TikTok’s woes continue into 2023 as the social media app’s hopes of a deal with the US government appear to be in trouble. According to the latest report from Reuters, TikTok has put on hold on its process for hiring consultants, who were supposed to help the company implement its ‘potential security agreement’ with the US government. This deal will allow China-based ByteDance to retain control of the US company. But many US officials are now opposed to the deal, adds the Reuters report. This also means the app’s future in the US, its biggest market, remains uncertain. Here’s a look at how TikTok faces a crisis in its most significant market.
TikTok and the China context
The short-video app is owned by China’s ByteDance and this ownership appears to be the main source of concern for most governments, across the world. TikTok has already been banned in India, a market where it was the clear leader in the short video format and had over 200 million users. In the US, there are fears over the private data of citizens being accessed by China and worries that the algorithm and content are being manipulated by China’s Communist party in some way.
More recently, reports showed that the company spied on journalists from Forbes magazine, which has not helped its cause. ByteDance tracked the physical location of several journalists from the magazine, using their Internet Protocol (IP) addresses, according to the report. In 2022, a BuzzFeed report also highlighted that US user data was repeatedly accessed in China, a charge the company later denied.
But US senators have been calling for a probe into TikTok since 2019. In 2020, US President Donald Trump passed an executive order calling for ByteDance to sell its TikTok’s US business or else it would be banned in the country. While that order was revoked by his successor President Joe Biden, TikTok continues to face scrutiny. The expectation was TikTok would sign a security deal with the US government and subject itself to more regulation, but the deal hasn’t gone through yet.
TikTok banned on US official devices
The worries about a country-wide ban are real as Biden signed a law banning federal employees from using TikTok on official government devices on December 30, 2022, which impacts roughly four million employees. This means a partial ban on TikTok is already in place. Meanwhile, 19 states in the US have also blocked the app on state devices over concerns about links to the Chinese government. The US House of Representatives has also banned TikTok on official devices. The app was termed ‘high risk’ due to security issues and thus banned.
TikTok’s promises
TikTok has been trying hard to convince the US government that it is not tracking US citizens or manipulating the content shown to them. As part of the deal, TikTok is supposed to hire consultants who will report to the US government. The list of consultants is supposed to include an auditor a source-code inspector, a cyber-security monitor, etc. TikTok’s hirings were supposed to be approved by the Committee on Foreign Investment in the United States (CFIUS), which is the security panel currently scrutinising ByteDance’s ownership of the app.
But as Reuters, reported, the hiring is now on hold. Thus indicating the deal is in trouble. The report adds that some US officials are not in favour of the deal and want ByteDance to divest its stock. A spokeswoman for TikTok confirmed it had paused the hiring process for the third-party security vendors and said this was because CFIUS has not yet approved the security agreement, added the report.
TikTok is also expected to migrate all of its data to Oracle’s data centres and the 2020 deal was largely seen as a win. Initially, TikTok was planning to sell the business to Microsoft in 2020 due to pressure from the Trump administration. But that didn’t happen. For now, Oracle is also supposed to review TikTok’s app and source code as well. Further, TikTok is supposed to delete US user data from its servers as part of the deal. The company has begun hiring for a US security division (USDS) to oversee data protection and content moderation. It has spent $1.5 billion on this particular unit, according to its own statement.
Tiktok and what a ban could mean
TikTok is hoping that by subjecting itself to more oversight from the US government, ByteDance can continue to retain ownership, and continue to operate in the market. However, given that Biden just signed a partial ban on government devices, and no deal in sight, its future in the US market looks tough. For TikTok, the loss of the US market would be a major one.
It has already been banned in India in 2020. TikTok’s loss has been Instagram and YouTube’s gain, with both players capitalising and dominating the short-video format in India now. In the US, TikTok remains the number one short-video app, but if it gets banned in the US, it will likely benefit the same competitors again.