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What could TikTok's future look like?

Author: Philip Brown
Date published: 13.08.2020

Our newsletter this week revolves around TikTok, and while reading up on the topic, I ended up in a bit of a rabbit hole. Below my (extended, and slightly adjusted) P.O.V on the topic.

The Politics
"Political football" is the term that most sticks to me thinking about all of this. The platform took out full page ads in various Australian newspapers. Social media is increasingly becoming part of the geopolitical world, and it is proving to be incredibly complicated.

To provide some context - there are two items here that need to be highlighted.

1. Companies that do business in China, whether their origins are domestic or foreign, are legally required to establish a party organisation within their business. There is also an article in the National Intelligence Law which highlights the “obligation of Chinese citizens to support national intelligence work.”
Combined, the common thought is that China could (as it has done with Yahoo in the past) force the likes of TikTok to hand over sensitive data upon request under the authority of the Chinese Communist Party.
2. TikTok has released statements underscoring that U.S. data is stored in the U.S. and that it is therefore not subject to Chinese law, and TikTok's GM in Australia stressed that the platform is "independent, and not aligned with any government, political party or ideology”, and user data is kept secure.

We then went on to look at some more articles, and found this article published by CNBC back in July 2019 which contains some interesting viewpoints. Samm Sacks, a cybersecurity policy at think tank, New America says:

“Bytedance goes to great lengths to separate TikTok as an international operation. But content created outside China could be a “major threat to the (Chinese Communist Party) and domestic stability. So they have a lot of incentives to keep international content and data pretty carved off.”

Leland Miller, CEO at China Beige Book counters: “if the China-based parent company is requested to share information by Beijing, it will adhere to any demand by the Party.”

And while India has already banned the app, and a likely take-over on the horizon in the U.S, Australia has decided to not ban the app based on the fact that research has shown that the app does not pose a big enough security threat to the country.

the Australian government had had a "good look" at whether to ban apps such as TikTok and concluded there was "no reason for us to restrict those applications at this point".

[...] "But people should know that the line connects right back to China and that they should exercise their own judgement about whether they should participate in those things or not," he said.

Reading through the lines, perhaps we should start asking ourselves the question “who am I more comfortable with having access to my data - the U.S or China?”

If you’d like to read more about "political football", I would suggest reading this article by the Atlantic

The Acquisition
It’s important to understand that Microsoft (potentially) buying TikTok comes with a lot of nuances.
Microsoft is not actually purchasing TikTok, nor its parent company Bytedance. Instead, it is offering to purchase a portion of its operations in the U.S., Canada, Australia and New Zealand. This in itself is unique, as no one has ever purchased a regional section of a social network before. There is a lot of uncertainty as to which parts of the operation Microsoft would/could purchase, but the expectation is that the current version of TikTok in the U.S. would cease to exist, and would be replaced by Microsoft’s version, which may not have access to TikTok’s highly secret and effective algorithm supported by AI), meaning that the future U.S. TikTok could end up being a slightly “worse” version of the same product.

However, even if Microsoft had a “lesser” version of TikTok in these four countries, it would still be a huge coup. This article discusses why Microsoft wants the platform. One obvious reason is that Microsoft has not been entirely successful when it comes to pure consumer services, nor does it have the same impact on the next generation of tech users as it used to. You can now go through your entire educational / professional life without the need for Microsoft software / services.

The Outcome
Microsoft would without a doubt be able to compete (more) with the likes of Facebook & Google, and even Amazon when it comes to social media platforms. Currently, all of those platforms enjoy more paid advertising income than Microsoft currently does (as it only benefits from LinkedIn), so the potential win here is quite significant. It also has the potential to help the company get rid of its "boring" label.

Experts are also weighing in on the price of the acquisition, and depending on who you ask varies roughly. Some estimations come in at $10 billion dollars, and others come as high $50 billion dollars. There are warnings that Microsoft could be overpaying, but access to a social media platform and a younger generation may well be worth it.