TikTok has reached a significant milestone by finalizing a deal to establish a new American-based entity. This move is intended to prevent a potential ban in the United States—a topic that has been under extensive discussion for several years. The platform currently boasts over 200 million users in the U.S.
Under this new arrangement, TikTok has agreed with notable investors including Oracle, Silver Lake, and the Emirati investment firm, MGX, to create the TikTok U.S. joint venture. The company announced that this new entity will function under "defined safeguards" aimed at ensuring national security. This includes stringent data protections, algorithm security, content moderation, and software assurances specific to U.S. users. Notably, American users will continue to access the same TikTok app they are familiar with.
Former President Donald Trump publicly endorsed the deal through a post on Truth Social, expressing gratitude to Chinese leader Xi Jinping for facilitating the agreement. Trump mentioned his hope that his role in this development will be remembered positively by TikTok users in the future.
As of now, the Chinese government has not provided any public comments regarding TikTok's announcement. Ahead of the deal, Liu Pengyu, a spokesperson for the Chinese embassy in Washington, reiterated that China’s stance on TikTok has remained consistent and clear.
Adam Presser, who previously served as TikTok's head of operations and trust and safety, will take the helm as CEO of the new venture. He will work with a seven-member board of directors, which will have a majority of American members, including TikTok’s current CEO, Shou Chew.
This partnership marks the end of prolonged uncertainty surrounding the future of TikTok in the United States. Following overwhelming bipartisan support in Congress for legislation that mandated TikTok find a new American owner or face a ban, the platform faced a potentially grim deadline set for January 2025. To maintain its operation during discussions of the sale, Trump signed an executive order on his first day in office, allowing TikTok to continue functioning.
The deal emphasizes the protection of user data by mandating that U.S. user data be stored in a system managed by Oracle. Additionally, the venture will focus on TikTok's algorithm, with the recommendation engine being retrained and updated using U.S. user data. This aspect has been a focal point in national security debates surrounding TikTok. Previously, China insisted that the algorithm must remain under Chinese control, but the U.S. regulatory landscape requires significant disconnects from ByteDance, TikTok's parent company.
In the context of the deal, ByteDance is set to license the algorithm to the new American entity for retraining purposes. However, U.S. legislation prohibits any cooperation regarding content recommendation algorithm operations between ByteDance and the new ownership group, raising questions on how ByteDance’s ongoing involvement will materialize.
Anupam Chander, a law and technology professor at Georgetown University, highlighted the pivotal role of who controls TikTok in the U.S., noting the influence it has over the content Americans view on the platform.
The joint venture structure sees Oracle, Silver Lake, and MGX as the three major managing investors, each claiming a 15% share in the new entity. Other investors include Michael Dell's investment firm. ByteDance retains a minority share of 19.9% in the joint venture.
