ByteDance, the Chinese parent company of the viral short video app TikTok, may opt to shut down the app rather than sell it after USA President Joe Biden signed a bill this week forcing it to divest ownership within the next 9 to 12 months, according to a report by Reuters on Friday, citing multiple sources.
ByteDance has been facing increasing pressure from US lawmakers concerned about national security implications due to its Chinese ownership. The bill signed by President Biden aims to address these concerns by mandating ByteDance to cease control of TikTok’s operations in the US.
ByteDance’s Response
Earlier this week, TikTok labelled the law as “unconstitutional.” While TikTok intends to challenge the legislation legally, it is suggested that ByteDance might find it more viable to shut down the app rather than sell it to another company.
Complexities in Sale
The core algorithms powering TikTok’s video feed are considered essential to ByteDance’s business model. Selling off the app without these algorithms would be highly complex. Moreover, tensions between the US and China further complicate any potential sale, making a shutdown more feasible.
TikTok, with 150 million users in America, has become a significant source of income for content creators, influencers and small businesses. However, for ByteDance, TikTok’s contribution to its overall revenues and user base is relatively small, making a shutdown in the US a viable alternative to selling the app.
Chinese Resistance
Also, Prior attempts to force ByteDance to divest TikTok were met with resistance from China. China’s Export Control Law, enacted in 2020, effectively portrays the state’s stance on regulating exports of algorithms and related technologies.
Investor Interest Amidst Uncertainty
Despite possible interest from investors, including former US Treasury Secretary Steven Mnuchin, in acquiring TikTok, ByteDance may face difficulties attracting buyers for TikTok’s US assets without including its algorithms. ByteDance, valued at $268 billion in December, remains backed by prominent investors.
