Summary
- TikTok may be forced to leave the US due to legal challenges and reluctance to sell to American buyers.
- The app’s core algorithms are crucial to its success, making a sale without them difficult.
- Exiting the US market could impact ByteDance’s revenue, but most comes from its Chinese version, Douyin.
After years of back and forth, TikTok is finally on the brink of getting banned in the US. As we reported earlier, legislation that could ultimately result in TikTok’s ban was approved by the US House, Senate, and President Biden, setting a 270-day deadline for the app to divest from its parent company ByteDance or halt its operations in the US. Despite ByteDance’s initial claims to fight for reversing the ban, it turns out that the firm may prefer withdrawing the app from the US market over selling it to an American buyer.
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According to Reuters, ByteDance is currently exploring its legal options in the United States. However, if these efforts prove unsuccessful, the report says TikTok will be withdrawn from the US market. This decision could potentially leave its 170 million users in a state of uncertainty, forcing them to search for alternative platforms and disrupting their social media experience.
TikTok might finally have to leave the US
The sources told the outlet that TikTok’s algorithms, which are at the heart of the app’s success and user experience, make the app’s potential sale almost impossible, as these algorithms are core to ByteDance’s overall operations. These algorithms are what make TikTok’s content so engaging and personalized, and they are a key part of ByteDance’s technology portfolio. Sources added that TikTok accounts for a small part of ByteDance’s revenues and daily active users. So, its withdrawal from the US won’t significantly impact the company’s operations.
On the other hand, Reuters reports that about 25% of TikTok’s overall revenue in 2023 came from the US. This means that leaving the US market could deal a significant blow to at least one of ByteDance’s revenue streams. The app currently boasts over 1 billion monthly active users worldwide, with US users accounting for about 5% of ByteDance’s daily active users. However, the majority of ByteDance’s revenue stems from its hometown app, Douyin, which is essentially a Chinese version of TikTok.
In addition to ByteDance’s reluctance to sell TikTok to an American buyer, the company’s undisclosed financial details make it harder for investment bankers to set an estimated price for the app. Some reports indicate that ByteDance has generated $120 billion in revenue in 2023, a massive leap from $80 billion in 2022. Meanwhile, it’s still unclear what percentage of this massive revenue comes from TikTok.
The sources also told Reuters that ByteDance may not find an American buyer willing to pay billions to acquire the app without its core algorithms. Moreover, China’s Export Control Law, enacted in 2020, subjects any sales of algorithms and source codes to the CCP’s approval. These factors present significant hurdles, suggesting that if TikTok’s legal efforts in the US fail, the app seemingly has no choice but to exit the US market.
