U.S. President Donald Trump is giving Microsoft until the middle of September to work out a deal with China’s ByteDance to own and operate TikTok in the United States, Canada, Australia, and New Zealand. The administration is concerned that Chinese tech firms collect data from U.S. consumers and corporations and send that data to a server in Beijing. It is this possible tie to the communist Chinese government that has led the U.S. to call companies like Huawei and ZTE national security threats. This could be the reason why the president prefers to see the short-form video app in U.S. hands or banned from the U.S. altogether.
A class-action lawsuit filed by parents of over 70 U.S. children who use the app claim that it gathers data including facial features, the kids’ locations, and their contacts. The suit alleges that this information is quietly sent to servers in China, although the Chinese government is not specifically mentioned.
While Microsoft seems to be the only U.S. company that has expressed interest in shelling out the big bucks to buy TikTok, Axios reported that other U.S. firms are believed to be interested in the app, which has been installed over 2 billion times from the Google Play Store and the App Store. One of the companies that are reportedly looking at a deal to buy TikTok is Apple.
Axios’ Dan Primack wrote that he has been told by multiple sources that Apple is interested in TikTok. He did note that none of these sources works inside Apple and pointed out that TikTok’s app works on both iOS and Android. Primack later wrote that he was told by Apple that there are no discussions underway with ByteDance and that the company isn’t interested in TikTok. A purchase of TikTok would certainly cost Apple more than the $3 billion that the tech giant spent to purchase Beats Audio back in 2014. That is the largest acquisition ever made by Apple which usually restricts purchases to smaller companies with a technology that is one to two years away from being used in a product like the iPhone.
While TikTok would seem to fit into Apple’s largest business segment, Services, the apps in that unit generate revenue from recurring subscription fees paid by the user. Instead, TikTok is a free app supported by advertisers. Even if we were to assume that Apple’s denial of any interest in TikTok was to be a negotiation ploy, it is hard to see how the company and its customers would benefit from such a purchase.
By putting a September 15th deadline on completing a deal, Trump might have pained himself into a corner. Because of TikTok’s valuation, this is not an easy deal to complete. If September 15th comes and goes without a transaction taking place, the president is going to be forced to ban an app that is immensely popular even among those of voting age. Meanwhile, the implications of a deal are having effects everywhere. In China, TikTok parent ByteDance is being branded as a traitor for agreeing to sell TikTok to a U.S. firm. While TikTok itself doesn’t operate in China, ByteDance is a Chinese firm.
In the states, TikTok users are jumping to rival platforms. Short-term video app Clash launched months earlier than planned to take advantage of the confusion surrounding TikTok and Instagram’s Reels is also close to launching. Snapchat is taking on TikTok with a service it is testing, and there are other apps already available such as byte and Triller. A 15-year-old TikTok user named Kyle Thomas told the Journal, “I spend all of my time on it. As much as it is my job, it’s also my entertainment. If I can’t have it, I wouldn’t be sure what to do.”
Yesterday, President Trump made a comment about the U.S. Treasury collecting a percentage of any deal that results in the purchase of TikTok by a U.S. company. White House economic adviser Larry Kudlow said, “It may be that the president was thinking because the Treasury has had to do so much work on this, there are a lot of options here. I’m not sure it’s a specific concept that will be followed through…Regarding fees or anything like that, all that remains to be seen.” Having the U.S. government profit from what the Chinese government sees as a forced sale of TikTok is sure to make the current relationship between the two economic powers much worse.