The last few months have been challenging, to say the least, for short form video app TikTok.
Its Chinese owner ByteDance hasn’t exactly reaped the benefits of its rising popularity, as the US raised concerns over potential security risks and alleged links with Beijing, which have been repeatedly denied [1].
However, the intensity of the situation has risen to such a high level that one could draw similarities between TikTok’s recent woes in the US and Huawei’s increasingly dire situation in the country.
US woes
Earlier this month, President Trump issued an executive order forbidding “any transaction by any person, or with respect to any property, subject to the jurisdiction of the US,” with ByteDance. The ban, however, was due to come into effect 45 days after the order, giving the company a tiny window to explore options.
Expectedly, TikTok was shocked [2], claiming Trump’s move came “without any due process” and hinting at legal action in response.
President Trump has taken an even harder line since: last week, he signed another executive order [3] demanding ByteDance divest operations in the US within 90 days and destroy related data. The Committee on Foreign Investment in the US would also need to approve any sale.
Avoiding a ban
Over the past two years, ByteDance took numerous steps to avoid the current situation.
After merging TikTok with social media service Musical.ly [4] in 2018, ByteDance distanced itself from China by making the app unavailable in its domestic market. At home, it focused on operating Douyin, deemed a similar service with highly censored content.
And in an effort to focus on international markets instead, in May it appointed American businessman Kevin Mayer as TikTok’s CEO. A TikTok representative told Mobile World Live (MWL) “hundreds of employees and key leaders across safety, security, product and public policy” were based in the US.
More recently, the service pulled out of Hong Kong [5] following the imposition of a controversial national security law. It also established its first European data centre (in the Republic of Ireland) a move it claimed will protect user privacy and data.
TikTok’s options
The logical course for TikTok to keep running in the US appears to be an all-American set-up, a move suggested by US officials [6] prior to Trump’s order.
And software giant Microsoft has also kept an eye on the situation, exploring a purchase [7] of the app’s business in the US and several other markets. Under Trump’s original order, these talks must be finalised by 15 September.
In a discussion with the President, Microsoft boss Satya Nadella outlined the benefits a takeover would bring. He pledged user data will be protected by transferring it to the US and removing it from non-domestic markets.
Twitter emerged as another suitor [8] and reportedly had talks with ByteDance about a potential tie-up.
However, Mukul Krishna, digital media global head at Frost & Sullivan told MWL the valuation of TikTok’s US unit was very high, between $15 billion and $50 billion.
“It will be difficult for any company to buy it outright and it might need a group of investors”.
ByteDance is also said to have received a proposal from some of its investors including Sequoia Capital and General Atlantic to take over a majority stake in TikTok, Krishna noted.
The consequences
History shows a decision made by one country could affect the rest of the world. Following indications of a US ban, Nikkei Asian Review reported Japan’s government was also mulling restricting use of the app.
Another possible country to follow is Australia, Krishna said, however he added a widespread global restriction of TikTok was not likely.
In the US, the financial hit “would be big as it’s been reported that TikTok was expecting the US to contribute $500 million in revenue this year”, Krishna said.
Users in the US would also be affected as the offering was the most downloaded free app on iOS and the second most installed from the Google Play Store in the US on 27 July, figures by Sensor Tower showed.
Overall, the app has generated 188.5 million downloads in the US since July 2014, when it was called Musical.ly.
Craig Chapple, EMEA mobile insights strategist at Sensor Tower, predicted “a fight amongst publishers” to take TikTok’s place if a ban was imposed.
Both Chapple and Krishna pointed to Reels [9], the newly launched video feature at Facebook’s Instagram, as a likely contender
“Since 1 January 2014, Instagram has generated an estimated 316.3 million installs in the US alone, giving it a huge audience already, putting it in a solid position to engage users with TikTok-like features”, Chapple noted.
So, Facebook is primed to fill a TikTok shaped hole in the US, and increase its social media dominance further.
Can Microsoft, or even Twitter, emerge as its saviour?
Right now, time is TikTok’ing on the app’s future.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.
[1] https://www.mobileworldlive.com/featured-content/apps-home-banner/tiktok-hits-back
[2] https://www.mobileworldlive.com/apps/news-apps/tiktok-shocked-by-trump-ban
[3] https://www.mobileworldlive.com/featured-content/top-three/trump-gives-tiktok-owner-90-days-to-ditch-us-assets
[4] https://www.mobileworldlive.com/featured-content/apps-home-banner/muscal-ly-and-tiktok-come-together
[5] https://www.mobileworldlive.com/apps/news-apps/china-security-law-prompts-tiktok-hk-exit
[6] https://www.mobileworldlive.com/apps/news-apps/tiktok-urged-to-split-from-parent-bytedance
[7] https://www.mobileworldlive.com/featured-content/top-three/nadella-talks-tiktok-takeover-with-trump
[8] https://www.mobileworldlive.com/apps/news-apps/twitter-mulls-tiktok-tie-up
[9] https://www.mobileworldlive.com/apps/news-apps/facebook-reels-out-tiktok-rival-feature-worldwide
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