Last week, the lower house of Congress overwhelmingly passed a bill in the United States that puts the Chinese owner of the popular network TikTok before a difficult choice: ByteDance must either sell its assets in the country to the American owner or accept the fact that TikTok will be blocked in America. This decision still needs to be approved by the Senate, which is currently busy with other matters, but there is little doubt that the bill will ultimately be supported. Why did they do this now, who in the United States is against the TikTok ban, and what consequences could this have for business and 170 million American users?
Why TikTok Faces a Potential Ban and Who Might Buy It to Avoid One
The drama that has been unfolding for several years around a possible ban of the popular youth platform TikTok in the United States began to gain new momentum last week. On March 13, the US House of Representatives voted to pass a bill that would require TikTok owner ByteDance to sell the app’s US assets within six months, or TikTok would be banned in the country. The Washington Post, however, claims that selling the US division would have taken ByteDance more than six months anyway, making the platform’s ban highly likely.
As Reuters reported, this was the most serious threat to the app since the presidency of Donald Trump. At the same time, the agency noted that the fate of the bill in the Senate could be more uncertain, since some senators advocate a different approach to regulating foreign-owned assets that pose a security threat.
On Sunday, March 17, National Security Council spokesman John Kirby urged the Senate to move quickly to pass the legislation. “We want to separate from the Chinese company because we care about data security, as every American should, and what ByteDance and the Chinese Communist Party might do with the information they collect from American users of the app,” he said. Kirby also said the U.S. is not interested in banning the service — it just wants China to stop controlling it.
TikTok has U.S. lawmakers worried for two reasons. First, they fear that the Chinese-owned company has access to too much of U.S. citizens’ data, some of which the company has admitted is stored on Chinese servers. Accordingly, this data could end up in the hands of the Chinese government. And second, U.S. officials suspect that China could use the popular platform as a propaganda tool, influencing American citizens through it.
The very next day after the bill was approved in the House of Representatives, former US Treasury Secretary Steven Mnuchin, who heads the investment fund Liberty Strategic Capital, began to gather a pool of investors who could act as buyers of the American part of TikTok. Interest in such a purchase was expressed, among others, by former Activision Blizzard CEO Bobby Kotick and OpenAI CEO Sam Altman.
However, the situation is complicated by the fact that the seller has not yet shown any desire to make a deal. TikTok itself has been actively lobbying against the bill, including through videos aimed at American users of the app – they were even encouraged to call Congress and ask not to pass the bill. The company’s CEO, Shou Tzu Chu, has made it clear that a sale is not an option, CNBC writes.
Chinese Foreign Ministry spokesman Wang Wenbin said the U.S. lawmakers’ decision illustrated the U.S.’s “predatory logic” toward TikTok, and Chinese officials, The Wall Street Journal reported, citing people familiar with the matter, had told ByteDance that the Chinese government would not allow a forced sale.
The price of the issue
ByteDance was valued at $220 billion in its last round of funding in 2023. TikTok’s share of that amount is unknown, as is its U.S. unit. The company’s most valuable asset, CNBC writes, is the algorithm developed in China that effectively selects content for users, which is also the one that worries U.S. lawmakers the most. Without that algorithm, TikTok is not such an attractive purchase.
According to the Financial Times, TikTok’s revenue in the US last year was $16 billion, and the company is expected to earn $120 billion in 2023, up 40% from the previous year. The company does not officially disclose its financial results, so the newspaper cites unnamed informed sources. According to the publication’s estimates, taking into account industry multiples, the value of the American part of TikTok could be around $150 billion, and Beijing’s consent would be required, which is not yet in sight.
The Wall Street Journal notes that TikTok’s growth in the US is already slowing, and wonders how profitable the acquisition is. The company’s user base in the US has stopped growing and is stagnating; according to experts interviewed by the publication, this is due to the fact that the audience is gradually growing out of the type of content consumption that once ensured the startup’s phenomenal success. “The generation that grew up with TikTok has now grown up and is now mature consumers,” Daniel Newman, head of the analytics company Futurum Group, told the newspaper.
Bloomberg tech columnist David Lee even thinks that TikTok’s Chinese owner should sell it sooner rather than later, while it can still get the best price. He claims that a source inside the company told him last week that they don’t see any way to separate the American TikTok from the global one. Lee disagrees: “American users are mostly talking to other Americans, and the same goes for advertisers.” If the company really thinks it can’t be split, he continues, then they should sell it whole while it’s still at the peak of its popularity — there’s no future for a Chinese-owned social network in the U.S. anyway, he argues.
Supporters and opponents of forced sale
Not everyone supports such radical measures as forced sale. The Senate has made it clear that it is in no hurry to pass the law. Senators have a busy week ahead: they need to agree on funding for bills on military spending, national security, and other significant budget items, funding for which expires on March 22.
In addition, Republican presidential candidate Donald Trump, whose administration had already tried to ban TikTok in the US (but failed) during his presidency in 2020, this time unexpectedly spoke out sharply against blocking and banning the Chinese social network. “Without TikTok, Facebook (owned by Meta, which is recognized as extremist and banned in Russia) will have more influence, and I think Facebook is the enemy of the people,” he said in an interview with CNBC.
Rep. Alexandria Ocasio-Cortez, a vocal Trump opponent, also did not support selling or banning TikTok — she was one of the few people who voted against the bill on March 13. Her Democratic colleague Ro Khanna also voted against, saying the solution should be to regulate data protection in general rather than ban specific companies.
But former US diplomat and Foundation for Defense of Democracies representative Craig Singleton, in a column for USA Today, warmly endorsed the congressmen’s decision, expressing confidence that the Chinese authorities are indeed using TikTok to influence Americans. “Forced sale of the American company will prevent China from using TikTok to spread disinformation or interfere in the upcoming US presidential election,” he writes.
Rep. Mike Gallagher, who chairs the House Select Committee on the Chinese Communist Party and is one of the bill’s sponsors, argues that the sale of the U.S. asset is in the best interests of ByteDance investors and could easily happen before the U.S. presidential election in November.
If TikTok is banned in the US, the company could sue for violating the First Amendment of the US Constitution, which guarantees free speech, according to analysts interviewed by The Wall Street Journal. TikTok has already won a similar lawsuit in Montana, where it was tried to be banned (the state appealed). Supporters of a forced sale insist that the process has nothing to do with free speech and is solely about regulating the company’s commercial activities.
According to Evgeniya Istomina, a PR and communications expert at PRoud.365, the situation around TikTok has reached such a fever pitch largely because US government decision-makers “have a very vague idea of how social networks work, and the expert community is supplying them with contradictory data.” For example, she notes, reports from BuzzFeed and Internet 2.0 claimed that TikTok was pursuing an overly aggressive policy in terms of collecting data from American users. However, researchers from the Citizen Lab at the University of Toronto came to the opposite conclusion. Moreover, it is very difficult to objectively verify the experts’ conclusions.
Nita Farahany, author of The Battle for Your Brain: How to Defend Your Right to Free Thought in the Age of Neurotechnology, wrote in a Guardian column that while millions of young Americans love TikTok, the social network is alarmingly addictive and does pose a national security threat. She said TikTok’s famous recommendation algorithm effectively exploits human psychology and suppresses self-control, encouraging compulsive content consumption.
Konstantin Negachev, co-founder and head of the VRT group of companies, agrees with Farahani’s theses: “Modern technologies allow us to very clearly define the values and behavior patterns of users of any software product, and the more such users, the better. Having such a large user base, you can deliver the necessary meanings to them, which they will most likely perceive exactly as the product owner wants. As one of the potential investors in TikTok, former US Treasury Secretary Steven Mnuchin, notes, no one will allow an American company to own something like this in China, which, in my opinion, is absolutely true.”
“I’m sure many US intelligence generals believe that TikTok is the Chinese digital equivalent of MK-ULTRA, the CIA’s project to manipulate consciousness,” says Daniil Shepovalov, an IT expert and former head of the PR department at Rutube. There’s no need to look far to confirm this guess: National Intelligence Director Avril Haines said at a hearing in the House of Representatives that China could use the social network to influence the US presidential election.
Predictably, the bill was opposed by American TikTokers who make money on the platform. “While I understand concerns about data protection and geopolitical tensions, I would be deeply disappointed to see changes to the way this international platform currently operates,” says blogger Vita Kari, who has 1 million TikTok followers. “I think it would have a significant impact on organic views and community building.”
Bloggers outside the US are also concerned about the impact a US ban could have on their careers. For example, Canadian blogger Matt Chessko, who has 3 million subscribers, said that about 35% of his channel views, as well as most of his advertising deals, come from the US. He also fears that a US ban could have global consequences and TikTok would be banned in other countries, especially Canada. His concerns are justified – Canada has already launched an investigation into TikTok for possible threats to national security.
How this might end
In many countries, including France, Australia and the UK, Norway, the Netherlands and Estonia, TikTok is banned for public servants to use on work devices. The European Parliament has urged its employees to remove the app from their personal smartphones as well.
The largest TikTok ban to hit an entire country was the one in India in 2020. According to CNN, while the app’s 200 million Indian users were upset by the ban, they have since found alternatives, and it also created new opportunities for other platforms — those 200 million needed to go somewhere. TikTok now has 170 million American users.
“De jure, the US authorities’ demand to ByteDance is quite feasible — this concerns both the prospects of forced sale and blocking the service’s operation in this country,” says Yuriy Fedyukin, managing partner of the law firm Enterprise Legal Solutions. “It seems to me that the most promising option is to spin off part of ByteDance’s business with the transfer of part of the rights under the intellectual property license, including the program code, brand, and means of individualization for conducting business exclusively in the US. Such a structure may not be connected to the parent company in any way except for obligations under license agreements, and the service itself, which this structure will manage, may well be isolated from the global TikTok, that is, be local, which, given the coverage in the US, the second most important market for ByteDance after China, is quite sufficient to ensure a high level of profitability. Considering that the amount of license payments to the copyright holder for the use of code and technical solutions can be arbitrarily large, I think this may well allow ByteDance to receive tangible profits from the American market, even without being present there.”
Negachev believes that such a favorable scenario is unlikely, since, in his opinion, China will not allow the US to dictate its terms, even if the company wanted to. According to his forecast, the social network will most likely be blocked after the allotted period for sale, and it will only be possible to use it with the help of VPN services. For the social network, the expert says, this is fraught with huge financial losses, since ByteDance’s marketing tools will stop working in the US, and therefore the company will lose out on colossal amounts. “It is difficult to guess how TikTok will solve this problem, but the Chinese authorities will probably have to provide the social network with comprehensive support during this difficult time for it,” Negachev thinks.
“The US House of Representatives offered ByteDance a choice without a choice: sell assets to American investors or lose access to the American audience. China reacted negatively to this proposal and will most likely not approve the deal,” said Olga Bobrovskaya, Marketing Director of the Gem Space app. “Considering that TikTok’s audience in China is several times larger than in the US, the company will most likely prefer to keep the Chinese segment, abandoning the American one.”
According to Andrey Mozhaev, CEO of the digital marketing agency Asia Pacific in China, a potential ban on TikTok would be a painful blow to American users and businesses. Today, according to TikTok estimates, about 5 million companies use the media platform for sales and marketing — and for most businesses, this is the only channel for working with clients. “If large businesses have cross-platform solutions and diversified communication and sales channels,” says Mozhaev, “then small and medium businesses (in the field of beauty products, educational services, confectionery, niche products — backpacks, candles) will be at risk of extinction.” In addition, says Mozhaev, the overwhelming majority of the most famous influencers in the world are based in the United States and use TikTok as one of the main channels for monetizing content and selling advertising. The ban could hit them too.
The founder of the Academy of Business and Strategic Marketing, Yulia Korchagina-Ozcan, also talks about the consequences for American bloggers, noting that if TikTok is closed in the US, bloggers will continue to work for an English-speaking audience – the content will be posted through a manager from another country. “This, of course, will hit the business and income of American bloggers hard, but a solution will be found,” she believes.
Ilya Varlakhov, CEO of the advertising agency VI-media, agrees with her: “Despite the drop in income for bloggers and influencers at the initial stage of blocking, based on the Russian experience, TikTokers will quickly adapt – they will redirect their efforts to other content placement platforms.”
“Apparently, all countries will try to interfere with the work of influential digital services associated with competing countries in one way or another,” Shepovalov suggests. “A kind of digital deglobalization: use services that inform on you only to your government, not to someone else’s. But users don’t care about politics, and they will always try to get around these obstacles.”
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