Updated Sep 19, 2020 - Technology

Trump agrees to TikTok deal

Illustration of the TikTok logo on a dais under a spotlight with confetti falling around it

Illustration: Sarah Grillo/Axios

President Trump on Saturday said he approved "in concept" a deal whereby TikTok will be allowed to continue operating in the U.S., with Oracle as its "trusted technology partner."

Why it matters: TikTok has nearly 100 million U.S. users, and is still growing fast. Trump has threatened to ban it, due to data privacy concerns related to TikTok's ownership by Chinese tech company.

Of note: The U.S. Commerce Department has announced a one-week delay to the EO taking effect.

What he's saying: "I have given the deal my blessing — if they get it done that's great, if they don't, that's okay too," Trump told reporters at the White House before departing for an evening rally in North Carolina. "I approved the deal in concept."

  • The president noted the new company would be headquartered "most likely in Texas," and could see "at least," 25,000 people hired."
  • Trump also said that TikTok "will be making a $5 billion contribution toward education." Axios has learned that contribution would come from proceeds of a TikTok IPO, if and when that were to happen.
  • Finally, Trump noted that "it'll be totally controlled by Oracle and Walmart."

Yes, but: It won't be. TikTok will be controlled by its board of directors, all of whom will be U.S.-based and approved by the U.S. government. But Oracle and Walmart each will be minority shareholders, with no single entity or no two entities representing a control position on the board.

What TikTok's saying: "We are pleased that the proposal by TikTok, Oracle, and Walmart will resolve the security concerns of the U.S. Administration and settle questions around TikTok's future in the U.S."

What Oracle CEO Safra Catz is saying: "As a part of this agreement, TikTok will run on the Oracle Cloud and Oracle will become a minority investor in TikTok Global... We are 100% confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world.

  • "This greatly improved security and guaranteed privacy will enable the continued rapid growth of the TikTok user community to benefit all stakeholders.”

Flashback: ByteDance originally formed TikTok via its acquisition of Musical.ly in 2018, but that deal received renewed U.S. national security attention beginning last November.

  • One major concern was a Chinese government rule whereby China-based companies are required to turn over user data to the government upon request.
  • TikTok maintained that it stored U.S. data locally, with a backup in Singapore, and that its data is not subject to Chinese law.
  • U.S. political criticism of ByteDance, from a data privacy perspective, has been bipartisan. Several lawmakers also expressed doubts about the proposed deal with Oracle.

Context: Trump in early August threatened to ban TikTok were it not sold by Sept. 20. Shortly after, the Committee on Foreign Investment in the U.S. (CFIUS) ruled the Musical.ly deal must be unwound by mid-November.

  • ByteDance originally was in talks to sell TikTok's U.S. operations to either Microsoft or Oracle.
  • Those talks broke down after the Chinese government implemented new tech export rules that would have prevented TikTok's recommendation engine (i.e., its algorithm) from being included.

The state of play: ByteDance informed Microsoft last weekend that it opted for a workaround arrangement with Oracle, whereby Oracle would be TikTok's "trusted technology provider in the U.S."

  • Oracle also was working with Walmart, which previously worked with Microsoft. The goal would be to add e-commerce functionality to TikTok, which currently generates relatively little U.S. revenue.
  • ByteDance subsequently submitted its proposal to CFIUS, and received redlined revisions last Wednesday. ByteDance agreed to most of the revisions, presumably with Beijing's blessing.
  • Axios scooped what was in the ultimate deal.

What happens next: Expectations are that Trump will rescind his executive order, which would have prevented U.S. downloads of TikTok beginning Sunday. The formal CFIUS process will take longer, possibly weeks.

The bottom line: TikTok lives.

Go deeper on TikTok with the Axios Re:Cap podcast:

Editor's note: This article has been updated with new details throughout.

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