ByteDance leans towards TikTok shutdown in US amid legal battles
ByteDance and TikTok
ByteDance, the parent company of TikTok, is contemplating shutting down the popular short-video app in the US if legal avenues to combat the approaching legislation fail.
ByteDance would prioritise a shutdown over selling TikTok, especially considering the critical role its algorithms play in the company's operations, Reuters reported citing sources familiar with the matter.
The algorithms underpinning TikTok's functionality are integral to ByteDance's operations, making the sale of the app with its algorithms highly unlikely.
Despite TikTok's significance in ByteDance's ecosystem, accounting for a small share of total revenues and daily active users, the parent company is inclined towards a shutdown rather than relinquishing control of its core algorithm.
ByteDance refrained from commenting on the matter.
However, in a statement released on Toutiao, a media platform owned by ByteDance, the company restated its stance of not intending to sell TikTok.
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This follows speculations regarding ByteDance exploring scenarios for divesting TikTok's US business while retaining control over the algorithm that powers video recommendations.
TikTok's CEO, Shou Zi Chew, was optimistic in overcoming legal hurdles posed by recent legislation aimed at banning the app in the US.
The legislation, driven by concerns over data privacy and national security, presents a major challenge to TikTok's operations in its largest market.
While the US market accounted for approximately 25 per cent of TikTok's revenues last year, ByteDance's financial details remain confidential.
Despite the challenges in valuing TikTok compared to its competitors like Meta Platforms and Snap, ByteDance's revenues rose from $80 billion in 2022 to nearly $120 billion in 2023.
ByteDance's algorithms, shared across its domestic platforms like Douyin, are considered superior to those of its rivals.
Divesting TikTok without its algorithms poses challenges due to intellectual property licensing complexities and the intertwined nature of TikTok with ByteDance's core operations.
Prior attempts to force ByteDance to divest TikTok were met with resistance from China, which opposed moves during a congressional hearing.
China's Export Control Law, enacted in 2020, highlighted the country's stance on regulating exports of algorithms and related technologies.
Despite possible interest from investors, including former US Treasury Secretary Steven Mnuchin, in acquiring TikTok, ByteDance may face difficulties attracting buyers for TikTok's US assets without including its algorithms. ByteDance, valued at $268 billion in December, remains backed by prominent investors.
(With inputs from Reuters)