It seems TikTok may not be out of the woods just yet, with various conflicting stories around the pending Oracle/TikTok deal.
On Saturday, US President Donald Trump told reporters that he had given the Oracle-lead deal for TikTok’s operations in the US ‘his blessing‘, which was enough for TikTok to put out two official statements about the app being ‘here to stay‘.
The President’s verbal approval seemed to be the final step in the negotiation process – but then, on Sunday, following an official statement from TikTok’s parent company ByteDance, things got a little murkier on the specifics of the proposed deal.
First off, ByteDance clarified that it will not be transferring algorithms and/or technologies to Oracle, or any other US company, as part of the deal.
As per ByteDance:
“The current plan does not involve the transfer of any algorithms and technologies. Oracle has the authority to check the source code of TikTok USA.”
So Oracle and its consortium partners will be able to use the source code as a reference point, but going on this statement, it seems that they will need to develop a new, unique algorithm for the platform – which could be problematic.
TikTok’s algorithm, which keeps users glued to the app, is seen as a key component of the platform’s success, and if Oracle, which has no social media experience, is forced to re-write or re-create is own version, that could have major impacts on its performance.
ByteDance is restricted in what it can transfer in this regard due to China’s new laws on the transfer of technology, including algorithms, in foreign trade deals, but the initial understanding was that by having ByteDance retain ownership of the platform, Oracle and Co. would be able to essentially license the source code, which would meet the legal requirements in this respect. That may not be the case.
And that’s just the first potential stumbling block for the new deal.
In addition to this, ByteDance also said that it was not aware of President Trump’s claim that it would be investing $5 billion into a new US education fund as part of the agreement.
President Trump touted the $5 billion investment as a key element in the deal. When originally announcing the Government’s action against TikTok, President Trump had called for the US Treasury to receive some form of payment for facilitating the eventual takeover deal, but transferring direct compensation to the government from commercial arrangements is not possible under US law. The $5 billion education fund seemed like a way to indirectly meet this request. Trump reportedly plans to use the funding to create a new ‘patriotic education commission’ to help re-establish national pride and identity.
But ByteDance says that it’s not paying it – which means it must be coming from somewhere else.
This, apparently, is another element that’s still being ironed out.
But the biggest potential stumbling block for the Oracle/TikTok deal thus far came on Monday, when President Trump stated that he would not be approving any deal for TikTok if its Chinese ownership did not fully sell its interest in the product.
As reported by The New York Times:
“Asked about reports that TikTok’s Chinese owner, ByteDance, would still own 80% of the service after the deal, Mr. Trump said that they would “have nothing to do with it, and if they do we just won’t make the deal.”
The current arrangement, as per reports, would see Oracle and Walmart take a 20% stake in a new ‘TikTok Global’ entity, which would be separated from ByteDance and launch as a new, independent company sometime in the new year.
That, according to reports, should be enough to meet the requirements of the US Government in separating the app, but the understanding many have reported is that ByteDance would still remain the majority owner of TikTok Global, at least for some time. Which may not be the case – and if ByteDance has no stake, and it’s not sharing its algorithms, that could also spell trouble for the future of the app in the US. If, of course, this is how the final deal ends up being constructed.
So, right now, TikTok is still under a cloud. The US Department of Commerce has extended its deadline for the removal of the app from US app stores by a week, so negotiators have a few more days to sort out the final details in order to get a deal through before it sees any impacts. But the depth of these potential concerns is significant, and not only for the immediate future of the app, but in the longer term as well.
If Oracle, for example, has to re-write TikTok’s algorithms, will that ruin the app? If ByteDance is forced out completely, earlier than expected, will that make the transition more rushed?
We still have at least a week of negotiations to come on the deal.