TikTok: From a viral app to being considered a security threat

• President Trump declares a ban on TikTok if US operations not sold to an American company by 20^th September
• TikTok chooses Oracle over Microsoft

For the past few months TikTok has been in news for all the wrong reasons. From being a rage of sorts, TikTok has gone from being a viral app that attracted hundreds of millions of users to being deemed a national threat in a time span of barely two years. TikTok, perhaps China's first social media hit globally, works on a concept of capturing attention of users via short filmed videos of people lip syncing, goofing around to music and even dancing. The app's raging success, however, has attracted scrutiny from several politicians who are concerned that the Chinese government could potentially make use of the app in order to not only spy on citizens but also spread political propaganda. While so far TikTok has not been found doing anything malicious with user’s data, but many deem it fundamentally unsafe to be sharing data with a company that could possibly allow Chinese authorities to intercept the same. TikTok on its part has vehemently denied any wrong-doing and has repeatedly maintained its stance of not having shared data with the Chinese government nor having the intention of doing so even if it were asked. The company claims it stores American user data on servers based out of Singapore and the U.S.

After India banned the app stating security reasons, several other countries too seemed to have mulled over the possibility, including Europe, Australia and the US. Around early August President Trump issued a warning about banning the app unless an American firm bought its US operations, citing national security concern. While a few congressional aides were concerned about a possible backlash by younger voters against the party owing to the ban of the app which has 100 million American users, President Trump remained steadfast in his resolve to ban the app if TikTok could not find an American buyer. TikTok, now a roaring success in the US, came into the US for the first time in August 2018 after its parent Company ByteDance acquired a competitor- Musical.ly and then merged the two apps.  The Company’s Monthly Active Users (MAU) have grown ~800% since January 2018, when the app was used by about 11 mn American users. Around a year later, that figure had skyrocketed to ~27 mn and by about June 2020, a few months into the pandemic & quarantine phase, TikTok’s user base of U.S. MAU’s had soared to 91+ mn. The Company now has more than 100 mn MAU’s along with 50 mn daily active users (DAU).

According to news reports, over the past few days, ByteDance Ltd. had been considering bids from two potential buyers- Microsoft (which has teamed up with Walmart) and Oracle. ByteDance was mandated to come up with a proposal in front of the White House administration in line with a 45-day timeline stipulated as part of the executive order signed by Trump on August 06th 2020. In addition, TikTok was also issued a November deadline to divest its US assets based upon CFIUS’ (Committee on Foreign Investment, an interagency US security panel) recommendation. On its part, TikTok also sued President Trump, arguing that the proposed ban was "a pretext for furthering the President's broader campaign of anti-China rhetoric in the run-up to the U.S. election."

The move has received growing criticism from the Chinese authorities. In a counter-act, China recently, added “civilian use” to its list containing technologies that it restricts for exports. This comes for the first time since 2008, that China had adjusted its list on export bans/restrictions and added 23 more items. The move was seen as an attempt to prevent TikTok from being able to sell the technology that runs the algorithm behind the app’s "For You" feed, which learns user behavior over a period of time in order to showcase the most relevant videos.  In fact, it was also being reported that China’s stance was to rather allow TikTok to be banned in the US rather than allowing its sale to an American company.

After a rather dramatic month over diplomatic feud, news reports that came in just today, suggested that TikTok has chosen Oracle after rejecting Microsoft’s proposal (possibly due to the Chinese government’s recent signs of opposition). While the precise nature of the agreement between the two has yet not been revealed yet, it is said to not be declared as an “outright sale”. Oracle is set to be announced as a “trusted partner to TikTok” and helping TikTok with its cloud technologies. Whilst Microsoft had been proposing a deal to buy off TikTok’s operations not just in the US but also in Canada, Australia as well as New Zealand, the deal with Oracle deal seems to be more of a corporate restructuring instead of an outright sale. It is now clear that the talks swayed away from the probability of a full acquisition, and thereby Oracle was chosen as a technology partner instead.

Oracle is known to have a history of collaborating with the US government, thereby making this partnership with TikTok a rather strategic move amidst the growing tide of Chinese opposition both in the White House and Congress. While the deal still needs to get an approval from the White House and CFIUS’ (Committee on Foreign Investment), for now, TikTok seems safe in the US in an ongoing clash between the superpowers, however only the coming few days should shed more light on the deal.