TikTok U.S. stumbles into controversy right out the gate
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Illustration: Lindsey Bailey/Axios
It's been an inauspicious start for TikTok U.S., the $14 billion social media spinout whose top backers include Oracle, Silver Lake, MGX, and former owner ByteDance.
Catch up quick: Some users have accused TikTok U.S. of censoring certain content, including mentions of ICE and Jeffrey Epstein.
- The company denied wrongdoing, instead claiming that a data center power outage caused a series of unintended technical failures — most of which have since been rectified.
The big picture: Neither scenario does much to inspire confidence in new management, because both play into preconceived narratives.
- If there's been censorship, something California Gov. Gavin Newsom pledged to investigate, it validates worries about a giant social media platform being controlled by ardent Trump supporters like Oracle's Larry Ellison. Let alone via a deal brokered by the White House.
- If it was tech failure, it validates worries that none of the buyers have deep experience running a social network — and the broader unknowns of trying to cleave off its U.S. operations.
State of play: These issues aren't likely to bother the average TikTok U.S. user, but top creators are paying attention — and any sort of significant exodus could cause eyeball and revenue deterioration.
- Just to emphasize the sort of ecosystem dollars we're talking about, top TikToker Khaby Lame just signed a $975 million deal to license his brand for the next three years.
Zoom in: We're also learning a bit more about the spinout transaction.
- Most ByteDance investors retain indirect exposure to TikTok U.S. via ByteDance's 19.9% stub, but are not direct investors in the new joint venture. It's unclear if everyone had a choice.
- The "exiting" group appears to include such firms as Sequoia Capital, NEA, Carlyle, KKR, TCV, Baillie Gifford, Dragoneer, SoftBank, and Tiger Global.
The bottom line: National security risk has been at least partially mitigated. Execution risk remains.
