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TikTok’s Hour of Reckoning

The Trump administration’s ban on TikTok comes as an ominous sign for the global expansion of Chinese mobile apps

By NewsChina Updated Oct.1

On August 6, US President Donald Trump announced that TikTok posed a threat to national security. According to his executive order, the social media app would be banned from operating if its parent company, ByteDance, does not sell it in 45 days.  

After earlier threatening to ban TikTok from the US entirely, citing security and privacy concerns, Trump said on August 3 that TikTok would shut down on September 15 unless Microsoft or another American company purchased it. Microsoft announced on August 2 that it was in talks with ByteDance, TikTok’s parent company, to purchase its business in the US, Australia and New Zealand by the deadline.  

It remains unclear how Trump’s order to ban TikTok would impact the potential deal between Microsoft and TikTok. While negotiating with Microsoft, TikTok plans to sue the US government to challenge Trump’s executive order, National Public Radio reported.  

While details and the legality of the ban remain unclear, it marks a major escalation in Trump’s hostility toward Chinese tech companies. At the center of Trump’s battle is TikTok, the popular short-video app.  

Quick Success
Launched in 2017 globally and in the US a year later, TikTok has emerged as a social media powerhouse. As people around the world were under lockdown during the coronavirus crisis, the app experienced rapid growth.  

According to Sensor Tower, a mobile industry data firm, on April 29, TikTok has seen downloads of more than 2 billion globally, 8.2 percent of which came from US users. US-based digital marketing agency Wallaroo Media estimates the app has 800 million monthly active users worldwide and 80 million monthly active users in the US. In July, TikTok was the most downloaded non-gaming app worldwide, with more than 65.2 million installs, followed by Zoom, Instagram and WhatsApp.  

This was a 21.4 percent increase over the same period last year, and the US topped the country list with 9.7 percent of total downloads. According to investment banking firm Piper Sandler’s latest survey of US teens, TikTok is the third-most popular social platform behind Instagram and Snapchat, with 62 percent saying that they use the app on a monthly basis.  

Many attribute TikTok’s success to its parent company ByteDance’s focus on the entertainment value of its mobile apps. Established in 2012 by Zhang Yiming, a former Microsoft employee, Beijing-based ByteDance owns some of China’s most popular mobile apps, such as Jinri Toutiao (“Today’s Headlines”), one of the most popular news aggregators in China, and Douyin, the Chinese version of TikTok.  

Zhang Yiming, founder of ByteDance

Dual Strategy
Compared to China’s other internet giants, such as Tencent, Alibaba and JD.com, ByteDance has been particularly successful on the international market. ByteDance has made overseas acquisitions, including Flipagram in 2017, which was rebranded as Vigo Video, Musical.ly in 2018 and TopBuzz in 2019. ByteDance reportedly attempted to buy Reddit in 2016, but failed.  

Different from most popular Chinese mobile apps, which seek to enter international markets by expanding their home market user bases, ByteDance adopted a dual strategy. There are two versions of the app: one for the Chinese market and another for the rest of the world. This is different from the approach taken by WeChat. WeChat, arguably the most popular mobile app in China owned by Tencent, shares the same platform as its Chinese version, known as Weixin. As a result, its scope is limited to the Chinese diaspora and foreigners doing business in China.  

By comparison, TikTok, which shares the same features and functions with Douyin, has a separate platform. This dual strategy not only allows ByteDance to adapt to different regulations regarding content censorship in overseas markets but has helped to downplay its Chinese origin. 

But in the backdrop of rising geopolitical tensions, especially between China and other countries, there seems to be a limit on how far this strategy can go. Its growing popularity in the US eventually alarmed the government. In November 2019, the US government launched a national security probe into ByteDance’s US$1 billion acquisition of Musical.ly, a US app that later merged into TikTok, citing concerns over the app’s censoring mechanism and data storage practices.  

In response, TikTok said in a statement on October 25, 2019 that it stores all US user data in the US with backup redundancy in Singapore, stressing that all of its data centers are located outside of China, and none of its data is subject to Chinese law.  

In the meantime, TikTok created a lobbying team composed of former US congresspeople and reshuffled its management to bring in American executives.  

In February, Michael Beckerman, former president of the Internet Association, became TikTok’s vice president and head of US public policy. In April, Nick Tran, Hulu vice president of brand marketing and culture, joined TikTok to become its head of marketing for North America, In May, Kevin Mayer, Disney’s head of streaming, became TikTok’s CEO and COO of ByteDance.  

Strategic and Political 
Just prior to Trump’s executive order, Mayer said the company would reveal the algorithms it uses to sort and share users’ videos to increase transparency. He also challenged other tech companies to follow suit.  

But none of these efforts was enough to dispel concerns over its Chinese connections. According to Duan Zhirong, an assistant professor at the Tsinghua University School of Economics and Management, as data becomes a strategic asset, tech company expansion is increasingly subject to political scrutiny.  

“Be it national security or content censorship, the actual issue challenging TikTok is the control of big data,” said Duan Zhirong. “Given the development of the internet, countries around the world have become increasingly sensitive about the control of data.” 

Besides concerns over data security and personal privacy, Duan told NewsChina that TikTok is unique because of its young user base. As young generations become more politically active, the social media platforms they use are increasingly important for politicians.  

Some in the US speculated that Trump’s ban on TikTok is out of revenge after young people used the platform to troll a Trump campaign rally in Tulsa, Oklahoma in June. 

According to Professor Xue Li, director of the National Institute for Global Strategy at the Chinese Academy of Social Sciences, Huawei’s predicament is more serious. “Huawei’s 5G business is about internet infrastructure, which the US absolutely will not tolerate,” Xue said, “TikTok’s business is about internet apps, which is a far less sensitive field and still has some room for maneuvering.” 

But Xue said that the crisis should serve as a wake-up call to Chinese tech companies. “It has become a pattern that when the US has technological dominance and advantages, it will advocate for the free market and open competition, and when it does not have the advantage, it will emphasize the importance of national security,” Xue said.  

Beyond the US
While the fate of TikTok’s US business remains unclear, the company’s troubles have spread to other countries. On June 29, in retaliation for a border skirmish with China that left 20 Indian soldiers dead, India banned TikTok along with other 58 Chinese apps. With 611 million installs, Indian users accounted for about 30 percent of TikTok’s global presence. The ban cost ByteDance an estimated US$6 billion.  

Also in June, the European Data Protection Board (EDPB) set up a task force to investigate TikTok’s data processing activities and privacy practices in the European Union. On July 29, lawmakers in Japan also pushed to restrict TikTok and other Chinese-owned apps.  

In its latest move to detach from its Chinese operations, TikTok announced that it would set up its first data center in Europe with a US$500 million investment in Ireland. In a statement released on August 3, ByteDance said that is considering moving TikTok’s headquarters from China and the US to another country. According to a report from British newspaper The Sun, the company will move its headquarters to London.  

The question remains whether such a strategy will help ByteDance ease concerns over its ties with China. But as geopolitical tensions remain high, the company’s US market woes may be just the beginning. 

TikTok holds a launch party at NeueHouse Hollywood in Los Angeles, California, US, August 1, 2018

People use TikTok, Bangalore, India, June 30

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