Congress passed a bill this week forces TikTok to be sold or face a nationwide ban. President Biden signed it into law A 270-day timer begins Wednesday for TikTok to decide its future in the United States. Such a ban has been talked about for years, but now it’s actually happening.
Bytedance, the app’s owner, has three options: it can challenge the bill in court, and if it wins, nothing will change; Bytedance could sell TikTok US to a local owner, although probably without its addictive algorithm; Or TikTok could simply shut down and give in to the ban. This is how the individual options would work.
Bytedance is fighting the bill in court
A TikTok spokesperson told Gizmodo, “This unconstitutional law is a TikTok ban, and we will challenge it in court,” likely arguing that these measures violate the First Amendment. Legal experts say ban on TikTok would impact freedom of expression of its 170 million American users, the app stores that carry it, and TikTok itself. If Bytedance wins on this argument, the law will be repealed and things will return to normal.
However, there is no guarantee that Bytedance will win in court. While the company has good arguments to make, there are numerous laws in the United States that violate constitutional rights on “national security” grounds. That is exactly the argument the United States is making here. Lawmakers have reportedly received classified briefings that show TikTok is a “spy balloon in Americans’ phones” and claim the app is sharing this information with the Chinese Communist Party. If the US can prove this in court, they could win. Then Bytedance has two options for the app.
Bytedance sells TikTok to a US owner
The next most likely option is that TikTok will be sold to a US owner. The information reported on Thursday that Bytedance was discussing internally how to sell TikTok US without its addictive algorithm. However, Bloomberg And Reuters also reported on the same day that Bytedance would not sell TikTok under any circumstances. So take what you will from these conflicting reports. Bytedance doesn’t want to sell, but is considering it if the other option fails
It is estimated that TikTok could have value anywhere 20 to 100 billion US dollars. If the app doesn’t have this great algorithm, it’s probably worth closer to $20 billion. But is the app really worth anything without the algorithm? Sure, it’s a good name and it has a lot of users, but if it sucks to use, people will just leave (see Twitter, now X).
When a sale involves the algorithm, the sky’s the limit – how can you set a price for something that 170 million Americans are addicted to? Former Treasury Secretary Steven Mnuchin said CNBC He puts together a band to buy TikTok. Mnuchin did not specify who the other investors would be, and he has no experience running a social media company. His basic premises are that he is 1) rich, 2) has rich friends, and 3) probably still has ties to the US government. That makes him a pretty strong frontrunner.
In a sale scenario, it’s possible that Meta, Snapchat, Alphabet, or another big tech company buys TikTok. However, this would likely make them vulnerable to monopoly concerns. TikTok alone is so dominant that owning TikTok and another social media platform may not be a success. There are very few people who could afford TikTok, and if Bytedance refuses to sell it, that leaves only one option.
TikTok US is shutting down
If TikTok’s legal challenge fails and a sale doesn’t go through, TikTok could simply shut down in the US. This would separate the most popular social media app of all time from the wealthiest user base in the world (Americans), which is why many people think it’s unlikely. It would force Bytedance to come away empty-handed and lose tens of billions of dollars, but you have to remember that this is not just a business matter, it is also a political matter.
There is a real possibility that TikTok will simply be banned, which I don’t think is being taken seriously enough. China has banned American social media apps for around a decade, most recently Threads and WhatsApp. American technology companies are losing out on the entire Chinese market, but are not selling their existing algorithms and brands to companies there. That would deprive America of its global competitive advantage.
I think TikTok is in a similar position. Selling its algorithm to the United States would be disastrous for Bytedance, and even selling its name could be problematic. TikTok is the first Chinese app to have a significant presence in the US. An outright ban on TikTok would cause frustration in the United States, which could be exactly what China wants.