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TikTok: Short Videos But Big Stakes

By Jon Talton The Seattle Times

WWR Article Summary (tl;dr) Claiming threats of national security, the Trump administration has threatened to ban the video-sharing app. Now the clock is ticking to find a U.S. buyer (Microsoft?) to keep the massively popular app up and running in the United States.


To channel my inner Grampa Simpson: What's all this about the government being afraid of TikTok, with short videos of users doing silly things? Sure, the Chinese own it, but the big users are teens. How is this a danger? What's this about Microsoft buying TikTok?

Why, in my day we had real threats to national security from the Soviet Union. We didn't have smartphones but we landed men on the moon. We made fools of ourselves without apps. And Donald Trump is president?

At my age the mind starts playing tricks...

But, no, this is all real.

It's a fast-moving story. But as I write, Trump has threatened to ban the video-sharing app in the United States, and on Thursday he decreed a mid-September ban on U.S. transactions with the app's owner as well as the Chinese company that owns the WeChat messaging app. The administration and some in Congress fear TikTok could share data on Americans with the Chinese government (TikTok denies this, saying its U.S. user information is secure and not in China) or otherwise threaten national security.

Meanwhile, Microsoft has said it's in talks to acquire TikTok from its parent ByteDance -- at least the app's operation in America, Canada, Australia and New Zealand. Trump appears to support the deal, giving Microsoft 45 days to clinch it, but saying the federal government should get a cut.

If all this sounds irregular, your mind isn't playing tricks.

For example, the federal government has never received a cut from forcing the sale of a foreign company. But Trump said the government "should get a very large percentage of that price because we're making it possible....we want and we think we deserve to have a big percentage of that price coming to America, coming to the Treasury."

And as with most things Trump, the "demand" was soon muddied, with economic adviser Larry Kudlow telling Fox Business, "I don't know if that's a key stipulation."

As for the threat to national security, how would that play out?

Might Air Force personnel take their smartphones with TikTok apps into Minuteman ICBM launch bunkers, enabling Beijing to compromise our nuclear triad? No -- launch officers are already prohibited from bringing phones. Indeed, the Pentagon has ordered all military personnel to delete TikTok.

The worries are more amorphous. TikTok claims 100 million users in the United States. The administration is concerned that China could compile information, including the embarrassing or compromising sort, on users.

Also, given China's aggressive government-sponsored hacking, the app might contain a "Trojan Horse" to cause mischief.

This is a legitimate U.S. concern in pushing back against Huawei, the world's largest maker and seller of telecommunications equipment and second-largest manufacturer of smartphones. Huawei's ties to the People's Liberation Army and alleged assistance in surveillance, especially against minority Uyghers in China, brought the company into the forefront of the U.S. trade war with Beijing.

The Justice Department brought criminal charges against Huawei earlier this year for allegedly stealing trade secrets from American competitors including T-Mobile. The company denies wrongdoing.

TikTok seems benign by comparison. But the Trump administration isn't the only one who's concerned. The issue has made allies of some unlikely lawmakers.

In October, Democratic Senate leader Chuck Schumer and Arkansas Republican Sen. Tom Cotton wrote to the acting Director of National Intelligence about TikTok.

"TikTok's terms of service and privacy policies describe how it collects data from its users and their devices, including user content and communications, IP address, location-related data, device identifiers, cookies, metadata, and other sensitive personal information," they wrote.

"While the company has stated that TikTok does not operate in China and stores U.S. user data in the U.S., (parent) ByteDance is still required to adhere to the laws of China.

"Security experts have voiced concerns that China's vague patchwork of intelligence, national security, and cybersecurity laws compel Chinese companies to support and cooperate with intelligence work controlled by the Chinese Communist Party. Without an independent judiciary to review requests made by the Chinese government for data or other actions, there is no legal mechanism for Chinese companies to appeal if they disagree with a request."

The Committee on Foreign Investment in the United States, the federal panel that assesses foreign companies for potential national security risks, has raised similar issues.

The paradox is that ByteDance/TikTok founder Zhang Yiming exemplifies the type of executive U.S. policymakers have long hoped for, to encourage Beijing's peaceful rise. As Michael Shuman wrote in the Atlantic, the serial entrepreneur "embodies what the United States wanted China to be." Zhang even did a short stint at Microsoft.

Now he and TikTok are caught in the larger competition between China and the United States, goosed by the nationalism of Trump and Xi Jinping, with the prospects of a poorer world at best, and a threat to peace at the worst.

As for Microsoft, it might face a price tag of as much as $50 billion, according to Reuters. That valuation is based on the entire company, but it's unclear if ByteDance would be willing to break up TikTok. Forbes values the U.S. operations at $20 billion. (Microsoft paid more than $26 billion for LinkedIn in 2016).

If successful, Microsoft would be buying a coveted demographic and become a significant force in the fast-growing online advertising market.

The acquisition would vault Microsoft beyond its bread-and-butter software, Xbox and cloud computing to compete more directly against Alphabet/Google and Facebook.

Therein lies some risk of its own. Microsoft was conspicuously absent from the recent congressional grilling of Alphabet, Facebook, Apple and Amazon over monopolistic practices and other sins.

The onetime Beast of Redmond, which lost a decade because of a federal antitrust fight, is now seen as a trusted and successful American corporation. That's an advantage its top executives will have to weigh carefully before leaping for TikTok. ___ Distributed by Tribune Content Agency, LLC.

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