its revenue comes from China. TikTok’s financials are not widely known, making it difficult for investment bankers to determine its value compared to competitors like Meta Platforms, Facebook, and Snap.
TikTok’s algorithms are also used in ByteDance’s domestic products, such as Douyin, which is the Chinese equivalent of TikTok. These algorithms outperform rivals like Tencent and Xiaohongshu. Divesting TikTok and its algorithms would be complex due to intellectual property licensing filed under ByteDance in China.
China has opposed the forced sale of TikTok. During a 2018 congressional hearing, China indicated that it would firmly oppose a forced divestment of the app, stating that it involves technology export and must go through administrative licensing procedures in accordance with Chinese laws and regulations.
ByteDance may struggle to find buyers for TikTok’s US assets, excluding the algorithms. China’s Export Control Law requires consent before exporting algorithms and source codes. While former US Treasury Secretary Steven Mnuchin has expressed interest in acquiring TikTok, ByteDance may encounter difficulties in finding suitable buyers.
ByteDance, founded in 2012, is a Chinese technology company known for TikTok. It operates other content platforms such as Toutiao and video platforms like Xigua Video and Huoshan. The startup uses artificial intelligence and machine learning to analyze user preferences and provide personalized content recommendations.
In conclusion, the future of TikTok in the United States remains uncertain. ByteDance is prepared to shut down the app rather than sell it if all legal options are exhausted. The company’s algorithms are essential to its operations, making a sale with the algorithms intact challenging. Furthermore, China opposes the forced sale of TikTok, adding another layer of complexity to the situation. ByteDance may struggle to find buyers for TikTok’s US assets, excluding the algorithms, due to regulatory restrictions and concerns over data security.