TikTok on the Clock

By Alasdair Richmond

Known for the renegade, influencers, and a Willy Wonka impersonator, TikTok has soared to success increasing its quarterly downloads just over 10 times from Q2 2016 to Q4 2019. Having taken over the social media industry with short 5-60 second videos, TikTok has certainly changed how media is produced and consumed, especially by Gen-Z. Favouring short videos, TikTok quickly became the most downloaded app in the United States– a place held for 5 consecutive quarters. Ironically, this was only to be dethroned by Disney+, TikTok’s CEO’s former employer.

This concept of short videos isn’t new. Vine, shutdown in January 2017, was famous for the same thing. Then Musical.ly, another video app came along but was bought out by ByteDance (TikTok’s parent company) in November 2017 for roughly US$1 Billion. There appears to be a stream of very similar platforms making big waves but then falling silent. The question is, is it now TikTok’s time to fall silent?

On the 6th of August Donald Trump signed an Executive Order which aims to ban TikTok in the United States, claiming that TikTok “captures vast swaths of information” and “location data” all of which would allow the “Chinese Communist Party access to American’s personal […] information”. This EO gives ByteDance 45 days to sell its US operations or shut down. Though this has been amended in a succeeding EO to 90 days (a 12th November deadline), a lot is left to be desired. After this deadline “any transaction by any person” with ByteDance would be prohibited. This rather vague phrase is open to a lot of interpretation. Does a transaction count as placing ads with TikTok or would even watching videos on the platform be covered? A senior administration official has suggested that even downloading the app would be covered by this EO. But would a ban like this even be possible?

“It would be impossible to actively delete TikTok from every device in the United States”, said Hank Schless a security manager at Lookout. To remove the app, major tech companies such as Apple and Google would have to cooperate in removing the app from the App Store and Google Play Store respectively. Given Apple’s record in not cooperating with Federal authorities this might not be viable. Apple famously refused to unlock an iPhone in February 2016, a move which set the precedent for Apple’s, and other tech companies’, privacy stance. Looking at India, where TikTok was banned earlier this year, the app was not forcibly removed. TikTok voluntarily removed the app from that territory. It’s hard to imagine a situation where TikTok would voluntarily remove its platform from territories worth 16% of its active user base, nor a world where tech companies would aid the US government in doing so.  

Even Mark Zuckerberg has spoken against the ban saying it would set “a really bad long-term precedent”. Banning a foreign company’s app from US territories is a step enough but it opens up the possibility of silencing US companies’ apps and limiting free speech. “The privacy and security concerns with platforms like these are real, but we should be wary of setting a precedent that would give this president, and every future one, broad power to interfere with Americans’ access to media.” Said executive director, Jameel Jaffer, of the Knight First Amendment Institute at Columbia University. It is concerning that this move to ban TikTok came after the platform was used as an impromptu news station during the Black Lives Matter movement.

Even the claims this EO stands on are unstable. TikTok itself is not any worse than other social media apps in collecting users’ data. Analysis shows that TikTok does not capture any more data than other popular social media sites. Most people have Facebook, Instagram, Spotify and many other platforms on their phones, all of which collect personal data. This collection of data is not a new phenomenon. Even the fear of the Chinese Government and the oversight they might have of ByteDance’s data is irrational – U.S. user’s data is stored in the U.S. and Singapore. In their complaint TikTok pointed out “as the U.S. government is well aware, [TikTok has] taken extraordinary measures to protect the privacy and security of [users’ data], […] by erecting software barriers that help ensure that TikTok stores its U.S. user data separately from the user data of other ByteDance products.” Rather than any National Security issue, TikTok instead threatens the American monopoly on tech companies. The U.S. tech sector is now worth more by market cap than the entire European market. The absurdity of the claim that TikTok is a threat to national security has caused TikTok to file a complaint in federal court. But assuming TikTok does go ahead in selling its U.S. operations, what would a US-Rest-of-World TikTok divide look like?

Currently there are two major factions said to be in talks with ByteDance over purchasing TikTok’s US operations: Amazon, and Microsoft and Walmart. Microsoft and Walmart have teamed up together to try and outbid Amazon which would give Microsoft the foot into the social media industry it needs. Whereas Microsoft was late to the search engine party losing out on a trillion-dollar industry, expanding into social media – especially social media aimed at a younger generation in comparison to LinkedIn (owned by Microsoft) which is aimed more at the working adult – would please shareholders. Certainly, Walmart’s shareholders approved of the announcement with Walmart shares hitting a 52-week high of US$139.35.

Though this high has taken a tumble recently with China announcing new restrictions on artificial-intelligence technology exports. This list covers technologies such as content recommendation, text analysis, speech modelling and voice-recognition. Any of technology on the list can’t be exported without a licence. A Chinese government trade advisor was quoted as saying ByteDance should “seriously and cautiously” consider whether or not it should halt its sales negotiations. As TikTok uses many of these features technologies, these new restrictions could potentially destroy any deal ByteDance may have been coming to.

Microsoft isn’t just bidding for the U.S. operations of Tiktok, but also those of New Zealand, Australia, and Canada. Nobody has ever tried to split a social network like this and even though these four countries have large user bases, they make up less than a third of TikTok’s global users. Splitting TikTok like this into a Microsoft-TikTok and a ByteDance-TikTok would require extensive and costly work in rebuilding infrastructure and teams. Essentially there would be two separate apps. If you wish to place an ad, you’d have to do it twice. If you want to send a TikTok from a UK account to a US account, you might not actually be able to do. It would require extensive engineering work.

This would also be a massive blow to the value of TikTok. Though it’s valued at around US$75 billion, splitting the user base like this would mean any investment would be spread out over a smaller pool of users. Microsoft-TikTok could presume to have the same operating costs but much less profit and far fewer users. With ByteDance owning TikTok across the rest of the world, it is hard to imagine how Microsoft-TikTok would scale up except as a data mining enterprise – exactly why this split is happening.

Whilst it is unclear who will be the leading bidder for TikTok in the coming weeks, and if TikTok’s complaint in federal court will go anywhere, it is fairly certain any sort of split would be extremely messy and costly. Requiring massive amounts of co-operation from ByteDance, the Chinese government, and the US government, it frankly seems unachievable.

The views expressed in this article are the author’s own, and may not reflect the opinions of The St Andrews Economist.

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