Chinese Officials Vow to Oppose TikTok Sell Off

While the Chinese Government has said that it would prefer to see TikTok get shut down than abide by the U.S. Government’s forced sale edict, the company itself is reportedly exploring scenarios in which it would be able to be acquired by a U.S. provider, following the approval of a bill that compels the company to separate from its Chinese ownership.

With U.S. President Joe Biden signing off on the TikTok sale bill this week, TikTok, and parent company ByteDance, are now considering their next steps, though Chinese officials are not happy with the U.S. Government’s push to force a sell-off.

Chinese foreign ministry spokesperson Wang Wenbin has accused the U.S. of acting without cause, in forcing the app’s sale without evidence of data misuse or propaganda, as stated as the reasons for the push.

As per Wenbin:

"This kind of bullying behavior that cannot win in fair competition disrupts companies' normal business activity, damages the confidence of international investors in the investment environment, and damages the normal international economic and trade order."

China’s view is that the U.S. sell off push will hurt the nation’s reputation in international trade, and has vowed to oppose the full sell-off of the app.

Which could impact a key element, in TikTok’s all-powerful recommendation algorithm.

TikTok’s algorithm is its secret sauce, with its system able to quickly detect your interests in real-time, ensuring a more compelling stream of videos are sent your way every time you open the app.

But under China’s export-control rules, the sale of systematic algorithms is dictated by the Chinese Government, which could mean that even if TikTok is sold, its back-end systems may not be included.

Which would significantly reduce the overall value of the app.

As reported by The Wall Street Journal, TikTok’s currently believed to be worth anywhere between $20 billion and $100 billion, depending on what’s included in the package.

As per WSJ:

“Some investment banks and investors are valuing TikTok at five times its advertising and livestreaming revenue, according to people familiar with the matter. Last year, TikTok’s revenue from advertising and livestreaming, its main revenue sources, was about $22 billion, people familiar with the matter said. That suggests TikTok could be valued at $110 billion.”

But again, there’s a big variance in price here depending on what’s included, because a TikTok without its algorithm is a far more risky proposal, and one which likely won’t drive the same performance.

And really, I’m not sure that the ByteDance itself would want to give over full access to its algorithms either, not so much from a proprietary information standpoint, but based on that we know about the likely elements that are included within that code base.

Back in 2020, The Intercept reported that TikTok’s algorithms included parameters designed to suppress posts that had been created by users “deemed too ugly, poor, or disabled for the platform.”

The view, apparently, was that the app’s popularity would be impacted by showcasing such clips, though officials from the company later clarified that such parameters were only ever used in the Chinese version of the app, and had not made it over to TikTok itself.

But the most interesting consideration here is that TikTok’s algorithm has the capacity to actually identify such traits, then highlight them to moderators for further action.

In other words, TikTok’s systems are able to detect very specific visual elements in uploads, which it then uses to show people more of what they like, and less of what they don’t. That could mean that TikTok’s algorithms include other questionable parameters like this, which would raise significant concerns about the impact of a platform that can feed into these interests.

Is it a good thing that TikTok can identify visual elements like this, and keep users hooked based on such?

I suspect that, if you had access to TikTok’s full algorithmic listing of parameters, you may not feel so good about how its feed maintains its compulsion.   

But again, that is TikTok’s secret weapon, and the question now is: “How long can it remain secret?”

If TikTok is to be sold, this will be another key element in its next phase.