The algorithms TikTok relies on for its operations are deemed core to ByteDance’s overall operations, which would make a sale of the app with algorithms highly unlikely, said the sources close to the parent.
In response to a Reuters request for comment, a TikTok spokesperson referred to ByteDance’s statement posted on Toutiao.
ALGORITHMS NOT FOR SALE TikTok shares the same core algorithms with ByteDance domestic apps like short video platform Douyin, three of the sources said.
Moreover, separating the algorithms from TikTok’s U.S. assets would be an extremely complicated procedure and ByteDance is unlikely to consider that option, the sources added.
ByteDance also would not agree to sell one of its most valuable assets – its “secret source” – to rivals, said the four sources, referring to the TikTok algorithm.
China indicated it would be likely to reject a forced divestment of the TikTok app during a U.S. congressional hearing in March last year.
Excluding algorithms, TikTok’s main assets include user data and product operations and management, said two of the people.
ByteDance may struggle to attract any buyers for TikTok’s U.S. assets excluding algorithms, the sources said.
HONG KONG, April 25 (Reuters) – If Chinese company ByteDance uses all of its legal options to oppose legislation that would ban the platform from U.S. app stores, the company would rather close down its loss-making app than sell it. s. Four people said.
The sources close to the parent company claimed that TikTok’s algorithms are considered essential to ByteDance’s overall operations, making the sale of the app unlikely.
The parent company of ByteDance would prefer to see the app removed in the United States because TikTok only contributes a small portion of the company’s daily active users and total revenues. s. rather than offer it to a possible American buyer, they claimed, in the worst case scenario.
According to the unnamed sources, who were not authorized to speak to the media, a shutdown would not have a significant effect on ByteDance’s operations and the company would not have to give up its core algorithm.
No comments were offered by ByteDance.
In response to a story by The Information stating that ByteDance is investigating possibilities for selling TikTok’s U.S. business, it said late on Thursday in a statement published on Toutiao, a media platform it owns, that it had no intention of selling the app. S. company without the algorithm that suggests videos to users of TikTok.
A representative for TikTok referred to ByteDance’s Toutiao statement in response to a Reuters request for comment.
According to CEO Shou Zi Chew of TikTok, the social media company anticipates winning a legal challenge to overturn legislation that President Joe Biden signed into law, which he claimed would outlaw the company’s well-known short video app, which is used by 170 million people in the United States.
After being approved by the U.S. S. , which is being driven by a general concern among U.S. s. lawmakers that China might utilize the app for surveillance or obtain access to American data.
The signing of Biden establishes a Jan. 19 deadline for a sale, which is one day before his term is about to end. However, if he finds that privately held ByteDance is moving forward, he may decide to extend the deadline by an additional three months.
ByteDance does not make available to the general public the financial information of any of its units or its own performance. According to multiple sources, the company still generates the majority of its revenue in China, mostly from its other apps like Douyin, which is TikTok’s Chinese equivalent.
The USA. S. according to a different source with direct knowledge, made up around 25% of TikTok’s total revenue in the previous year.
In an interview with Reuters, over six investment bankers stated that it was difficult to determine TikTok’s valuation in relation to its like-for-like competitors Meta Platforms (META. O)Opens a new tab that shows Snap (SNAP) and Facebook. N)Opens a new tab because TikTok’s financial information is not easily or widely accessible.
According to two of the four sources, ByteDance’s 2023 revenues increased from $80 billion to almost $120 billion. Everyday active users on TikTok in the U.S. s. According to one of the sources, they also account for approximately 5% of ByteDance’s DAUs worldwide.
NOT FOR SALE ALGORITHMs.
According to three of the sources, TikTok and domestic ByteDance apps like the short video platform Douyin use the same core algorithms. One of them claimed that its algorithms are superior to those of ByteDance’s competitors, Tencent and Xiaohongshu.
The sources claimed that because TikTok’s intellectual property license is registered under ByteDance in China and is thus challenging to separate from the parent company, it would be impossible to divest the app with its algorithms.
Separating the algorithms from TikTok’s U.S. also helps. s. assets would be a very difficult process, and the sources stated that ByteDance is unlikely to take that option into consideration.
Concerning the TikTok algorithm, the four sources said that ByteDance would not consent to sell one of its most valuable assets—its “secret source”—to competitors.
The courts prevented the Trump administration’s attempt to outlaw TikTok and Chinese-owned WeChat in 2020. Since then, attempts at and partial bans of the short-form video app have occurred in the U. s. & other nations.
China said that during a U.S.-China summit, it would probably reject a forced divestiture of the TikTok app. S. Congress met in March of the previous year.
At a press conference in Beijing towards the end of March 2023, a Ministry of Commerce spokeswoman declared, “China will firmly oppose it (the forced sale of TikTok).”.
“Technology export is involved in the sale or divestiture of TikTok, and administrative licensing procedures must be completed in compliance with Chinese laws and regulations. “.”.
The final version of China’s Export Control Law, which was unveiled in 2020, expanded upon earlier drafts’ definition of “controlled items.”. The amendment, according to state media, makes sure that exports of algorithms, source codes, and related data must go through approval procedures.
According to two of the people, TikTok’s primary assets—aside from algorithms—are user data and product operations and management.
Previously U. S. Steven Mnuchin, the secretary of the Treasury, has indicated interest in organizing an investor group to attempt to acquire TikTok. It might be difficult for ByteDance to find any purchasers for TikTok’s U. s. assets that do not include algorithms, the sources claimed.
Supported by Sequoia Capital, Susquehanna International Group, KKR and Co (KKR. N)When it offered to buy back about $5 billion worth of shares from investors in December, N)New Tab, opens new tab, and General Atlantic, among others, were valued at $268 billion, according to a report from Reuters at the time.
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Additional reporting was done in Hong Kong by Josh Ye, Austin, Texas’s Sheila Dang, and New York’s Milana Vinn. Sumeet Chatterjee, Jane Merriman, and Jan Harvey handled editing.
