TikTok announces deal to keep its US operation
What happened: On January 23, TikTok announced the details of a deal structure that would allow it to keep operating in the US.
- The structure looks largely unchanged from what was reportedly agreed in September between US and Chinese negotiators.
Under the final deal:
- A new entity – TikTok USDS Joint Venture – is created to handle data security and content moderation.
- The new JV will be majority-controlled by US investors with ByteDance remaining the largest single shareholder at 19.9%.
- TikTok’s existing US entities keep the commercial side of the business, including ecommerce, advertising, and marketing.
Based on the latest announcement, it's not fully clear who owns the algorithm.
- But a December memo from TikTok CEO Shou Zi Chew said ByteDance will retain the algorithm’s IP and license it to the new JV for a fee.
- Subsequent reporting has repeated this assertion.
Our take: If that licensing setup stays true (which we think it does), ByteDance didn’t give up much.
- The only small concession is losing majority control over the new JV that oversees data security.
Beijing can absolutely live with that: Apple’s Guizhou data center operation – which houses Chinese user data – is owned by the local government.
- Apple reportedly doesn’t own the data operation at all.
- By that standard, ByteDance has walked away with a sweeter deal in the US than Apple got in China.
The bottom line: If this is the blueprint other Chinese tech platforms need to follow to operate in the US, they'll be happy to do so.