Tweens and Generation Z’ers can rest easy. Their favorite social media app is saved, for now.
American Silicon Valley stalwart Oracle Corp won the bidding for the video-sharing app’s U.S. operations. It managed to beat out a bid from its rival, Microsoft. However, the deal doesn’t involve an outright sale. Instead, TikTok’s Beijing-based parent company will name Oracle as its official “trusted tech partner” in the U.S. This approach will help the two companies avoid running afoul of U.S. and Chinese regulators.
The deal’s full terms and financial details haven’t been released to the public just yet. However, early reports indicate it’s likely to be a fairly complex arrangement. Sources say the agreement will function more like a partnership than a sale. Although, the two companies believe it will be enough to satisfy the U.S. government’s data security concerns. However, the White House and the Committee on Foreign Investment in the U.S. still need to approve the deal before it becomes official.
The negotiations to acquire TikTok’s U.S. operations began last month when President Trump said he would ban the app on September 15 unless Bytedance sold its U.S. operations to a trusted U.S. tech firm. TikTok is one of the fastest-growing social media platforms in the United States. So, many of America’s tech giants showed interest in making a deal.
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China’s New Restrictions
However, shortly after the Trump announcement, China complicated the situation by issuing new restrictions on artificial intelligence export. This included TikTok’s core algorithm. Overcoming the Chinese restrictions was a significant challenge for TikTok’s suitors. However, Bytedance and Oracle believe they have a deal that will work for both sides.
American regulators’ biggest concerns center around Bytedance’s data privacy. The Chinese government has an ownership stake in Bytedance. Additionally, many U.S. officials feared China’s authoritarian communist regime would be able to access and potentially exploit millions of Americans’ user data. TikTok has repeatedly stated it did not receive requests to share data with the Chinese Chinese government. It also mentioned that it would refuse any request to do so.
However, the relationship between Bytedance and TikTok is more concerning than it may seem on the surface. Investigative reports from the Epoch Times revealed Bytedance employs a significant number of high-ranking Chinese Communist Party officials, and the Chinese government regularly uses the app to spread misinformation and propaganda.
It’s currently unclear whether the deal will include the transfer of TikTok’s algorithms. Two unnamed inside sources cited by the Wall Street Journal said it was more appropriate to call the deal a partnership rather than an acquisition. That statement suggests the agreement doesn’t include a significant transfer of assets, so there is currently some doubt over whether Oracle will obtain the highly coveted algorithms.
Oracle One-Up’s Microsoft
— BallerAlert (@balleralert) September 14, 2020
Microsoft was Oracle’s biggest challenger in the effort to acquire TikTok, but it wasn’t willing to compromise on the algorithm transfer. If they were going to give Bytedance billions of dollars, they wanted the algorithm included in the deal. Oracle possibly won the contract by offering some flexibility in this regard, which would also explain why early reports describe the deal as more of a partnership than a buyout.
In Mid-August, President Trump expressed support for a potential Oracle deal after hearing that the Silicon Valley pioneer was launching an effort to acquire TikTok. “Well, I think Oracle is a great company and I think its owner [Larry Ellison] is a tremendous guy, a tremendous person,” President Trump said to a reporter who asked about Oracle’s interest in the app. “I think that Oracle would be certainly somebody that could handle it.”
TikTok’s U.S. has more than 100 million monthly users, and America is one of Bytedance’s most lucrative growth markets. TikTok has roughly 689 million users throughout the globe, but the company is not profitable at the moment.
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