One in seven people globally are TikTok users, but the company that created this trend has faced a tough road in recent years. Concerns about privacy and security began over five years ago. Back then, there were fears that the Chinese government might access the data of 200 million American users. In response, President Trump tried to ban the app from U.S. stores.
To tackle these concerns, TikTok’s parent company, ByteDance, launched Project Texas. This project aimed to safeguard U.S. user data by storing it on servers run by Oracle, an American company. They also moved part of their headquarters to Singapore and Los Angeles to distance themselves from their Chinese roots.
Despite these steps, Congress moved to potentially ban TikTok again in 2024 unless ByteDance changed how it operated in the U.S. Recently, ByteDance struck a deal to separate TikTok from its global operations. Now, a new group of companies, including Oracle, will jointly manage the app in the U.S.
This has big implications. TikTok is still a crucial player in the U.S. market, but it has to follow stricter rules. Experts believe this could hinder other Chinese tech firms’ efforts to expand.
How Did We Get Here?
The rivalry between the U.S. and China has led to clashes over tech companies due to national security worries. In past trade disputes, TikTok has been a “low-hanging fruit,” used as a bargaining chip for other deals, like U.S. agricultural products.
This new structure allows China to appear as though it’s winning by regulating its own tech exports while retaining access to its user base. However, ByteDance will lose control over the app’s algorithm and data. Instead, it will license these to the new U.S. entity, a deal valued at $14 billion.
Kelsey Chickering, an analyst at Forrester, points out that TikTok’s success comes from its powerful content algorithm. With the new setup, user experiences in the U.S. will inevitably change. This could lead to lower engagement for creators, as content might not spread as widely across regions.
In 2024, TikTok’s global revenue was estimated between $20 billion and $26 billion, with about $10 billion from the U.S. However, this split may reduce its U.S. earnings while ByteDance will still hold a small share of the profits.
Running separate algorithms and managing operations on two fronts can create complexities and slow innovation, according to technology analysts.
The India Experience
ByteDance has faced regulatory challenges before, particularly in 2020 when India banned TikTok, which had 200 million users. This setback was significant but not insurmountable. Chris Stokel-Walker, author of “TikTok Boom,” notes that ByteDance has continued to grow despite these hurdles.
The circumstances surrounding both the U.S. and India bans tie back to geopolitical tensions. India’s ban wasn’t solely a TikTok issue; about 200 apps were blocked to target China’s influence more broadly. While local competitors emerged, none have matched TikTok’s success.
A Broader Pattern
The situation with TikTok is drawing comparisons to Huawei, another Chinese tech giant that has faced barriers in Western markets. Unlike Huawei, TikTok has been allowed to operate, albeit under tight controls. This shows a shift in how Western governments are handling Chinese technology—some companies are completely shut out while others can function but with limitations.
Looking Ahead
As TikTok navigates its challenges in the U.S., it retains control over Douyin, its Chinese counterpart, which thrives without such constraints. Douyin is profitable and innovative due to full access to its algorithms.
ByteDance is also investing in data centers, cloud technology, and artificial intelligence, aiming to diversify its offerings beyond consumer apps driven by advertising.
Experts argue that TikTok’s issues extend beyond data privacy to deeper concerns over cultural influence. Former President Trump voiced unease over China shaping American culture. Time will tell how ByteDance adapts under new rules in the U.S. and whether similar structures will become commonplace for other Chinese tech firms looking to expand in cautious environments.
For further details about the impact on tech companies, you can refer to the Forrester report on emerging trends.
