Issue #16
Banning TikTok and its side-effects
ByteDance purchased Musical.ly in 2017 and merged Musical.ly with a similar app called TikTok, which grew phenomenally. Today TikTok competes with the likes of Facebook and SnapChat. Caught in the Sino-American geopolitical strife it looks like takeover of TikTok’s American business by a US domestic buyer may soon happen. Touted as a national security concern to protect Americans, it is more a depressing example of opportunism, more likely hurt American companies and investment and stoke Chinese nationalism.
Microsoft, is in talks to buy TikTok’s American operations, as well as those in New Zealand, Australia and Canada. Twitter has also discussed to buy TikTok’s American operations.
But why would Microsoft want to buy TikTok? TikTok doesn’t gel well with Microsoft’s core competence. Microsoft has a mixed record with consumer technology.
It would give Microsoft a strategic advantage in the social-media big league. Nabbing TikTok would be a hedge against Google’s YouTube, Snapchat and Facebook’s Instagram by giving it troves of data on a demographic it does not cater.
How an American TikTok would work is unclear. Microsoft would need to replace the TikTok’s Chinese infrastructure. It would have to license from ByteDance content for other non-US jurisdiction for interoperability, which may hit a wall with the current US administration.
One of America’s tech superpowers — Apple — is caught in the crosshairs.
Also Caught in the fray is WeChat owned by Tencent which is more than just messaging. It’s a world within itself used in China for payments, ride-hailing, grocery orders, paying utilities and really any digital service. And no, WeChat on iOS would be a a problem for Apple.
The Executive Order is vague and it could mean Apple must only remove TikTok and WeChat from its US App Store. But, if the ban applies globally, Apple’s sales will crater:
In the worst case scenario, in which Apple would be forced to remove WeChat from its App Store globally, iPhone’s annual shipments could decline by 25 to 30 percent as a result of the ban.
ByteDance is the latest but not the last in a series of Chinese firms, among them Huawei, a telecoms-equipment provider was effectively banned last year. Lenovo, a partly state-owned Chinese firm, sells lots of computers in America. Tencent, a social-media giant, owns large stakes in video-game studios with millions of American users. Mike Pompeo, the secretary of state, suggested in his “Five Cleans strategy” that America may take action against not only TikTok but also Tencent’s WeChat app and “countless more” Chinese firms which are “feeding data directly to...their national security apparatus”. Trump has even suggested that the Treasury should get a cut for making the TikTok deal possible, a demand with no precedent.
The data threat from China is real. But nationalist jingoism, backed up with arbitrary threats of expropriation, is no way to respond.
America has always been relaxed about protecting its citizens’ data, and hostile to cyber-security concepts like encryption. A new data-privacy and cyber-security law would create transparent standards for handling data. But rushed asset sales at the barrel of a gun are not the right answer. America needs to respond in a way that is less arbitrary and more democratic.
What kind of actions can we expect China may retaliate back with? Mark Zuckerberg said that this can have bad long term consequences across the world. Other countries may adopt similar measures to use data protection tool to stifle competition. If that happens we may see the internet splitter and lead to “Internet balkanisation.” And most of all this could potentially break up Silicon Valley Business model of scale and reach.