Thursday, April 25, 2024

ByteDance prefers TikTok shutdown in US over sale: Report

TikTok parent would rather have it shutdown in US than have it sold to a US buyer with algorithms, Reuters reported.

The algorithms TikTok relies on for its operations are deemed core to ByteDance overall operations, making a sale of the app with algorithms unlikely [File: Dado Ruvic/Illustration/Reuters]

Published On 25 Apr 2024

TikTok owner ByteDance would prefer shutting down its loss-making app rather than sell it if the Chinese company exhausts all legal options to fight legislation to ban the platform from app stores in the United States, Reuters reported citing four sources.

The algorithms TikTok relies on for its operations are deemed core to ByteDance overall operations, which would make a sale of the app with algorithms highly unlikely, the sources, who are close to the parent, said on Thursday.

TikTok accounts for a small share of ByteDance’s total revenues and daily active users, so the parent would rather have the app shut down in the US in a worst-case scenario than sell it to a potential American buyer, they said.

A shutdown would have limited impact on ByteDance’s business while the company would not have to give up its core algorithm, said the sources, who declined to be named as they were not authorised to speak to the media.

ByteDance declined to comment.

It said late on Thursday in a statement posted on Toutiao, a media platform it owns, that it had no plan to sell TikTok, in response to an article by tech platform The Information saying ByteDance is exploring scenarios for selling TikTok’s US business without the algorithm that recommends videos to TikTok users.

In response to Reuters request for comment, a TikTok spokeswoman referred to ByteDance’s statement posted on Toutiao.

TikTok’s CEO Shou Zi Chew said on Wednesday the social media company expects to win a legal challenge to block legislation signed into law by President Joe Biden that he said would ban its popular short video app used by 170 million Americans.

The bill, passed overwhelmingly but the US Senate on Tuesday, is driven by widespread worries among US lawmakers that China could access Americans’ data or use the app for surveillance.

Biden’s signing sets a January 19 deadline for a sale – one day before his term is poised to expire – but he could extend the deadline by three months if he determines privately owned ByteDance is making progress.

ByteDance does not publicly disclose its financial performance or the financial details of any of its units. The company continues to make most of its money in China, mainly from its other apps such as Douyin, the Chinese equivalent of TikTok, separate sources have said.

The US accounted for about 25 percent of TikTok overall revenues last year, said a separate source with direct knowledge.

ByteDance’s 2023 revenues rose to nearly $120bn in 2023 from $80bn in 2022, said two of the four sources. TikTok’s daily active users in the US is also just about 5 percent of ByteDance’s DAUs worldwide, said one of the sources.


Algorithms not for sale

TikTok shares the same core algorithms with ByteDance domestic apps like short video platform Douyin, three of the sources said. Its algorithms are considered better than ByteDance rivals such as Tencent and Xiaohongshu, said one of them.

It would be impossible to divest TikTok with its algorithms as their intellectual property licence is registered under ByteDance in China and thus difficult to disentangle from the parent company, said the source.

ByteDance also would not agree to sell one of its most valuable assets – its “secret source” – to rivals, said the four sources, referring to the TikTok algorithm.

In 2020, the Trump administration sought to ban TikTok and Chinese-owned WeChat but was blocked by the courts. The short-form video app has since faced partial and attempted bans in the United States and other countries.

China indicated it would be likely to reject a forced divestment of the TikTok app during a US congressional hearing in March last year.

“China will firmly oppose it [the forced sale of Tiktok],” said a spokeswoman for the Ministry of Commerce at a news conference in Beijing in late March in 2023.

“The sale or divestiture of TikTok involves technology export and must go through administrative licensing procedures in accordance with Chinese laws and regulations.”

China in 2020 unveiled the Export Control Law and the final text extended the definition of “controlled items” from prior drafts. According to state media, the amendment ensures that the exports of algorithms, source codes and similar data are subject to an approval process.

Excluding algorithms, TikTok’s main assets include user data and product operations and management, said two of the people.

ByteDance, backed by Sequoia Capital, Susquehanna International Group, KKR & Co and General Atlantic among others, was valued at $268bn in December when it offered to buy back approximately $5bn worth of shares from investors, Reuters reported at the time.


Life after TikTok: Why ban would be buzz kill for viral beekeeper


By Ana Faguy & Rachel Looker,
BBC News, Washington
Aimee Aubin 
Erika Thompson says TikTok has given her the opportunity to teach tens of millions of viewers about bees

US President Joe Biden has signed legislation that could lead to a potential TikTok ban in the US, leaving many of the platform's creators panicked about their future. TikTok has said it will challenge the "unconstitutional law" in court, which could delay a ban for several years. The legislation gives ByteDance, the platform's Chinese owner, nine months to sell the app before it could be blocked for its 170 million US users. Several US lawmakers have raised concerns that TikTok shares user data with the Chinese government. The company has denied those claims. Content creators on the platform say they fear a ban would affect their livelihoods and limit people's access to new information. Here's how a potential TikTok ban would affect four TikTok creators. A Texas beekeeper When Erika Thompson posted her first bee removal video on TikTok in 2020, it received 24 million views in 24 hours. Ms Thompson, of Smithville, Texas, said TikTok has given her the opportunity to teach tens of millions of viewers about the insects by taking viewers inside hives. "My life changed with the push of a button," she said.

The 38-year-old is the owner of Texas BeeWorks, a company she launched before she began posting on the social media platform.

But the platform has now become a significant source of revenue for Ms Thompson, who travels around the world teaching people about bees. She is able to offset the cost of her bee removal work through the income she generates on the platform and provide all her bee removals for free. While Ms Thompson views herself as a beekeeper first and a content creator second, she says a ban on the platform would limit who she can educate about bees. "To me that's really sad," she said. "TikTok has given me the opportunity to be the voice of bees - which is arguably the most important species on Earth- for an entire generation of people."

A TikTok scholar Trevor Boffone describes himself as a "dancing teacher" in his social media bios where he has over 300,000 followers. He went viral on TikTok in 2019 for posting videos replicating trendy TikTok dances in the classroom with his high school students. Mr Boffone, of Houston, Texas, resigned from his teaching job last year and now calls himself a TikTok scholar, running TikTok accounts for local businesses and publishing books about the culture of the social media platform. The 38-year-old said he will lose the majority of his livelihood if the app is banned.


Trevor Boffone describes himself as a "dancing teacher" in his social media bios where he has over 300,000 followers

"The people who are making these decisions about banning TikTok - the way they talk about TikTok shows that they think that it is this silly, meaningless place where teenagers are hitting dance challenges," he said.

"But there's so much more education, rulemaking, community building that is taking place on this platform." Mr Boffone said he feels the government's efforts to ban TikTok is an overstep. "Singling out TikTok because it's owned by a Chinese company- it just to me wreaks of a digital Cold War," he said. A taco queen Ilse Valenzuela, 35, was trying to make ends meet after the pandemic left her and her husband without jobs. The pair then began selling tacos at a corner store in Phoenix. Ms Valenzuela's small business went viral when a customer posted a TikTok of the taco shop. Fast forward four years, she has opened three brick and mortar shops with a fourth on the way, has 10,000 followers on her TikTok account and a videographer who helps put content together.

Now that a ban on the platform looms over creators' heads, she's concerned - but also confident the platform won't disappear since it has millions of active users. And while she has loyal customers, her TikTok videos serve as a reminder to come and "get their fix" of tacos. "[TikTok] took our business where it needed to go," Ms Valenzuela said. "I'm on every platform and none of them are giving me the result that TikTok does and I don't pay for it, I'm not paying for my posts to go viral." A disability advocate Disability advocate Tiffany Yu, 35, gives her nearly 130,000 TikTok followers an inside look at what it's like to navigate life with a paralysed arm. Over the past four years, Ms Yu's TikTok following has led to brand deals, an upcoming book and, most crucially to her, a way to educate people about her life experience.

Tiffany Yu
Disability advocate Tiffany Yu, 35, says her TikTok following has led to brand deals and an upcoming book

While Ms Yu, based in Los Angeles, said she's sad about the potential end of the platform in the US, she's also confident that people in the creator community will work around the potential ban. "As disabled people, we are some of the most creative, problem-solving people out there," Ms Yu said. "I know we'll figure it out, because we always have." Already, Ms Yu said creators in the disabled community have mobilized and plan to take action if the impending ban comes to fruition. "We just feel sad and propelled into action," Ms Yu said of the disability creator community. "It makes me really excited to see people … get involved and figure out a way to keep [TikTok]."

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