THE ECONOMIST: ByteDance keeps the algorithm while USA ignores China’s security risk under Trump’s TikTok deal

TikTok has sucked up countless hours of teenagers’ lives. But it has kept plenty of politicians awake past their bedtime, too. Ever since the short-video app launched nearly a decade ago, Western governments have suspected it of being a tool of the Chinese Communist Party.

In 2020, during his first presidential term, Donald Trump declared a national emergency as he tried unsuccessfully to outlaw TikTok, claiming that it was stealing users’ data and feeding them propaganda. Four years later, under Joe Biden, a big bipartisan majority of Congress passed a bill compelling the app to separate from its Chinese owner or else be banned. After the Supreme Court upheld that law last year, TikTok’s days in its largest market looked numbered.

Twelve months later, against the odds — and against the law — TikTok is still ticking over in America. One of Mr Trump’s first acts on returning to power last January was to order officials not to enforce the ban for 75 days, a period he has extended again and again.

Now the app increasingly looks set to stay. TikTok’s boss told staff before Christmas that a deal had been struck to transfer ownership of its American operations to a group of mainly American investors, and that the transaction would close on January 22. Right now, it’s far from certain whether this latest deadline will be met. But a resolution appears close. Years of drama seem to be heading for a surprisingly low-key ending.

On the face of it, the proposed deal solves the China problem. America’s law says that investors from “foreign adversaries”, including China, may not own more than 20 per cent of TikTok. Its Beijing-based owner, ByteDance, is duly creating a new American version of the app and reducing its stake in it to 19.9 per cent.

Oracle, a tech giant, and Silver Lake, an investment company — both American — will each take 15 per cent, as will MGX, an Emirati sovereign-wealth fund. The remainder will be owned by “affiliates of certain existing investors of ByteDance”, which probably means the company’s American shareholders.

Users’ data will continue to be held in America by Oracle, which will also retrain TikTok’s algorithm on American data to prevent foreign manipulation. So far, so good.

The snag is that ByteDance will remain closely involved in the company. It will have a board seat and reportedly will lease its algorithm in return for ongoing payments of around 20 per cent of the American entity’s revenue.

TikTok says that its ByteDance-owned unit will continue to manage the American company’s ad business, its e-commerce arm and “global product interoperability”, implying close links between the two apps.

Advertisers have been told that they will be able to buy spots across TikTok globally, via a single platform. All this would fly in the face of the law’s requirement that TikTok be cut off from any “operational relationship” with ByteDance. ByteDance may not own the car, but it will still own the engine, sums up one analyst.

Why has Mr Trump, who once branded TikTok a threat to “the national security, foreign policy and economy of the United States”, agreed to this engineless car of a deal?

One reason is public opinion. As more Americans have flocked to TikTok, fewer want to ban it. When Mr Trump took aim at the app in 2020 it was a teenage craze. The Pew Research Centre found in 2023 that supporters of a ban outnumbered opponents by two to one.

By last year the numbers were almost tied. Today TikTok is used by 170 million Americans, including some 40 per cent of 45- to 54-year-olds, reckons GWI, a data provider: no longer just teens but their parents, too.

Another reason is that the deal looks like a bargain for allies of the president. The buyers will pay about $US14 billion ($20.7b) for TikTok’s American business, the vice-president, J.D. Vance, said in September.

If true, it is a steal: equal to roughly one year of TikTok’s American ad revenue, estimates eMarketer, a research firm. The deep discount may partly reflect the ongoing lease payments to ByteDance. But the main factor is simply that, facing a ban, TikTok’s Chinese owner has few options.

“It’s like saying, ‘I’m going to buy a house, and if you don’t sell me the house, I’m going to burn it down’,” says an adviser to one of the American buyers.

The president may also see an advantage to himself from TikTok’s new setup. Mr Trump and his allies have not been shy about pressing American-owned media to sweeten their coverage of the administration.

In Oracle, TikTok will have a steward whose owner, Larry Ellison, is friendly with the president and has already overseen Trumpy changes at CBS News, which his family controls. And an executive order on TikTok that Mr Trump signed last year says that “trusted security partners may also share information with other United States Government officials.”

Americans’ media diet could be open to influence by their own government, too.

Swipe along, nothing to see here

Six years on from the first attempts to ban it, TikTok is no less of a security risk.

More Americans than ever are glued to the app. And whereas in 2020 only a quarter of them used TikTok for news, today half do. Yet Americans seem exhausted by the saga.

Congress, whose TikTok ban has been flagrantly ignored in the year since it passed, cannot seem to muster fresh indignation about the flimsy new deal.

China hawks within the administration, such as Marco Rubio, who campaigned against the TikTok “Trojan horse” while in the Senate, have fallen in behind the president, and focused instead on adventures in Venezuela, Greenland and elsewhere.

Democrats are becoming less concerned about foreign authoritarianism as they worry more about the domestic sort.

Outrage about TikTok, so heated a few years ago, now seems like a time capsule from another era. That the negligent, self-dealing new arrangement seems to be going ahead with so little opposition shows not that TikTok has become safer, but that so much else in America has become more dangerous.