TikTok has less than two weeks before it must sell or shutter its U.S. operationsat least according to the Trump administration, citing national security concerns.
The social media app, which gained an initial following with teens sharing dance videos before becoming an international sensation, will be required to shut down in the U.S. if it doesnt sell by Sept. 15.
What happens next is unclear. But what is clear is that the sites future has become one of the tech industry biggest dramas in years.
It involves Trump battling with Chinas government over foreign trade. It also involves some of the biggest U.S. companiesOracle[/hotlink], Microsoft, and Walmartlining up as suitors in an effort to gain an edge over their rivals.
For its part, ByteDance, TikToks Chinese owner, is caught in the middle.
Its between a rock and hard place, frankly, Mark Shmulik, an analyst at investment bank AB Bernstein. Its a very unenviable place to be.
In an effort to escape its predicament, TikTok has sued the Trump administration, which it says has deprived it of due process. Meanwhile, Chinas government has entered the fight by enacting a new law that would require any sale of TikTok to first be approved by Beijing.
Heres everything you need to know about TikTok and moment of reckoning.
The big companies bidding on TikTok would benefit from the apps young user base, ad capabilities, and e-commerce potential. Of the apps 100 million monthly U.S. users, most are teens, a demographic many brands want to reach.
Meanwhile, social commerce, the emerging business of selling products through social media, is a growth opportunity. ByteDance already has its eyes on that business and is pushing TikTok and Douyin, its sister site in China, to add more e-commerce.
This is the future, Shmulik said about social commerce. Legacy companies want to participate in the future. And If you cant build, it buy it.
In recent years, Walmart has been beefing up its e-commerce arm and reach new customers. Meanwhile, Microsoft already has a social media businessLinkedInand has the technical chops to build a social commerce operation.
So if [social commerce] is the future of e-shopping, what more perfect combination is there than a retailer like Walmart and Microsoft? Shmulik said.
Michael Lasser, an analyst at investment bank UBS, said the joint Walmart-Microsoft bid may ultimately lead to Walmart accomplishing one of its key goals. Capturing more hearts and minds of the younger generation is a really an important part of Walmarts outlook, Lasser said.
But there also could something else at play: Walmart is increasingly challenging Amazons dominance in online retailing by growing its own online business during the pandemic and rolling out a subscription service called Walmart+ that mimics Amazons popular Prime. Meanwhile, Microsoft is also butting heads with Amazon over cloud computing, the gigantic business that involves supplying data center computing power to corporate customers.
The combination of Walmart and Microsoft would represent two companies going up against a common enemy, said Tom Keiser, CEO of Hootsuite, a tool that helps people manage their social media. And this wouldnt be the first time the two have teamed up. Walmart chose Microsoft Azure as its cloud provider in 2018.
Retailers have always had a deep mistrust for Amazon, Keiser said. That has spilled into AWS.
Trump has long complained about Chinas trade practices, which he says have unfairly benefitted China. His concerns: U.S. companies have limited access to operate in China, while Chinese companies operate freely in the U.S. Hes also worried about the theft of intellectual property from U.S. companies and the access the Chinese government may have to data collected from the U.S.
When U.S. operations arent allowed to operate [the same way] in China, but the reverse is true, its a very real argument we probably should be having anyway, Shmulik said.
But young TikTokers may have put Trumps sights on TikTok by allegedly sabotaging his campaign rally in Tulsa in June. TikTok teens along with Korean pop fans claim to have registered for hundreds of thousands of tickets so that the arenas seats would remain empty. As a result, only about 6,000 people attended the event, and Trump ended up canceling a second rally in Tulsa that was scheduled for the following night. Trump now may be seeking payback.
Meanwhile, Trump has expressed concern over what the Chinese government may do with data TikTok collects from U.S. users and the threat that could pose for national security. In June, India, citing similar concerns, banned TikTok and other apps owned by Chinese companies.
Similar to Trump, China likely sees TikTok as an important piece in its game of chess with the U.S. over trade.Following Trumps order that TikTok sell or shutter, the Chinese government crafted a response that complicates matters: Any deal involving ByteDance would have to cleared by Beijing.
The new law is meant to protect what Chinas government considers to be sensitive technologies, including artificial intelligence. Without its artificial intelligence and other sensitive technologies, TikTok is nothing more than a name. Youd effectively be buying a shell, Shmulik said.
Experts say the situation could play out three different ways: ByteDance could sell TikTok and leave the two governments to argue over the deals specifics. Or ByteDance could sign a deal with a U.S. buyer before the deadline to hold off the U.S. government, but then find a way to delay the process in hopes that a new administration with different policies is elected in November.
One final possibility is that ByteDance closes its U.S. operations, to avoid itand Chinafrom acquiescing to the Trump administration.
I think its 80% chance a deal doesnt go through, Shmulik said. I think theyre hoping for an eleventh-hour save.
Keiser said he expects any resolution to be delayed far beyond the Sept. 15 deadline. I would guess this drags into next year, he said. I dont think theres a quick and easy wrap up to this.
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