ByteDance would rather shut down TikTok than sell it if it exhausted all legal options to fight legislation that would ban the platform from U.S. app stores, four sources said.
Sources close to the parent company said the algorithm TikTok operates on is considered core to ByteDance’s overall operations, making the sale of an app with the algorithm highly unlikely.
Although TikTok is extremely popular, with more than 1 billion users, it still operates at a loss and accounts for only a small portion of ByteDance’s total revenue and daily active users. They said the parent company would rather have the app shut down in the U.S. in a worst-case scenario than sell it to a potential U.S. buyer.
Sources said the shutdown would have a limited impact on the bit-beating business, but the company would not have to abandon its core algorithms.
On Thursday night, ByteDance issued a statement on its media platform Toutiao that the company had no plans to sell TikTok, in response to an article in The Information that Bytedance was exploring selling TikTok without a recommendation algorithm U.S. Business Solutions.
In response to a request for comment, a TikTok spokesperson pointed to ByteDance’s statement on Toutiao.
TikTok 執行長Shou Zi Chew 週三表示，該社群媒體公司預計將贏得一項法律挑戰，以阻止喬·拜登簽署的立法，他表示該法案將禁止1.7 億美國人使用其受歡迎的短視頻app.
The bill overwhelmingly passed the U.S. Senate on Tuesday, driven by widespread concerns among U.S. lawmakers that China could obtain Americans’ data or use the app for surveillance.
The deal signed by the US president sets a deadline for the sale of January 19, 2019 – the day before Biden’s term is set to expire – but he can extend the deadline by three if he determines private ByteDance is making progress months.
ByteDance does not publicly disclose its financial performance or financial details of any of its divisions. According to sources, the majority of the company’s revenue still comes from China, mainly from other apps such as Douyin (the Chinese equivalent of TikTok). Another person familiar with the matter said that the U.S. market accounted for about 25% of TikTok’s total revenue last year.
Reuters spoke to more than a half-dozen investment bankers who said it was difficult to assess TikTok’s value compared with similar rivals Meta Platforms’ Facebook and Snap because its financial data is not widely available or easy to access. .
Two of the four sources said ByteDance’s 2023 revenue will rise from $80 billion in 2022 to nearly $120 billion in 2023. One of the sources said that TikTok’s daily active users in the United States only account for about 5% of ByteDance’s global DAU.
TikTok shares the same core algorithm as bit-beating domestic apps such as short-video platform Douyin, three sources said. Sources said it would be impossible to spin off TikTok and its algorithm because their intellectual property licenses are registered in China’s ByteDance, making it difficult to separate from the parent company.
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ByteDance would also not agree to sell one of its most valuable assets — its “secret origins” — to a competitor, four sources said, referring to the TikTok algorithm. Additionally, sources added that separating the algorithm from TikTok’s U.S. assets would be an extremely complex process and ByteDance is unlikely to consider such an option. Two people familiar with the matter said that excluding algorithms, TikTok’s main assets include user data and product operations and management.
In 2020, the Trump administration tried to ban TikTok and the Chinese enterprise WeChat, but was blocked by the court. The short-video app has since faced partial and attempted bans in the United States and other countries.
At a U.S. Congressional hearing in March last year, China indicated that it might refuse to force divestment of the TikTok app.
“China will firmly oppose [the forced sale of TikTok]”, a spokesperson of the Ministry of Commerce said at a press conference held in Beijing in late March 2023.
Former U.S. Treasury Secretary Steven Mnuchin has expressed interest in forming an investor group to try to acquire TikTok. Sources said ByteDance may have difficulty attracting any buyers for TikTok’s U.S. assets, excluding the algorithm.
In December, ByteDance offered to buy back about $5 billion worth of stock from investors, valuing the company at $268 billion at the time.
