What Are the Repercussions of a US-TikTok Standoff?

Published August 4th, 2020 - 08:30 GMT
What Are the Repercussions of a US-TikTok Standoff?
Reeling from being sanctioned in India, its largest market, TikTok now faces being barred from the largest advertising revenue market in the world. (Shutterstock)

What do we know about Trump’s TikTok ban and what would a potential Microsoft deal mean?

On Friday night aboard Air Force One, US President Donald Trump announced that he was banning the mega-popular video-sharing app TikTok, marking the latest escalation by Washington against Beijing in a bilateral standoff that shows no signs of abating.

“As far as TikTok is concerned, we’re banning them from the United States,” he told reporters, adding that, “I have that authority,” and that he planned to use either emergency economic powers or an executive order to bar the app from operating domestically.

Trump’s decision wasn’t surprising: his administration had been threatening to impose a ban for weeks over concerns about how the Chinese-owned company was a national security threat given the sensitivity over how the platform collected American users’ data.

However, the ban was not made official on Saturday or Sunday. It was not immediately clear whether Trump’s declaration was a negotiating tactic or merely anti-China posturing ahead of the November elections.

White House officials have also remained vague over a possible timing of a ban.

In a Fox News interview on Sunday, Secretary of State Mike Pompeo said that the president would “take action in the coming days” to address “national security risks” presented by Chinese-owned tech companies, which could indicate that TikTok is one of many other targets.

Amid these mixed signals came news on Sunday that Microsoft was resuming its efforts to buy TikTok, apparently with Trump’s approval.

Some of Trump’s closest political advisers, like Treasury Secretary Steve Mnuchin and National Economic Council chief Larry Kudlow, have been persuading him to sign off on a deal rather than turning off a service used by millions.

More hawkish officials like anti-China hardliner and trade adviser Peter Navarro have objected to a sale, viewing the moment as an opportunity to curb the influence of Chinese apps.

Meanwhile, the news of a ban prompted many of the app’s users to issue emotional farewells while others vowed electoral vengeance.

What would a deal with Microsoft mean?

Microsoft had already been in advanced talks with ByteDance, the parent company of TikTok, to divest and satisfy the White House’s goal for the app to be controlled by a US company.

Trump’s proposal to ban the app on Friday appeared to dent any chance of a deal.

But Trump has now pumped the brakes after a conversation with Microsoft CEO Satya Nadella over the weekend, clearing the way for a potential blockbuster deal that the software giant said it would pursue over the coming weeks and complete no later than September 15.

“Microsoft fully appreciates the importance of addressing the president’s concerns,” the company said in a statement. “It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury.”

The company said that such a deal would involve purchasing TikTok in the US, Canada, Australia and New Zealand. ByteDance would continue to own the app’s operations in Beijing and other markets. A series of outside investors might be brought in and would hold minority stakes in any deal.

Microsoft pledged that it would make sure that all US user data is transferred back to the country and deleted from foreign servers, and said that it would bolster the app’s security and privacy protections.

Any deal would have to be approved by both US foreign investment and antitrust regulators, and while there may be other companies or investors interested in a deal, Microsoft seems to have the inside track as both positioned to afford it as well as win government approval.

The South China Morning Post reported on Sunday that ByteDance insiders favour spinning off TikTok as opposed to selling it.

Politics aside, the deal could have huge implications for Microsoft and the social media landscape.

The company’s otherwise abysmal performance in the internet space during the Ballmer years, and lack of dominance in search, social and ecommerce, has seen it escape the tag of “Big Tech.”

While it has dabbled in consumer acquisitions – it now owns LinkedIn and Bing – the acquisition of TikTok, with close to 100 million users in the US alone, could be a game changer for the software giant and pit it directly against social media titans like Facebook, Twitter and Reddit.

How have users responded?

Trump’s supposed ban has irked many TikTok users who share viral videos and dance clips on the service, prompting an outpouring of outrage, grief and even revenge.

Videos referencing the ban have reached over 380 million views, and creators have sent tearful goodbyes with announcements to their followers about where they could be found online post-ban.

There have even been attempts to discourage Trump with appeals to his vanity:

There’s been speculation that Trump had another reason to go after TikTok: as an act of retaliation against its users.

Many of them infamously prank-reserved tickets to his under-attended Tulsa rally in June; another user, comedian Sarah Cooper, has become famous for mockingly lip-syncing him.

 

On Sunday, nine TikTok creators with a collective 54 million followers published an open letter addressed to Trump, imploring him to sell it to a US company or spin it off as TikTok US in an IPO.

What are the potential consequences?

The outcome of the US-TikTok standoff could have far reaching implications.

With an estimated value of as much as $20 to $40 billion, things are coming to a head for TikTok. A ban or forced sale could weaken its ability to take on US tech behemoths, who continue to benefit from their monopolistic positions.

Reeling from being sanctioned in India, its largest market, the app now faces being barred from the largest advertising revenue market in the world. Both US and Indian markets are crucial for any technology business with global ambitions.

The impact on large swathes of the US entertainment industry could also be considerable – both for creators and for the businesses that orbit them.

Security concerns aside, some have argued it would also be a blow to free speech.

Another consequence could be one that Trump would like to take heed of come November.

A survey conducted in July showed that Republicans and older adults expressed the most support for a TikTok ban, while nearly 60 percent of Generation Z respondents opposed it.

NBC News noted on Saturday that a ban could prompt a massive mobilisation of first-time voters seeking electoral revenge.


Copyright © 2020 TRT World

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