Sources reveal that ByteDance, owner of TikTok, is prepared to shut down the app if it exhausts all legal avenues to fight U.S. legislation aiming to ban the platform from American app stores. The algorithms integral to TikTok's operations are deemed critical to ByteDance's overall functions, making the sale of the app with its algorithms highly improbable, according to insiders close to the parent company.
Although TikTok contributes a small portion to ByteDance's total revenues and daily active users, the parent company would opt to shut down the app in the U.S. rather than sell it to an American buyer, should legal options be exhausted. This decision would have minimal impact on ByteDance's business, allowing it to retain its core algorithm, sources said on condition of anonymity.
In response to reports suggesting ByteDance was exploring scenarios for selling TikTok's U.S. business without the algorithm, the company stated it had no plans to sell TikTok. TikTok's CEO Shou Zi Chew expressed confidence in overcoming legal challenges against legislation aimed at banning the app, signed into law by President Joe Biden.
The legislation, driven by concerns among U.S. lawmakers about data privacy and national security risks posed by Chinese-owned apps, sets a deadline for a sale by January 19, with a possible three-month extension. ByteDance, which does not publicly disclose its financials, primarily generates revenue from its Chinese apps like Douyin, the Chinese counterpart of TikTok.
The challenge in valuing TikTok compared to competitors like Meta Platforms' Facebook and Snap lies in the limited availability of TikTok's financial data. ByteDance's revenues reportedly surged to nearly $120 billion in 2023 from $80 billion in 2022, with TikTok's daily active users in the U.S. accounting for about 5% of ByteDance's global user base.
Despite potential interest from investors, ByteDance may face difficulties attracting buyers for TikTok's U.S. assets without including its algorithms. China's stance on forced divestment of TikTok remains firm, as indicated during a U.S. congressional hearing in March 2023, highlighting the complexity of any potential sale.
In light of China's regulations on technology export and the importance of algorithms to TikTok's operations, ByteDance appears unlikely to entertain options that involve separating its core assets from the app.
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