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TikTok parent company ByteDance is finally selling a majority of the US version of the app to a consortium of investors that include the US’ Oracle and Silver Lake, Abu Dhabi-based MGX, and some mystery investors that haven’t been named.
The deal, first reported by Axios Thursday, hasn’t satisfied China hawks who are taking issue with the fact that the content recommendation algorithm, TikTok’s secret sauce, will be licensed from ByteDance by the US consortium. That could still open the app up to manipulation by the Chinese government, they say.
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The Hollywood Reporter had an interesting tidbit: According to an internal TikTok memo, the algorithm would be retrained on US user data to ensure there is no outside manipulation. What this presumably means, according to sources I’ve talked to, is that Oracle will have the ability to interpret the outputs of the new recommendation algorithm, which will run on Oracle’s servers. In other words, if the Chinese government somehow tries to influence what people on TikTok are seeing, Oracle will be able to detect it. In the end, Oracle could just start from scratch and create its own recommendation algorithm, which would not be hard. The problem with that, though, is that the app wouldn’t know what to serve TikTok users for a while, which would probably reduce engagement and destroy a lot of the value that the joint venture is paying for. Oracle declined to comment.
The other big question is who the mystery investors are. The $14 billion price tag for TikTok is incredibly low. It sounds like an AI startup’s Series B fundraising round, not an acquisition price for the hottest social media app around.