Insights: What TikTok’s Debacle Means For The World’s Fastest-Growing Social Media Site, And Everyone Else

By 09/16/2020
Insights: What TikTok’s Debacle Means For The World’s Fastest-Growing Social Media Site, And Everyone Else

On its face, the Donald Trump-forced “acquisition” of TikTok this week by database giant Oracle is both befuddling and potentially precedent-setting for any tech or social media company attempting to operate on a global scale.

It’s befuddling because originally the deal was positioned, back when Microsoft and Walmart were the leading candidates to make it happen, as an acquisition of TikTok assets in the United States and three smaller English-language territories. That was supposed to assuage alleged Trump administration national security concerns around possible Chinese government access to TikTok user data.

Oracle, a vastly wealthy corporation not known—ever—for running consumer-facing businesses, instead proposes to serve as TikTok’s “trusted technology provider,” according a proposal it submitted to the Treasury Department. Importantly in this whole mess, Oracle chairman and co-founder Larry Ellison, one of the world’s richest men, is also one of the few Silicon Valley billionaires who’s actually a friend and major donor to Trump himself. So too is Oracle CEO Safra Catz, who’s donated $130,000 to his re-election.


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The deal Oracle hopes to seal is essentially Oracle buying access to a customer, while taking that customer away from a major cloud-computing competitor, Microsoft, and fending off a third, Alphabet. TikTok thus becomes a marquee customer in Oracle’s back-of-the-pack cloud-computing service as it tries to catch up with those two market leaders and Amazon.

Some dealing is still being done. Some private-equity investors in TikTok parent ByteDance may join in, for instance. And Walmart reportedly still wants a piece, intrigued by all those millions of ardent users as it pushes harder into ecommerce.

Okay, but what about the thing that makes TikTok tick, that algorithm that does such a masterful job connecting users with videos they will want to watch? On Monday, TikTok issued a statement saying it believed the proposal would “resolve the administration’s security concerns.”

But will it satisfy the Chinese government’s own national security concerns? A couple of weeks ago, the Chinese hurriedly put in place a new law banning export of artificial-intelligence technologies without government approval. That includes the algorithm ticking at the heart of the TikTok beast.

So, to recap, many of the original investors will still be involved if the deal is approved. The algorithm that makes it go probably sticks with ByteDance. And all that’s really changed seems to be the cloud provider. If the algorithm isn’t part of the package but Oracle takes over in some fashion, how does TikTok operate in the United States? How long would it take for the  spun-off operation to create its own algorithm, and what would that experience be like?

More importantly for all the human beings out there, what would Build Your Own Algorithm mean for TikTok creators and users?  Would users and creators flee? Would that kill the site in the United States?

And if the algorithm does come along, say in some joint operating agreement between ByteDance and Oracle, how are they protecting TikTok’s cavalcade of users from the depredations of the (admittedly awful) Chinese government? That’s not so clear either. This is why it’s such a befuddling deal.

As for precedent setting, if the deal is approved without, you know, really fixing those national security concerns (because algorithmic absence), then it’s not a befuddling deal, it’s a political payoff/payback. Don’t forget that Trump is still mad at K-pop fans on TikTok who bragged about helping disrupt his disastrous Tulsa political rally back in June. Petty, yes, but it’s not like Our Only President has been above such things in the past.

Widespread reports suggested Trump wanted to scuttle AT&T‘s $85 billion acquisition of WarnerMedia because of his distaste for CNN. And Amazon accuses Trump of steering a massive $10 billion Department of Defense cloud services deal known as JEDI to…Microsoft. Amazon CEO Jeff Bezos, if you’ve forgotten, happens to own another Trump bete noir, The Washington Post.

All this uncertainty hasn’t yet significantly impacted TikTok users and viewership, early statistics suggest. Practically every day, Tubefilter, your favorite news site covering the influencer universe, is chock full o’ stories detailing yet more TikTok-related initiatives.

And mobile analytics provider App Annie said the company’s weekly active users numbers continue to climb, hitting 53.5 million the week ending Sept. 5, halfway into the sale process. That’s up half a million from a month earlier, and 3.5 million from mid-July.

Those numbers dwarf wannabe challengers such as Likee, Dubsmash, Zynn, and Byte, none of which had more than 1.7 million weekly average users, according to App Annie. Notably, though, Triller just signed a non-exclusive deal with TikTok’s biggest star, Charli D’Amelio, and the rest of her family.

Meanwhile, Facebook has copied TikTok twice (and reportedly was the straw that stirred up the administration’s security concerns when it couldn’t buy or bury TikTok). Facebook also just released Campus, which looks like the original Facebook while trying to seem less square and dead to teens than the main site, as well as ReelsInstagram’s TikTok copycat.

And now YouTube is jumping in with Shorts, because being the world’s largest video site (and most beloved by teens) wasn’t enough. Shorts launched in beta this week in India. India, you may recall, is a gigantic market that not incidentally just banned TikTok and 100 other Chinese-owned apps after a border skirmish in disputed Kashmir left 20 Indian troops dead.

As the India move and now Trump’s order suggest, it’s a fraught time to be a globe-girdling tech or entertainment firm. How to navigate, especially with the possibility of four more years of Trumpian crony capitalism? One approach is to be very friendly, as Ellison has done, and Mark Zuckerberg most likely did. It’s probably still useful to be an American tech or entertainment firm, despite the huge size of so many Chinese-built mobile apps. So companies can work on that, especially if Trump manages to get re-elected despite a horrendous year of anti-achievements.

But it’s also a fraught time for creators navigating yet another a geopolitical minefield. The best advice: diversify, like Charli D’Amelio is doing. If TikTok works for you, great. But it’s way past time to cross-pollinate and cross-market as strategically as possible onto other platforms, and also to get that line of books, podcasts, music, and merchandise up and going. This is no time to settle in anywhere.

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