ByteDance prefers TikTok shutdown rather than selling to US firms
What's the story
ByteDance, the Beijing-based parent company of TikTok, has publicly announced its decision not to sell or divest from its US operations. This declaration comes in response to a new US law that could potentially ban TikTok unless sold by ByteDance. The company confirmed the news on its official Toutiao account in China, saying, "ByteDance doesn't have any plans to sell TikTok."
Major challenge
Foundational algorithms present a barrier
Earlier this week, TikTok revealed its intention to challenge the new US law in court, labeling it as "unconstitutional." This announcement surfaced amidst speculations that ByteDance was considering selling TikTok without its core algorithm. These algorithms driving TikTok are crucial to ByteDance's business model. They are closely integrated with ByteDance's other domestic applications, posing difficulties in their separation. This is the primary reason why the company is not willing to sell TikTok to an American entity.
Business impact
Withdrawal from the US market
Despite TikTok only constituting a small portion of ByteDance's revenue and user base, the company is hesitant to sell it to a US buyer. There are indications that ByteDance might withdraw from the US market entirely. A potential TikTok shutdown in the US could have a minimal effect on ByteDance's overall business while preserving their control over their proprietary algorithm.
Uncertain future
Finding investors for TikTok could prove challenging
The future of TikTok in the US remains uncertain as ByteDance navigates regulatory pressures and national security concerns. The company, valued at $268 billion in December, continues to generate most of its revenue in China, primarily from its other apps like Douyin, the Chinese version of TikTok. Despite interest from potential buyers such as former US Treasury Secretary Steven Mnuchin, finding investors willing to purchase TikTok's US operations without its core algorithms could prove challenging for ByteDance.