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TikTok’s Fate Rests With US and China Governments as Deadline Looms

by Nitesh Patel | 9月 15, 2020

Time is running out for ByteDance to find a buyer for TikTok’s US operations by 20th September 2020, the sale deadline set by the Trump administration. TikTok has been courted by Microsoft, the owner of LinkedIn, Oracle, and Twitter, among others. However, over the weekend ByteDance submitted a proposal to work with Oracle as a “trusted tech” partner, dealing a blow to other suitors. Will this proposal be enough to keep TikTok’s heart beating?

This proposal needs to be vetted by CFIUS (Committee on Foreign Investment in the United States) and national security to ensure that US user data and their phones are secured from threats. I have to assume the proposal aims to strike a balance between ticking security and political boxes, while keeping the underlying AI/ML code (its secret sauce) in the hands of ByteDance. Chinese media reports the Chinese government would rather TikTok cease operations in the US rather than handover its code to US companies. Is the latest proposal able to meet demands from both sides? Time will tell. The proposal includes plans for the US to become the global head-quarters for TikTok and the creation of thousands of new US jobs, which will be seen as a win in the eyes of Donald Trump. Ultimately, it will need to be signed off by Trump and his administration, and we expect there to be some further negotiation as the deadline looms.

Data from Strategy Analytics’ AppOptix US panel shows that TikTok has gained impressive growth during the CV19 stay-at-home order, and also increased media coverage due to its potential ban. It’s highly addictive among the youth segment, and data usage among users is off the chart when compared to other social platforms. For example, TikTok users spent an average of 555 minutes per month engaged with TikTok during Q2 2020 and an average of just over 19 GB per month in data use. This compares to over 1000 minutes per month and 5.7 GB of data use for Facebook. TikTok is video heavy, so its data usage exceeds Facebook use despite users spending on average just over half of the time spent on Facebook. Average time spent in TikTok outstrips that of Instagram, Twitter and Facebook. Its ability to keep users engaged is a function of AI/ML to serve up targeted content to users, plus a rich catalog of compelling social content.

Top 5 US Social Apps - Time Spent and Data Use (2Q 2020)

In China (where the app is called Douyin) in-app purchases for digital gifts have proved to be successful for monetization. ByteDance is reported to have made $17 B in 2019 with TikTok likely the major contributor. However, in Western markets TikTok’s monetization is in its infancy, but has strong potential for growth – assuming it remains alive. In Western countries TikTok remains focused on advertising for revenue growth. Influencers are already making some money on the platform through promoting brands and products in videos, and TikTok is encouraging brands and businesses to create their own content for TikTok to reach their audiences (e.g. Topview, Brand Takeover, In-Feed Ads, etc). Strategy Analytics estimates spending on social media is set to reach between $38.6 B and $40.2 B in 2020, and for mobile video $17.2B- $18 B in North America.

Therefore, for Oracle, there is clear upside for revenue growth from TikTok from advertising – Oracle’s revenue has grown steadily over the past 5 years and revenue from TikTok’s operations could provide a boost from non-traditional sources. More directly, Oracle will benefit from TikTok using its cloud storage and infrastructure supporting TikTok’s 100 M active users, in addition to the security capabilities which Oracle brings to the table.



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