New York City, USA – US lawmakers are gearing up to potentially vote on a second bill within a span of two months that puts Chinese-owned ByteDance, the parent company of TikTok, in a difficult position – either sell its US business or face a ban.
The concerns surrounding the potential transfer of data about millions of Americans to China have been the driving force behind congressional efforts to separate TikTok from its Beijing-based company. Despite TikTok’s claims that ByteDance does not act on behalf of China, the app’s immense popularity in the US has intensified tensions between Washington and Beijing.
With approximately 170 million Americans spending at least an hour daily on the platform, including a significant percentage of teenagers who are active users, TikTok has become a central point of contention. The prospect of a ban on TikTok poses challenges concerning free speech and enforcement, particularly in a crucial election year.
Analysts predict a potential roadblock in Beijing’s efforts to block a sale, raising questions about potential buyers for TikTok’s US operations valued at an estimated $100 billion. The fundamental question remains: Will ByteDance agree to sell its most successful app?
ByteDance’s attempts to allay US concerns, embodied by TikTok’s Singaporean CEO Shou Zi Chew’s reassuring statements before Congress, have not been entirely successful. Despite these efforts, the US House of Representatives previously voted to grant ByteDance six months to divest TikTok to non-Chinese owners, with a potential revisit of the measure this weekend, coinciding with discussions on aid to Ukraine, Israel, and Taiwan.
The valuation of TikTok for a sale presents a challenge due to the lack of financial transparency as a privately-owned company. Reports suggest TikTok generated between $16 to $20 billion in US revenue in 2023, constituting a significant portion of ByteDance’s overall revenue. Analysts anticipate a distressed sale scenario if a transaction occurs amid current political risks and lack of liquidity.
ByteDance’s ownership of TikTok’s AI-driven recommendation engine emerges as a critical factor for potential buyers, with the algorithm regarded as essential to the app’s success. The deal’s inclusion of this element poses a significant hurdle, as the algorithm’s ownership and functionality remain subject to negotiation.
Amid discussions of a sale’s implications, the integration of a US-owned TikTok with the app’s global operations raises questions about content sharing and potential regulatory challenges. The interplay between national security concerns, foreign influence, and the app’s functionality underscores the complexities involved in TikTok’s potential divestiture.