Against the backdrop of mounting pressure on TikTok from US regulators, ByteDance’s investors are considering taking over the short-video app at a valuation of about USD 50 billion—a figure markedly higher than Snap Inc. (NYSE:SNAP) and Twitter (NYSE:TWTR), Reuters reported earlier this week.
An earlier report from The Information explained that a group of existing ByteDance shareholders, including Sequoia Capital, SoftBank, and New Enterprise Associates, would probably join forces to buy a majority stake in TikTok.
In recent years driven by TikTok’s massive success, ByteDance has achieved what many other Chinese internet companies have not—competing with western tech conglomerates on the truly global stage.
Originally a lip-syncing, music video, and meme app, TikTok has become a global phenomenon in a short period of time. Worldwide, users have downloaded it more than 2 billion times since its launch, according to data provider Senor Tower. TikTok reportedly projects to generate up to USD 1.4 billion in revenue this year. In the US alone, the app aims to generate USD 500 million in revenue, mainly through ads.
This success triggered scrutiny from local governments in its operations and handling of data, most recently with a ban in India, Trump administration’s potential ban, and a fine in Korea. ByteDance, the Beijing-based parent company which also operates TikTok’s Chinese version Douyin in the domestic market, was valued at between USD 100 billion and USD 140 billion in private markets in May, as KrASIA reported.
It’s considering listing its China business in Hong Kong or Shanghai instead of listing as a combined entity in the US as it previously planned, Reuters reported today, citing people familiar with the matter.
The now-besieged ByteDance isn’t the first Chinese tech company in the crosshairs of the drastically altered global environment. The US government’s entity list forced telecommunications giant Huawei to explore domestic semiconductor manufacturing and develop its in-house operating system to fill the void of Google Mobile Services.
However, different from Huawei and some other tech companies on a US blacklist who have doubled down on the domestic market driven by a boost in patriotic sentiment, ByteDance is not retreating from the western market anytime soon. On the contrary, it has to distance itself from its ties with China.
The possible sale of TikTok, which is reportedly still at an early age, is expected to distance TikTok from its Chinese corporate parent and dispel any notions of a national security threat, as levied by some US lawmakers. Executives inside ByteDance are adjusting corporate structures and planning separate headquarters, KrASIA reported.
But the distance also has some practical problems—it would entail giving outsiders access to ByteDance’s computer code, which runs its addictive content-recommendation engine, The Information wrote, citing sources. Also, there’s no guarantee that a spinoff would satisfy US lawmakers.
Already, TikTok has eaten into the global mobile ads markets, heaping intense pressure on Facebook, Google, Snapchat, Twitter, and other social networks.
TikTok CEO Kevin Mayer expressed his sharp criticism on Facebook in a blog post, titled “Fair competition and transparency benefit us all”, on Wednesday, attacking the social giant for hiding behind a patriotic guise, while pointing out the failure of Facebook’s recent attempts to dislodge TikTok by launching products Lasso and Reels.
During a congressional antitrust hearing this week, which put Amazon’s Jeff Bezos, Google’s Sundar Pichai, Apple’s Tim Cook, and Facebook’s Mark Zuckerberg together, Zuckerberg said that “I think it’s well documented that the Chinese government steals technology from American companies,” when asked whether the Chinese government steals technology from US companies.
“If you look at where the top technology companies come from, a decade ago the vast majority were American,” the Facebook CEO said. “Today, almost half are Chinese.”
Meanwhile, TikTok pledged to give creators over USD 2 billion in the next three years to fend off US rivals Instagram and YouTube.
On Friday, Bloomberg reported that American computing giant Microsoft (NASDAQ:MSFT) is exploring acquiring TikTok from ByteDance.