About TikTok

TikTok is a short video entertainment app, owned by Chinese firm ByteDance which allows users to post videos of varying content from dance crazes to life advice. The app is most popular with teenagers and young adults. TikTok has 500 million active users, of which 100 million reside in the US – with more than 2.3 billion downloads it’s safe to say it’s popular [1]. Throughout this article I will outline the pressure the Trump US administration has put on ByteDance to sell TikTok’s US operation to a US firm. I will detail the complications involved in coming up with a deal that is agreeable with the US administration.

Pressure From the US

President Trump, US head of state, threatened to remove TikTok from the Apple Store and Google Playstore with an executive order in September 2020 [2]. Under this order, US residents would no longer be able to download the video sharing app. As a result, US residents who already had TikTok would see a deterioration in their user experience as they would be unable to get the necessary updates. The aim of this executive order was to eradicate Chinese influence in America. Trump has expressed concerns that TikTok may be undermining US national security and would feel more comfortable if TikTok was owned by a US company. TikTok owners ByteDance have been given until 12th November 2020 to ‘divest its interest in TikTok in the US’ [3]. Critics have pointed out the strategic placement of this deadline as it is after the 2020 US Presidential elections. By having the deadline after the election date Trump can appease younger voters and still maintain his hardline stance.

Fair or Not?

It’s possible that suspicion surrounding TikTok is unwarranted as the app is mostly used by teenagers. Evan Medeiros, a Georgetown professor and ex – White House adviser to former US president Barack Obama, has argued that the Trump administration has “(let) their anxiety and attitude (towards China) get the best of them” [4]. It’s possible that Trump is fixated on TikTok as a wider indication of a struggle against Chinese power amidst the ongoing US – China trade war. But US experts say that the information gathered by TikTok’s algorithm is threatening US security as big data leads to intelligence.  Essentially the US government suspects that the data is being used for espionage which the US government has been keeping a close eye on since 2019. James Lewis, a cyber expert at the Center for Strategic and International Studies argues that the US is in a “spy war with China”, which TikTok is one of the sources providing the data [5].

Forced Acquisition?

If TikTok wants to continue to operate in the US, where ⅕ of their active users reside, they need to have some US ownership. The key contenders for TikTok’s acquisition are detailed below:


Microsoft is a US vendor of computer software and hardware for computers, mobiles and gaming systems as well as providers of various cloud services [6]. Microsoft were proposing buying the US arm of the TikTok business, which would include extracting TikTok from parent company ByteDance. This would be a complicated process as TikTok shares a lot of its code with Chinese sister app Douyin. This deal was attractive as Microsoft is trusted by both the US and China. Microsoft’s biggest research & development centre outside the US is based in Beijing and ByteDance owner Mr Zhang is Microsoft alumnus. Microsoft has been described as a “white knight”, as it is a desirable option for both sides [7]. Additionally, Microsoft has experience of owning the video calling app Skype, which could be transferable in managing TikTok.

However, there was disagreement surrounding the valuation of TikTok, with the two sides trying to settle on a valuation between $15 billion – $30 billion. TikTok is also yet to be profitable in the US as a lot of money has been spent on promotion and content [8]. Additionally, with the proposed deal, Mirosoft would be operating the US  arm of TikTok and ByteDance would still have the majority stake in TikTok, as they will own the app in most of its other geographical domains. This begs the question of continuity of quality across the franchise as ByteDace and Microsoft make different updates to the app causing a discontinum in user experience quality across the world. However, the US President’s executive order threatening to ban downloads of TikTok derailed Microsoft’s acquisition process of TikTok which meant that Oracle triumphed in the race against the clock for TikTok.


Oracle is an American computer technology company selling software and technology products [9]. Oracle has proposed buying a minority stake in TikTok whilst ByteDance, TikTok’s Chinese parent company, maintains the majority stake. The idea is that the US operation of TikTok is meant to run at an arm’s length from ByteDance. Most importantly the US algorithm will be kept away from the Chinese owned element of the business – essentially forming a Chinese wall in the business [10]. Under the agreement between TikTok and Oracle, TikTok will be based in the US – providing 20,000 job opportunities [11].

What remains unclear about this deal is the actual division of TikTok’s assets and revenues between Oracle and ByteDance as well as the percentage owned by Oracle. Additionally, the technical difficulty of extracting TikTok’s back end technology from the wider ByteDance Chinese based app franchise will prove difficult given the time constraints [12]. A further complicator to this deal is gaining US approval. If Trump accepts this deal he may appear weak as the Chinese parent company ByteDance will still have a majority stake in TikTok, but if Trump doesn’t accept the deal he risks upsetting younger voters in the run up to the US 2020 presidential elections [13]. However, TikTok have said if this Oracle deal is completed they would want to list on the US exchange in a year [14]. The US IPO of TikTok may act as an effective appeasement method for the US administration as they will no longer have to worry about Chinese interference through TikTok.


The acquisition of TikTok is a unique case as it was prompted by a government disagreement. TikTok was essentially forced to sell off parts of its business to continue to operate in the US. This type of governmental pressure complicates the acquisition process and disqualifies many bidders, as can be seen by the fall out of Microsoft’s bid. Moreover, government involvement in the acquisition of companies is becoming more commonplace. This could be indicative of the increasingly transnational nature of firms, especially technology firms, raising sovereign security issues. It’s possible that government triggered acquisitions may become more commonplace in the future of corporate acquisitions.

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