TikTok Lives: US, China Reach Deal

TikTok’s powerful recommendation algorithm has been at the heart of a geopolitical tug of war over the short-video app since the first Trump administration, when Beijing unveiled export controls on algorithms to thwart a forced sale of the app.

The artificial intelligence algorithm underpins the app’s prized ability to serve up addictive videos tailored to individual users, but has also raised fears among national security hawks that it could be manipulated to push Chinese propaganda or polarising material to users.

The Trump administration has repeatedly intervened to keep TikTok available despite US law that required ByteDance to divest its American operations of the app or face a nationwide ban.

Another person familiar with the matter said TikTok had been developing a standalone US app in anticipation of a deal but was keen to ensure that content generated by American users would still be available to users in the “rest of the world” app and vice versa.

Ahead of a previous April deadline, the White House was close to an agreement that would have spun off US TikTok into a company receiving new investment, potentially diluting the stakes of Chinese investors.

Under the terms of that deal, investors, including Andreessen Horowitz and Blackstone, would have owned about half of TikTok’s US business, while large existing investors, including General Atlantic, Susquehanna and KKR, would have held about 30 per cent of the new entity.

As part of that deal, Oracle, which already stores the personal data of American users on its US cloud servers, would have taken a small holding in the new business and also been responsible for securing the US app’s data.

Some analysts have said the algorithm must be fully operated by the US entity to meet the requirements of the divest-or-ban law signed by then-president Joe Biden last year. That would preclude a licensing deal with ByteDance.