TikTok’s ‘moment of truth’ is coming, wide-ranging consequences are expected
ByteDance’s scrutiny (BDNCE) TikTok has increase in recent days as legislators around the world have ordered the social network to be removed from government devices and US lawmakers have threatened to ban the app purely about national security concerns.
Whatever happens to TikTok, its “time of validation” is likely to happen sooner, and the consequences of any decision could be widespread, investment firm Wedbush Securities said.
Analyst Dan Ives likens political pressure on TikTok coming from the Biden Administration and the Foreign Investment Commission to a “deja vu moment,” much like the pressure it faces from the Trump Administration.
US-China relations have become colder in recent years, and TikTok is caught in the middle of this tug-of-war between the world’s two top superpowers.
“This is a very complicated situation because ByteDance’s ownership of TikTok and the gold jewel algorithm at the center of this security debate is a hot-button issue that can’t necessarily be solved simply by splitting or property sale,” Ives wrote in an investor note.
Earlier this week, TikTok CEO Shou Zi Chew repeat those thoughts, saying the sale would not address U.S. security concerns.
The concerns stem from the US government’s concern that the Chinese Communist Party could ask TikTok to hand over data about US users.
If a ban happens, it will also dramatically change the advertising market. TikTok is said to have held a data privacy summit with advertisers in recent weeks, according to reports. Information. However, some attendees were not entirely convinced by TikTok’s assurances, the news agency added, citing sources.
There is a chance that advertisers could cut back on spending on the platform and consider other options for their spending if an outright ban happens.
Recent media coverage propose TikTok is reviewing its options, going as far as to look at the deals it has reviewed under the Trump Administration, including Oracle’s pick (NYSE:ORCL) in partnership with Walmart (WMT) to take over TikTok.
Late 2022, new concerns about TikTok rise from the Biden Administration, resulting in a delay in reaching an agreement with the company regarding their data privacy. New concerns include how TikTok will share information with an algorithm that figures out which videos to show users, as well as the level of trust lawmakers will place in the company.
As part of the deal, TikTok will only store its US data on US-based servers, most likely run by Oracle (ORCL), as opposed to its own servers in Singapore and Virginia. Also, Oracle (ORCL) will monitor TikTok’s algorithms for content recommendations due to concerns about Chinese government interference.
The deal will also see TikTok form a panel of security experts to report to the US government.
TikTok speak in June that it will route all US traffic through Oracle’s (ORCL) cloud technology infrastructure to better secure the information of users in the United States.
Ives said partnership with Oracle (ORCL) was designed to intercept “this data and give the US government some comfort in terms of access to consumer data blocked in China and Beijing”, but concerns have grown since then. from there and is unlikely to abate anytime soon.
TikTok CEO Chew will testify before Congress on March 23, an event Ives believes will be “closely watched.”
If TikTok and ByteDance (BDNCE) decided to fight the US government over the requirements for the app to exist in the country, it is likely that any ban would spur Snap (NYSE:SNAP) and Meta Platform (NASDAQ:META), Ives added, echoing another analyst’s thoughts, including Ronald Josey, of Citi.
However, Ives went a step further and said the ban would “significantly increase” tensions between China and the US, especially in light of the ongoing “Cold Technology War” in the sector. software and semiconductors.
Ives explained: “This is purely a high-stakes poker game, and it’s clear that Beltway is putting more pressure on ByteDance to strategically sell this key asset in a potentially massive move. significant spillover”.
Last week, Senate Intelligence Committee Chairman Mark Warner introduced a bipartisan bill aimed at controlling the technological threat from “adversary” nations. a move that points to the possibility of banning TikTok.