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ProBeat: The takeover of TikTok will not take place



When I wrote about the forced takeover of TikTok last month, I set out what everyone wants. The Trump administration wants trouble for TikTok (and China), Microsoft wants TikTok’s data (and algorithm), and parent company ByteDance wants to be responsible for its own fate (and revenue). Oracle has since established itself as a potential acquirer (which makes even less sense than Microsoft as a buyer), and China is starting to toss its weight around. Much has happened, and yet we got no closer to a resolution before US President Donald Trump’s expiration date on September 15. A month ago, I didn’t think Microsoft would buy TikTok. Now, I don’t think we’re going to see a TikTok acquisition at all.

7;m not saying this because CNBC reported that a deal was announced last week and then nothing happened. I also don’t read too much in this week’s reports: Wall Street Journal According to ByteDance, the Trump administration is talking about avoiding a sale of its U.S. TikTok operations, while Bloomberg says ByteDance will likely miss the deadline. (Update at 10:50 a.m. Pacific: According to Reuters, China prefers to close TikTok in the US instead of a forced sale.)

For me, all of these reports merely point out the reasons against a deal continues to rise. Meanwhile the arguments to the A deal was never there from the start – they were artificially imposed. Aside from the fact that forcing foreign companies to sell their most prized possessions is inherently problematic, here are the barriers that hinder a TikTok acquisition.

Trump card

This whole brouhaha started when Trump gave Microsoft 45 days to seal a TikTok deal. This is insufficient time for a US company to make an acquisition that was never on the table in its wildest dreams, let alone one as complicated as that of a social app from a Chinese company with users around the world. Such pressure certainly makes potential parties talk, but it also makes them less likely to bring up all the dirty details that would normally take months to work out.

Next, Trump wants to lower the selling price of TikTok. If one ignores the dangerous precedent such a demand sets, what pocket will this disc come from? Neither party has reason to pay what, in Trump’s own words, is “key money” – an illegal property search fee. Demand just makes a deal less attractive.

Tick ​​tock

TikTok is suing the Trump administration over its order banning U.S. transactions with TikTok from September 20. What will the courts say about this – and will they say it in the next week? If the courts don’t take action, TikTok clones stealing their users will soon steal their US revenue, making the app even less attractive to potential buyers.

To make matters worse, all acquisition talks focused on TikTok’s North American, Australian and New Zealand activities. This means that a potential acquirer will not get the entire app, as well as all users and data. Not only would TikTok be separated from ByteDance, but TikTok’s other regions as well, adding to the long list of technical challenges that such a deal would bring.

Speaking of which, no one can articulate exactly how TikTok’s data will be moved by ByteDance to a new parent company. TikTok applies machine learning to this data to determine which videos you are most likely to engage in. This allows you to post similar content or content that people with similar preferences will like. However, it’s not clear whether TikTok’s AI algorithm – the real value of a potential business – would come along for the ride.

Xi

It is no coincidence that China added AI technology to its export control list late last month, including “Recommendations for personalized content based on data analysis”. Translation: TikTok’s AI algorithm is not for sale. In the event that the news does not get through, China’s state media quoted a government adviser as saying ByteDance should study the new export list and “seriously and carefully” consider ending contract negotiations. This is just another battle in the AI ​​arms race where the US is ahead and China is getting closer.

The US has a problematic deadline and finder fee, the lawsuit and technical challenges are of no help, and China wants to reject any kind of acquisition that affects TikTok’s most valuable asset.

In addition, China’s President Xi Jinping can and will play the long game. While Trump is constrained by an annoying issue known as the U.S. Constitution (Amendment XXII limits the office of president to two terms), Xi removed the president’s term limits in 2018.

Like everyone else, I have no idea what will ultimately happen. Trump could save face by announcing that an agreement has been reached with no further follow-up. (He’s certainly made technical announcements that he hadn’t made before.) Or ByteDance could try to appease Trump by announcing some sort of “deal” and then pulling his feet until an alternative is reached. That would fit nicely in Xi’s playbook.

What I can say is that “the TikTok acquisition” looks less and less like a deal every day.

ProBeat is a column where Emil grumbles about everything that hits him this week.




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