AsianFin -- The TikTok deal greenlit by the U.S. President Donald Trump will create a new joint venture for data security while ByteDance, Chinese parent of the short video application, will control another entity based in the country for commercial operations, according to Chinese news media outlet Caixin.
Credit：ByteDance
The TikTok deal introduces a revised operation plan for TikTok in the United States, which involves two entities based in the U.S.: ByteDance TikTok U.S. (“BD TikTok US”), a wholly-owned subsidiary of ByteDance, and TikTok U.S. Data Security Joint Venture (“TikTok USDS JV”), with 19.9% stake owned by ByeDance, Caixin reported.
ByteDance, through BD TikTok US, will continue to take charge of e-commerce, brand advertising and other TikTok’s commercial operations in the country, along with global connectivity, and product and engineering support, per the report. It said that TikTok USDS JV will be responsible for data security, content moderation, software security, and related local operations in the U.S. The joint venture will reportedly receive external investment to expand its capital while ByteDance will remain its largest single shareholder.
To ensure the smooth operation of the new joint venture, a revenue-sharing arrangement for reasonable commerial purpose is reported to be developed between the two TikTok entities. As to the highly-debated algorithm, ByteDance will retain ownership of the intellectual property rights and authorize TikTok USDS JV to use the algorithm in the U.S., charging a licensing fee. Prior to signing the licensing agreement, ByteDance has to apply for Chinese authorities’ approval through a review in accordance with the local law.
Trump on Thursday signed an executive order approving a deal to keep TikTok operating in the U.S. while protecting national security. Under the planned arrangement, TikTok’s U.S. app will be run by a newly established joint venture based in the U.S. The new venture will be majority-owned and controlled by U.S. individuals, and less than 20% of the entity will be held by ByteDance the remaining stake being owned by U.S. investors.
U.S. Vice President J.D. Vance at a press conference said the transaction values the American-owned TikTok entity at $14 billion. Given Caixin report, the entity that Vance referred to is TikTok USDS JV, with the valuation much less than that for overall TikTok U.S. business, which was reported to be valued at nearly $40 billion. By comparison, ByteDance was reported to set valuatioin at more than $330 bilion for a new share buyback in late August.
Trump at the press conference said Oracle Corp. CEO Larry Ellison is involved in the ownership group and his company will play “a very big part”. Vance indicated that Oracle will play a central role in the future operations of the app.
All U.S. user data will be stored in a trusted, secure, and purpose-built cloud environment in the United States run by Oracle in accordance with the Protecting Americans from Foreign Adversary Controlled Applications Act, according to the executive order.
Oracle, partnering with the U.S. government, was on Monday reported to be in charge of algorithm retraining, application development and source code review, and data from U.S. users would be stored in a secure cloud managed by Oracle. ByteDance would reportedly not have access to information on TikTok’s US subscribers, nor would it have any control over the algorithm in the U.S.
