It’s now official. Well, official as it can be.
On Thursday evening, The White House issued an Executive Order, signed by US President Donald Trump, which will effectively see TikTok banned in the US if it is not sold to a US-owned business by that time.
The Order details the case against TikTok, including claims of potential censorship and its process of gathering “vast swaths of information from its users”:
“This data collection threatens to allow the Chinese Communist Party access to Americans’ personal and proprietary information – potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.”
“TikTok also reportedly censors content that the Chinese Communist Party deems politically sensitive, such as content concerning protests in Hong Kong and China’s treatment of Uyghurs and other Muslim minorities. This mobile application may also be used for disinformation campaigns that benefit the Chinese Communist Party, such as when TikTok videos spread debunked conspiracy theories about the origins of the 2019 Novel Coronavirus.”
Last September, The Guardian published leaked details from TikTok’s moderation guidelines, which included instructions to censor videos that mentioned Tiananmen Square, Tibetan independence, or the banned religious group Falun Gong. TikTok said that these guidelines were never used for TikTok, but were designed for the Chinese-specific version, Douyin, and were outdated either way. Since then, various claims have been made about TikTok censoring content like videos about the Hong Kong protests, though on investigation, nothing has been proven.
As noted by tech analyst Ben Thompson, proving such would be difficult due to the way TikTok’s algorithm is constructed, but the concerns clearly remain regardless.
But TikTok, in its response to the EO, did not hold back in criticizing the US Government’s approach.
In a statement on its blog, TikTok said that it was “shocked'” by Executive Order, which it claims has been issued without any due process.
“For nearly a year, we have sought to engage with the US government in good faith to provide a constructive solution to the concerns that have been expressed. What we encountered instead was that the Administration paid no attention to facts, dictated terms of an agreement without going through standard legal processes, and tried to insert itself into negotiations between private businesses.”
The latter point relates, of course, to US President Donald Trump saying that “a very substantial portion” of the price eventually paid for TikTok, if it does indeed get bought out by a US company, will need to come to go to the US Treasury for facilitating the deal. Whether that’s legal, or even possible, remains up for debate.
TikTok also reiterated its commitment to transparency, outlined recently by new CEO Kevin Mayer, and refuted concerns around its Chinese Government links.
“We have made clear that TikTok has never shared user data with the Chinese government, nor censored content at its request. In fact, we make our moderation guidelines and algorithm source code available in our Transparency Center, which is a level of accountability no peer company has committed to. We even expressed our willingness to pursue a full sale of the US business to an American company.”
Clearly frustrated by the process, TikTok finally notes that it will seek all forms of recourse in combating the US Government’s order, if it comes to a possible ban.
“This Executive Order risks undermining global businesses’ trust in the United States’ commitment to the rule of law, which has served as a magnet for investment and spurred decades of American economic growth. And it sets a dangerous precedent for the concept of free expression and open markets. We will pursue all remedies available to us in order to ensure that the rule of law is not discarded and that our company and our users are treated fairly – if not by the Administration, then by the US courts.”
The tone of TikTok’s messaging resembles the recent statement from Mayer, in which he criticized Facebook, and other tech players, for their actions to impede the app’s growth. And really, backed into a corner, there’s not much else TikTok can do – sure, taking on the US Government to secure the future of your app in their jurisdiction seems risky. But TikTok does have some valid points – unless the US Government has intelligence beyond what’s been shared publicly, the case against TikTok on several fronts is based on unsubstantiated fears.
That doesn’t necessarily make them less plausible, but in a legal sense, they may not hold up.
At present, Microsoft is pushing to buy TikTok in its entirety, which analysts estimate will cost it between $10b and $30b. But is TikTok really worth that? The app is popular now, but it’s arguably in a similar position to what Vine was at peak, when Vine had 200 million US users. TikTok has about half of that, while the app also recently lost 200m users in India, and has much smaller user bases in other markets.
Overall, you’re looking at paying $30 billion for a platform with, maybe, 300 million users right now, and no defined path towards full monetization, nor an effective eco-system to pay its top creators – who could generate more revenue for their content on YouTube or Instagram (which just rolled out its TikTok-clone ‘Reels’ in more markets).
That seems risky – for comparison, Twitter is currently valued at around $29.8b, and arguably has a much more viable market position and business model. If Microsoft is going to spend so much, it needs to be seeking some solid assurances.
Of course, theoretically, Indian regulators would allow TikTok back into the market if it were no longer Chinese owned – yet even then, there’s no guarantee that users will return to the app if and when it is re-introduced.
Then there’s also Microsoft’s other business interests in China.
The CCP is reportedly very unhappy with how the US Government is forcing a Chinese company to sell part of its business to a US group. If Microsoft ends up being that group, the Chinese Government could look to punish the tech giant for its involvement. Microsoft has over 6,000 employees in China, though the region’s impact on Microsoft’s overall revenue is minimal, according to the company.
It may have to assess just how ‘minimal’ it really is if it goes through with a TikTok deal.
Is TikTok set for major revenue growth in future? Could Microsoft take it to the next level? Will Instagram’s Reels de-rail the app?
There are still a lot of key questions for Microsoft, or indeed, any potential buyer to weigh up.
And they now have only 45 days to do so. Before the next stage.
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