ByteDance Would Rather Shutter TikTok US, Than Sell – Report

The positions of both the United States and TikTok’s parent ByteDance continue to harden this week.

A day after President Joe Biden signed the TikTok ban or divest bill into law, Reuters has reported (citing four sources) that ByteDance would prefer to shut down its loss-making app rather than sell it, if the Beijing-based firm exhausts all legal options to fight legislation to ban the platform from app stores in the US.

TikTok has already confirmed it will fight the US legislation in the courts, but this latest threat will not ease the concerns of the 170 American TikTok users, or the thousands of content creators in the US.

Core algorithms

The ban or divest law gives Beijing-based ByteDance 270 days (or roughly nine months) to sell TikTok to a US-based company, or the app will face a total ban from American app stores, as well as being prohibited from “internet hosting services” that support the app.

President Biden could extend the deadline another 90 days if he determines ByteDance has made progress toward a sale. That would give TikTok potentially up to a year before facing a ban.

But ByteDance is subject to Chinese law, and the Chinese government has previously stated it will oppose a sale.

According to Reuters the algorithms TikTok relies on for its operations are deemed core to ByteDance’s overall operations, which would make a sale of the app with the algorithms highly unlikely, sources close to the parent were quoted as saying.

TikTok accounts for a small share of ByteDance’s total revenues and daily active users, so the parent would rather have the app shut down in the US in a worst case scenario than sell it to a potential American buyer, the sources reportedly said.

A shutdown would have limited impact on ByteDance’s business while the company would not have to give up its core algorithm, said the sources, who declined to be named as they were not authorised to speak to the media.

ByteDance reportedly declined to comment, and late on Thursday in a statement posted on Toutiao (a media platform it owns), it reportedly said that it had no plan to sell TikTok, in response to an article by The Information that reported that ByteDance was exploring scenarios for selling TikTok’s US business without the algorithm that recommends videos to TikTok users.

Legal battle

With the positions of both sides now clearly defined, attention will now turn to what will likely be a lengthy legal battle in the United Sates.

TikTok’s Singaporean CEO Shou Chew on Wednesday in a video statement, had sought to reassure worried American users and content creators, after he said, “Rest assured: we aren’t going anywhere.”

He also said TikTok expects to win a legal challenge to block legislation signed into law.

TikTok may have some reason to be optimistic.

In November 2023 TikTok achieved a victory after a US judge blocked Montana’s first-of-its kind state ban on TikTok, ruling the Montana ban violated the free speech rights of users.

Montana however is currently appealing that ruling.

Potential buyers?

There are no words on possible buyers for TikTok in the US, but when former President Donald Trump in 2020 had tried to ban TikTok or force its sale to a US entity (his efforts were blocked by the courts), companies such as Oracle, Microsoft and even Walmart were mooted as potential acquirers.

More recently, Trump seems to have changed his mind about TikTok and has railed against the possibility of a ban, reportedly saying Biden would be “responsible” for such a measure.

Reuters reported that ByteDance does not publicly disclose its financial performance or the financial details of any of its units. But it noted that ByteDance was valued at $268 billion in December when it offered to buy back around $5 billion worth of shares from investors.

ByteDance reportedly continues to make most of its money in China, mainly from its other apps such as Douyin, the Chinese equivalent of TikTok, separate sources have said.

The US accounted for about 25 percent of TikTok’s overall revenues last year, said a separate source with direct knowledge.