Sep 14, 2020 - Technology

TikTok's fresh swirl of uncertainty

There's now a deal on the table to let TikTok continue operating in the U.S. with the backing of a major American tech firm, potentially staving off President Trump's plan to ban the popular Chinese-owned video app by mid-month.

Yes, but: Software giant Oracle's proposed deal isn't the straightforward acquisition that Microsoft had jockeyed for until falling out of the running this weekend, and the whole affair is still rife with unknowns.

Driving the news: The Trump administration is reviewing a deal that would make Oracle TikTok's "trusted technology partner" in the U.S., Treasury Secretary Steven Mnuchin confirmed to CNBC Monday, after multiple press outlets reported Sunday night that Oracle had made such an offer.

  • The proposal includes "many representations for national security issues" from Oracle, Mnuchin said, as well as a commitment to establish TikTok's global headquarters in the U.S. and create 20,000 new American jobs.

Meanwhile: Chinese state media reported early Monday that TikTok parent ByteDance isn't selling its U.S. operations or the algorithm driving the app — to Microsoft or Oracle.

  • Some commenters took that as a sign that Beijing is quashing all hopes of a deal of any kind. Yet the report would also appear to track with the more limited arrangement Mnuchin described.

Between the lines: In the middle of talks last month between U.S. companies and China's ByteDance, which owns TikTok, the Chinese government instituted new rules that prevent "technology based on data analysis for personalized information recommendation services" from being exported without a license.

  • China's move threw a new spanner in the works of a TikTok deal because TikTok's recommendation algorithm is the "secret sauce" that has won the app its success.
  • It also transformed the conflict from one where U.S. and Chinese businesses served as shadow proxies for their governments to one where the two nations' leaderships are directly clashing.

The intrigue: Oracle's CEO Larry Ellison is a prominent Trump supporter and the company has close ties to the administration. That could give the company an edge in trying to win White House approval for a deal that might not meet all the demands Trump has made.

  • The president has said that TikTok must become a fully U.S.-owned company — so the "trusted technology partner" approach may not fly.
  • Trump has also insisted — without providing any rationale for such an unprecedented demand — that the U.S. Treasury receive a cut of any deal.

The catch: The U.S. has argued, without providing evidence, that TikTok's ties to the Chinese government imperil the data of its U.S. customers.

  • It's unclear how a deal that gives TikTok an American "partner" to run its cloud operations would satisfy U.S. security concerns.
  • "A deal where Oracle takes over hosting without source code and significant operational changes would not address any of the legitimate concerns about TikTok," Alex Stamos, a cybersecurity expert and former Facebook security head, wrote on Twitter.

Of note: Last year TikTok signed an $800 million contract with Google to provide cloud services, according to The Information.

What's next: For a deal to happen, ByteDance, Oracle, and both the U.S. and Chinese governments would all need to sign on.

  • Any one of the four could blow it up, so "no deal" remains a real possibility.
  • Mnuchin said the deadline for a deal is this coming Sunday, as laid out in Trump's executive order banning the app, and not this Tuesday, as the president has repeatedly insisted.
  • If Sunday rolls around without a deal, TikTok — which has already filed a lawsuit over the executive order — is likely to seek a temporary injunction to stop the government from shutting it down.
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