Key Takeaways
- TikTok has signed binding agreements with investors, including Oracle, Silver Lake, and MGX, for the sale of its US arm, creating a joint venture as part of a deal orchestrated by President Donald Trump.
- The deal is expected to close on January 22, with ByteDance owning 19.9% of the company, and a group of new and existing investors taking the remaining 35%.
- Oracle will oversee the algorithm that recommends videos in users’ feeds, which will be retrained using US user data to ensure the content feed is free from outside manipulation.
- The deal has faced pushback from lawmakers who want to see TikTok shut down in the US or more completely severed from ByteDance.
- The future of TikTok in the US has been in doubt since last year, when Congress passed a law mandating ByteDance divest its US operations over privacy and national security concerns.
Introduction to the Deal
The sale of TikTok’s US arm has been a highly anticipated and complex process, with the company finally signing binding agreements with investors, including Oracle, Silver Lake, and MGX. The deal, which was orchestrated by President Donald Trump, creates a joint venture that will operate as an independent entity with authority over US data protection, algorithm security, content moderation, and software assurance. According to TikTok’s chief executive, Shou Zi Chew, the US joint venture will be built on the foundation of the current TikTok US Data Security (USDS) organization.
Ownership Structure
The ownership structure of the new joint venture is complex, with ByteDance owning 19.9% of the company, which is the most allowed by US law. Larry Ellison’s database giant, Oracle, private equity group Silver Lake, and Abu Dhabi’s MGX will each control 15% of the company. A group of new and existing investors in TikTok will take the remaining 35%. The deal is expected to close on January 22, and it is unclear if the terms of the deal have changed since they were first announced. According to previous reports, ByteDance is expected to receive a 50% share of the app’s American profits, despite US shareholders owning the majority of the business.
Algorithm Oversight
One of the key aspects of the deal is the oversight of the algorithm that recommends videos in users’ feeds. Oracle will be responsible for overseeing this algorithm, which will be retrained using US user data to ensure the content feed is free from outside manipulation. This is a crucial technology that makes the app so popular with young people, and it has been a major point of contention in the negotiations. Under Chinese law, Beijing has control over the export of algorithms, and the country’s cyber security regulator has previously said it had agreed a framework for the TikTok deal that included "licensing the algorithm and other intellectual property rights" to the US.
Pushback from Lawmakers
The deal has faced pushback from lawmakers who want to see TikTok shut down in the US or more completely severed from ByteDance. Congress passed a law mandating ByteDance divest its US operations over privacy and national security concerns, and some lawmakers have expressed concerns that the deal does not go far enough in addressing these concerns. The future of TikTok in the US has been in doubt since last year, and it remains to be seen how the deal will play out in the coming months. Despite the pushback, the deal is expected to close on January 22, and it will be interesting to see how the new joint venture operates and how it addresses the concerns of lawmakers and users.
Global Implications
The deal has significant implications for the global operations of TikTok, with the US joint venture operating as an independent entity with authority over US data protection, algorithm security, content moderation, and software assurance. TikTok’s global entities will manage global product interoperability and certain commercial activities, including ecommerce, advertising, and marketing. The deal is also expected to have significant implications for the global revenue of ByteDance, with international revenues worth $40bn of the Chinese company’s overall 2024 sales of $155bn. The US TikTok arm provides the largest chunk of its overseas business, and the deal is expected to have a major impact on the company’s global operations.
Conclusion
In conclusion, the sale of TikTok’s US arm is a complex and highly anticipated deal that has significant implications for the company’s global operations. The deal, which was orchestrated by President Donald Trump, creates a joint venture that will operate as an independent entity with authority over US data protection, algorithm security, content moderation, and software assurance. Despite the pushback from lawmakers, the deal is expected to close on January 22, and it will be interesting to see how the new joint venture operates and how it addresses the concerns of lawmakers and users. The deal is a significant development in the ongoing saga of TikTok’s US operations, and it will have major implications for the company’s global revenue and operations.