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Nov 1, 2019 - World

Report: U.S. government to probe TikTok

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Illustration of the Chinese flag with the stars rendered in TikTok's logo style.

Illustration: Aïda Amer/Axios

The U.S. government plans to probe TikTok over national security concerns, sources tell CNBC.

Why it matters: The viral video-sharing app owned by Chinese tech giant ByteDance has cause concern for U.S. policymakers in recent months. As its reach grows within the U.S. — particularly among children — there's anxiety as to whether the app collects and shares data from American users with the Chinese state.

Details: The Committee on Foreign Investment in the United States (CFIUS) is reportedly reviewing ByteDance's year-old acquisition of U.S. karaoke app Musical.ly.

  • According to CNBC, ByteDance is in talks with CFIUS over divesting parts of Musical.ly.
  • A TikTok spokesperson told Axios: "While we cannot comment on ongoing regulatory processes, TikTok has made clear that we have no higher priority than earning the trust of users and regulators in the U.S."
  • "Part of that effort includes working with Congress, and we are committed to doing so."

The big picture: The news comes amid a slew of policymaker investigation requests into the app — as well as growing concern from industry leaders.

  • Last week, Sens. Chuck Schumer (D-N.Y.) and Tom Cotton (R-Ark.) asked for a national security probe into the app.
  • Last month, Sen. Marco Rubio called a CFIUS to review the acquisition of Musical.ly.

TikTok has grown to become one of the most popular apps among U.S. youngsters.

  • According to a new Morning Consult survey, the app is more popular today among U.S. teens than Facebook.
  • The app hit 1 billion downloads in February. It reportedly has more than 100 million U.S. downloads.

Be smart: There's a precedent that's been set, somewhat, in this situation. Earlier this year, the owner of Grindr, a U.S. LGTBQ dating app, was reportedly forced by CFIUS to sell service over U.S. national security concerns.

Industry rivals have pointed to TikTok as an example of unprecedented competition and the threat it poses to U.S. leadership in the tech sector.

  • Last week, Adam Mosseri, head of Instagram, said at a company news event that TikTok’s ability to clone a U.S. competitor and then grow it big enough to acquire that competitor was "some serious s--t."

Between the lines: The news comes amid reports that ByteDance is looking to go public, potentially in the U.S. market. Regulatory concerns could greatly impact its ability to launch a campaign to go public in the U.S.

Yes, but: ByteDance’s accession has come with an increase in regulatory firepower.

  • The company, reportedly valued at $75 billion, has increased its lobbying prowess in the U.S., bringing on outside experts and even a former member of Congress to help with its lobbying efforts and with crafting its content moderation policies.

A source tells Axios that Grindr was "a key case as to how social media would be handled under CFIUS, but people overlooked it because it was an LGBT app."

Bottom line: This is bad news for ByteDance if it wants to continue to grow its presence in the U.S. The U.S. is by far the most lucrative advertising market and at a key stage for expansion for any foreign-owned app that wants to grow its bottom line. 

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