The big news to come out of this weekend and what many will be following for the next 6 weeks is the federal government looking to curtail the risks of the popular Chinese social media app Tik Tok by either banning the app entirely, or forcing a sale to a US firm. This is a huge step forward in the speculations of Tik Tok as a national security risk and following suit of other countries who have taken action against what many believe to be a potential Trojan Horse for Beijing espionage.
Tik Tok is the biggest social media platform since Snapchat and in the last 3 years has competed with Facebook in global downloads and users. It is really the lone argument in the last decade to prove that there may not be a social media monopoly and that it is possible for new entries into the market. The only problem is the national security risks that the Chinese owned company poses, as it collects data and personal information that is suspect to be shared with the Chinese Communist Party. This is why Secretary of State Mike Pompeo and the federal government has been very adamant in restricting the availability of the app.
One of the proposed solutions in keeping Tik Tok available in China’s largest active international market would be the force sale of Tik Tok to a US based company. The current leader seems to be Microsoft with other players, like Apple, interested in the acquisition as well.
This is an unprecedented move regarding international mergers & acquisitions as the US federal government has granted a timeline of September 15 until further action is taken against the app. That is 1/2 the craziness of this deal, while also President Trump floating the idea that the federal government should get a cut of the sales price. He has compared this as the US government helping provide a lease between a landlord and a tenant. It’s a very intriguing point but it does change how many will view future, international M&A’s and we are not sure what the Chinese response to this would be. Ultimately, it would be a US firm giving money to the government, though, so in theory it should only drive the price up higher from a negotiating standpoint for Bytedance. It’s a very confusing situation that no one really knows what type of path it leads toward in the future.
President Trump is correct in when he says he is the only person of his position who would think to take a rake in the deal. I don’t think the amount of money that the govt. would collect will even make a dent in our growing debt crisis, but it is a fair position from a pure business standpoint.
And honestly, I wouldn’t be surprised if Trump is floating this idea around because he doesn’t want a deal to get done in the first place so he can end up putting a ban on the app all together. That would send a message to China, and the world, about social networking spyware being deployed around the world. The WSJ notes that “any app is one update away from becoming a spy operation“. So yes, if Microsoft acquires the platform it would in theory be in much more secure hands, but the idea of data privacy and security is still at the forefront of the worries with Big Tech. It is better that the data isn’t being vacuumed to Beijing, though.
Another interesting alternative I heard would be Tik Tok detaching from Bytedance and becoming an independent, US, entity that files for an IPO. This won’t be able to be achieved with the given timeline, but I feel like this would be a good solution that puts Tik Tok in secure hands and keeps it active for the 100million US users. It also helps create new competition in this Big Tech anti-trust debate, but clearly this plan won’t get accomplished.
So, as the future of this app hangs in the balance, we will see the many influencers and users potentially experiment with new platforms to diversify the outlets in which they have grown a following. It will be interesting to see where this someday takes us.
Not surprisingly, there are reports that China is not happy with this stance that the US has taken, even though they have restricted US technology in their country as well. Trump has shown that the times of the United States not reciprocating treatment that the CCP puts on us are over, and we will hopefully work to come to fair treatments of each other.
National security is clearly at the forefront of this debate so I believe it is an interesting case study when looking at how technology impacts both the private and public sector as we go forward. This is yet another move in the escalating technological Cold War that we see ourselves in with China.
Freedom will prevail, but it’s up to us to pave that path.