After more than a year of negotiations, the US and China are nearing an agreement to hive off the US operations of social media platform TikTok to a consortium that could include software giant Oracle Corp. If the deal is finalised, it would resolve a persistent issue in Beijing-Washington relations that has become entangled in broader talks over trade.
Under a national security law signed last year by then-President Joe Biden — the Protecting Americans from Foreign Adversary Controlled Applications Act — the app’s owner, Beijing-based ByteDance Ltd., was ordered to either sell TikTok US or discontinue the service. The initial deadline was in January of this year, but President Donald Trump extended this multiple times after reentering office.
Under the spin-off arrangement set out in an executive order Trump signed on Sept. 25, TikTok will be majority-owned and controlled by Americans. Many of the finer details of the agreement have yet to be made public. The final outcome will help shape the fate of ByteDance — a $400 billion startup that is China’s most valuable private company, and whose video platform TikTok is used by 170 million Americans.
How the framework evolves will likely have ramifications for the broader US social media landscape, too, where rivals including Meta Platforms Inc. and Alphabet Inc. are jostling for market share.
Who will own TikTok in the US?
Trump’s September executive order said that ByteDance and its affiliates will hold a less-than-20-percent stake in TikTok US — as required by the national security law — and that the rest of the company will be owned by “certain investors,” without specifying who they could be.
The consortium of buyers is expected to include Oracle. Private equity player Silver Lake Management LLC and Abu Dhabi-based investment company MGX are also in talks to invest in the new US venture, Bloomberg reported.
Oracle currently provides cloud services for TikTok and hosts user data in the US and other countries. Should this deal go through, Oracle will act as TikTok’s security provider and monitor the app for safety, working with the US government, according to a senior White House official.
Trump suggested in an interview with Fox News that Fox Corp. chairman Lachlan Murdoch and his father Rupert Murdoch are also involved in the takeover. He mentioned Larry Ellison, the chairman of Oracle, and Michael Dell, chairman of Dell Inc., as well.
The proposed plan is for Americans to hold six of seven seats on the board of TikTok US, and they will have national security and cybersecurity credentials. ByteDance will choose the remaining board member, who will be excluded from the security committee, according to a senior White House official.
The executive order gives the parties 120 days to close the transaction, by which point more than a year would have passed since the original deadline for ByteDance to divest its US TikTok operations. While Trump has said that the deal has been given the go-ahead by President Xi Jinping, the Chinese government has yet to say publicly whether it has granted its approval.
How much will TikTok US be worth?
US Vice President JD Vance said the deal would value TikTok US at roughly $14 billion. That’s far below previous estimates of the worth of ByteDance’s most lucrative business outside of China, which were between $35 billion and $40 billion.
Valuing TikTok’s US operations has always been difficult, particularly given the complexity of the app’s coveted content algorithm. But even by the most conservative estimates, the business generates more than $10 billion of revenue per year.
At a $14 billion valuation, TikTok US would then carry a price-to-sales ratio of roughly 1.4 times, in line with mature, low-growth companies like Exxon Mobil Corp. and General Mills Inc. Instagram operator Meta trades at around 10 times sales, while YouTube parent Alphabet is at eight times.
How will this deal affect TikTok users in the US?
TikTok will continue operating in the US in its current form until an accord is finalised, at which point it will be discontinued in the country and the app’s users will migrate to a new platform, according to Bloomberg reporting. The details of this new platform that TikTok’s millions of mostly young American users will have to converge on are unclear.
What will happen to TikTok’s algorithm?
TikTok’s breakout success came off the back of its algorithm, which feeds content to users based on their recent activity and interests.
Under the proposed deal, Oracle will recreate and provide security for a new US version of the algorithm, a White House official said. The owners of the US-based TikTok will lease a copy of the algorithm from ByteDance that Oracle will then retrain “from the ground up,” according to the official.
Data from US users will be stored in a secure cloud managed by Oracle, and there will be controls to keep out foreign adversaries, including China, the official said. ByteDance won’t have access to information on TikTok’s US subscribers, nor any control over the algorithm in the US.
What’s the fuss over TikTok’s US operations anyway?
By some reckonings, TikTok’s US branch ranks among America’s most popular social media platforms based on average daily app usage, rivalling the likes of Alphabet’s YouTube and Meta’s Instagram. That level of engagement makes it a lucrative business with advertisers eager to capture the attention of its vast user base.
In 2024, TikTok drove a worldwide revenue expansion for ByteDance that helped offset an economic downturn in China, pushing sales from the parent company’s overseas operations to $39 billion for the year, Bloomberg reported.
More importantly, as Trump himself has repeatedly emphasised, is TikTok’s influence with a younger, Gen-Z audience. The longer-term potential for newer offshoots such as TikTok Shop to challenge Amazon.com Inc. and Walmart Inc. in e-commerce is also appealing to investors.
TikTok is still arguably among the most successful overseas forays by China’s tech sector, which in past years have been circumscribed by geopolitical tensions.
Why did the US give ByteDance this ultimatum?
US lawmakers have long been concerned that TikTok could be used to spy on American citizens. This stems from the fact that China requires its companies, upon request, to share any national security-related data with its government.
US officials also worry that China’s government could abuse the data of US TikTok users — for example, by collecting dossiers of personal information for blackmailing purposes or exploiting content preferences to manipulate the type of videos users see to spread propaganda.
TikTok sought to counter these concerns by migrating the storage of US users’ data to US-based cloud servers operated by Oracle in 2022. However, those efforts failed to assuage lawmakers.
By Bloomberg News