ByteDance would rather shut down TikTok in the US rather than sell it, new report reveals
According to sources familiar with the matter, TikTok's parent company, ByteDance, may opt to shut down the app rather than sell it if U.S. legislation bans the platform from American app stores. The algorithms that power TikTok are crucial to ByteDance's operations, making a sale of the app with its algorithms highly improbable, the sources said.
After all, TikTok accounts only for a small portion of ByteDance's overall revenues and daily active users (DAU). Additionally, the US represents only about 5% of ByteDance's global DAUs and accounts for about 25% of TikTok’s overall revenue. A shutdown would have a limited impact on ByteDance's business, and the company would not have to relinquish control of its core algorithm.
TikTok shares its core algorithms with ByteDance's domestic apps like Douyin, and these algorithms are considered superior to those of ByteDance's rivals, including Tencent and Xiaohongshu. Separating TikTok from its algorithms would be complex, as the intellectual property license for these algorithms is registered under ByteDance in China.
ByteDance has made it clear that it will not sell one of its most valuable assets, its algorithm, to rivals. This stance reflects the company's commitment to protecting its "secret source."
However, TikTok's CEO, Shou Zi Chew, is confident that the company will win the legal battle against the US legislators.
The bill, which was overwhelmingly passed by the U.S. Senate and signed into law by President Joe Biden aims to ban TikTok, citing concerns that China could access Americans' data or use the app for surveillance. The legislation requires that TikTok divest from the US or exit the market and sets a deadline of January 19 for a sale.
That is one day before President Biden's term ends. However, the President has the authority to extend the deadline by three months if ByteDance shows progress.
The Trump administration previously attempted to ban TikTok in 2020, but the courts blocked the move. Since then, TikTok has faced partial and attempted bans in the U.S. and other countries.
China has indicated that it would likely reject a forced divestment of TikTok. According to a spokeswoman for the Ministry of Commerce, any sale or divestiture of TikTok would involve technology export and must adhere to Chinese laws and regulations.
ByteDance's main assets, excluding algorithms, include user data and product operations and management.
Former U.S. Treasury Secretary Steven Mnuchin has expressed interest in putting together an investor group to buy TikTok, but ByteDance may struggle to find buyers for TikTok's U.S. assets without its algorithms.
