ByteDance would prefer to shut down TikTok rather than sell it if the Chinese company exhausts all legal avenues to fight a bill that would ban it from U.S. app stores, four people said. Ta.
The algorithms that TikTok relies on to operate are considered core to ByteDance's overall operations, and people close to the parent company say it's highly unlikely that an app powered by them will be sold.
Although TikTok is hugely popular and boasts more than 1 billion users, it still operates at a loss and accounts for a small portion of ByteDance's total revenue and daily active users. The parent company would prefer, in a worst-case scenario, to shut down the app in the United States rather than sell it to a potential U.S. buyer.
The closure would have a limited impact on ByteDance's business, but the company would not have to let go of its core algorithms, said the people, who asked not to be identified because they were not authorized to speak to the media.
ByteDance said late Thursday in a statement posted on Toutiao, a media platform it owns, that it has no plans to sell TikTok. This was in response to an Information article that said ByteDance was considering a scenario where it would sell TikTok's U.S. business without a recommendation algorithm. Provide videos to TikTok users.
In response to a request for comment, a TikTok spokesperson referred to ByteDance's statement posted on Toutiao.
TikTok CEO Shou Zi Chew announced Wednesday that he would like to see legal action to block the bill signed by Joe Biden that would ban the popular short video app used by 170 million Americans. He said the company is expected to win the appeal.
The bill was overwhelmingly passed by the U.S. Senate on Tuesday, with U.S. lawmakers saying it could allow China to access Americans' data or use apps for surveillance. Concerns are growing.
The U.S. president's signature sets the deadline for the sale to be January 19, the day before Biden's term ends, but if it is determined that ByteDance is making progress, the deadline will be extended by three months. there is a possibility.
ByteDance does not publicly disclose financial performance or financial details for each division. Another source said the company continues to make most of its revenue in China, primarily from other apps such as Douyin, China's equivalent of TikTok. The U.S. accounted for about 25% of TikTok's overall revenue last year, another source with direct knowledge said.
Reuters interviewed more than a half-dozen investment bankers who said TikTok's financial information is not widely available or easily accessible, and that similar companies like Meta Platforms' Facebook and He said it is difficult to assess the value of TikTok compared to Snap.
ByteDance's 2023 revenue rose from $80 billion in 2022 to nearly $120 billion in 2023, two of the four people familiar with the matter said. TikTok's daily active users in the U.S. account for only about 5% of ByteDance's DAUs worldwide, one of the people said.
TikTok shares the same core algorithm as ByteDance's domestic apps, including short video platform Douyin, three people familiar with the matter said. Selling TikTok's algorithm would be impossible because TikTok's intellectual property license is registered with China's ByteDance and would be difficult to separate from its parent company, the people said.
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ByteDance also would not agree to sell one of its most valuable assets, its “confidential sources,” to a rival, the four people said, referring to the TikTok algorithm. Furthermore, separating the algorithm from TikTok's U.S. assets would be a highly complex procedure, and ByteDance is unlikely to consider that option, the people added. Aside from algorithms, TikTok's main assets include user data and product operations and management, two people said.
In 2020, the Trump administration tried to ban TikTok and Chinese-owned WeChat, but was blocked by the courts. The short video app has since faced partial bans and attempted bans in the US and other countries.
At a U.S. Congressional hearing in March last year, China indicated that it was likely to reject a forced sale of the TikTok app.
“China firmly opposes it.” [the forced sale of TikTok]” a spokesperson for the Ministry of Commerce said at a press conference in Beijing in late March 2023.
Former US Treasury Secretary Steven Mnuchin has expressed interest in forming an investor group to acquire TikTok. ByteDance may have trouble attracting buyers for TikTok's U.S. assets, excluding Algorithm, the people said.
ByteDance was valued at $268 billion when investors offered to buy back about $5 billion worth of stock in December.
