ByteDance doesn’t begin or end with TikTok.
A Trump-card up the sleeve, deepening geopolitical divides, much more enterprise technology besides...
One of China’s most influential technology giants is facing an uncertain future in the US market; but its sprawling technology empire remains a bright spot for China’s competitive ambitions, rather than a dampener.
What’s happening? TikTok and its parent company ByteDance’s bid to hold onto its US-based market of 170 million or so people was dealt a blow this week, as a federal court rejected its appeal against a forced divestment.
For TikTok’s American users, including a third of all adults and nearly two-thirds of those aged 18 to 29, is inching closer.
TikTok is also embroiled in the shock cancellation of presidential elections in Romania, after far-right candidate, Calin Georgescu, surged in the polls; a result of Russian manipulation on the video-sharing platform, and channeling frustration in the country.
Concerns abound among US officials that China could use TikTok to compromise US citizens, implant software vulnerabilities, influence its population and gain exploitable insights on how American society functions. The events in Georgia will amplify these concerns for some security hawks.
So what? TikTok’s role in geopolitics has never been so fraught, with one Western democracy annulling elections on the basis of a foreign government’s attempts to influence voters through the platform, and another pushing ahead with a ban on national security grounds.
What’s next? An expensive legal dispute at the highest level of the US justice system. The case is pending for review by the US Supreme Court, which could have the final say on whether national security concerns should override free speech arguments.
ByteDance has also lodged an emergency appeal to temporarily halt court proceedings, perhaps hoping that the incoming president, Donald Trump—who, contrary to many of his hawkish advisors, has expressed opposition to a ban on TikTok—will offer a reprieve of some kind.
Either way, TikTok would probably remain a global powerhouse with hundreds of millions of users in Indonesia, Brazil, Europe and elsewhere, after the dismembering of its American market share.
So.. to sell? A forced divestment of one of the hottest media properties in history—and of one of the hottest predictive recommendation algorithms in history—would likely attract a frenzy of bids.
One unusual prospect is Project Liberty, a consortium of investors led by billionaire Frank McCourt and backed by World Wide Web inventor Tim Berners-Lee, which has indicated its interest in a “peoples bid” for the short-form video platform “not influenced by foreign actors” and “not beholden to Big Tech…”
McCourt, a real estate developer, sports team owner, and philanthropist, has said he believes that TikTok is a viable platform with or without the proprietary algorithm being included in a sale. If it were stripped of ByteDance’s intellectual property, the value of TikTok’s brand is arguably not so hot.
Or not to sell? ByteDance has said that it would have no intention of selling TikTok in the event of a ban in the US, and considers the court ruling as “unconstitutional.”
ByteDance’s broad technology business isn’t dependent on revenue or access to data through TikTok, but the company appears confident that it’ll win the day eventually. TikTok’s Singaporean CEO, Shou Zi Chew, has gone as far as to say that “the facts, and the Constitution, are on our side… rest assured, we aren’t going anywhere.”
The Beijing question. Chinese authorities have painted the proposed ban on TikTok as an act of aggression by the US. Beijing may elect to block a sale completely, using export controls that it has put in place in recent years in response to the US’ expanding toolkit of measures.
Such a move could force TikTok to shut down in the US, which would be a significant blow for marketers and social media influencers who have built followings and revenue streams through the platform. While it would trigger some pushback in China, and compromise ByteDance’s financial interests, it still might be more palatable to Beijing than allowing TikTok’s proprietary technology (chiefly the platform’s recommendations algorithm) to fall into the hands of a foreign entity.
The Washington problem. TikTok has drawn the ire of successive US administrations and Congress, at a time of bipartisan opposition to China unprecedented since the Cold War. Not even the elaborate Project Texas initiative was enough to diffuse suspicions among US lawmakers—despite billion-dollar promises to bring TikTok’s operation onto American soil, allow Oracle to host the TikTok algorithm along with all US-based user data, and give review capabilities to US officials.
Questions remain as to how TikTok’s institutional investors—including Milner, SIG, Sequoia China, SoftBank, KKR, Tiger Global, Fidelity and others—will respond to a forced divestment, and whether they will have any leverage in influencing the nature of a deal.
Does China really care? Yes, but for an app run by a limited liability company out of Los Angeles and Singapore, and only 20 percent owned by a Chinese entity, TikTok has become more a political hate object than it is a major part of the apparatus of China’s technology ambitions. The rest of ByteDance itself is a different story…
Beyond TikTok. ByteDance’s Doubao, an AI chatbot, has surged to 51 million active users, becoming the world’s second most popular AI application behind OpenAI’s ChatGPT.
Generating profit. ByteDance’s profit also outstripped that of its chief Chinese rivals, Tencent Holdings and Alibaba Group, earlier this year. That was despite economic headwinds. ByteDance is one of several companies pouring billions in artificial intelligence hubs in Malaysia, the fastest-growing compute and data infrastructure market in Southeast Asia.
Generative models. ByteDance has likewise emerged as a leader in the race to deploy enterprise generative artificial intelligence applications and is increasingly a cornerstone of China's tech ambitions. It is betting on generative models to bolster its business; as the FT reported this week, ByteDance is China’s biggest buyer of Nvidia chips for artificial intelligence workloads, and a top destination for the country’s computer science practitioners.
It is also a leading cloud software service provider, with a growing enterprise footprint covering Dali Education, Lark, business services platforms BytePlus and ByteDance’s “Ji Meng AI” platform is a particularly promising AI technology lab.
Concerns will linger that ByteDance needs to grow outside of China. TikTok’s Chinese counterpart, Douyin, and other softwares provided in China, have hit a saturation point, at the usage ceiling in the domestic market, while app-based usage and revenue overseas is being hotly contested by Instagram, YouTube, Snap and other challengers.
The upshot? ByteDance’s US-based business faces an existential threat. Although TikTok’s parent company could absorb the loss of its US operations without really blinking, a number of its other apps are liable to be caught by other US policy initiatives seeking to restrict the ability of apps hosted within the borders of one of the US’ foreign adversaries from operating in the US.
What we’re reading:
A new policy report from AIxGEO on moving beyond the disabling effect of competitive dynamics in the artificial intelligence governance field.
An intriguing announcement from Google on Willow, a quantum qubit error correction breakthrough.
A optimistic, and compelling, projection about the year to come in artificial intelligence from Sequoia Capital.
What we’re looking ahead to:
6 - 7 February: The Inaugural Conference of the International Association for Safe and Ethical AI, Paris, France.
10 - 11 February 2025: AI Action Summit in Paris, France.
11 - 13 February 2025: World Governments Summit 2025, Dubai, United Arab Emirates.
12 February 2025: Chief AI Officer Summit UK, London.
April 2025 (expected): G7 Digital Ministerial, Canada.
2 - 4 June 2025: AI+ Expo and Ash Carter Exchange in Washington, DC.
9 - 11 July 2025: AI for Good Global Summit.
"Concerns abound among US officials that China could use TikTok to compromise US citizens, implant software vulnerabilities, influence its population and gain exploitable insights on how American society functions."
For this specific reason, it is critically important that Bytedance not be forced to divest TikTok because it sets a horrific precedent for all multinational companies and will ultimately hurt American companies.
If TikTok's divestment goes through, the EU and India could suddenly start openly worrying that the US government could use Google and Meta services to compromise European and Indian citizens, implant software vulnerabilities, influence its population and gain exploitable insights on how European/Indian society functions (paraphrase).
The US must remember that it is not the only country in the world concerned about foreign influence. The post-WW2 global system has helped create unprecedented levels of peace and prosperity for billions of people around the world, but it is fragile and must be protected.