One in seven people worldwide now use TikTok, a testament to its explosive growth and cultural impact. However, the parent company, ByteDance, has navigated a tumultuous landscape over the past few years amid rising security concerns, particularly in the United States.
The scrutiny of TikTok began more than five years ago when former President Trump signed an executive order to remove the app from U.S. app stores. Lawmakers raised alarms about the possibility of the Chinese government accessing personal data from approximately 200 million American users, causing fears of potential manipulation of their feeds.
In response to such concerns, ByteDance initiated Project Texas, a plan designed to store U.S. user data on domestic servers managed by Oracle, an American firm. The company also shifted its headquarters to Singapore and Los Angeles, aiming to distance itself from its Chinese origins. These measures, perceived as significant concessions at the time, did not quell all fears. In 2024, Congress passed a law threatening a complete ban on TikTok unless ByteDance transformed its ownership structure in the U.S.
Following this legislative push, ByteDance entered a new phase, finalizing an agreement to separate TikTok’s U.S. operations from its global business, forming a consortium that includes Oracle. While TikTok has managed to remain available in a critical market, this development highlights the compromises ByteDance will have to make to continue its presence in the U.S. market—and possibly in other regions.
The ongoing U.S.-China rivalry has led to a tightening grip on each other’s tech companies, with TikTok emerging as a “low hanging fruit” that China could leverage in broader trade negotiations, such as discussions surrounding American agricultural products. The new deal allows the Chinese government to present itself as having gained a win, enhancing its negotiation position while still exporting technology.
Although ByteDance will continue to access its American audience and a substantial base of U.S. businesses, it will surrender control over TikTok’s algorithm and data management. The company will now license the algorithm to the new U.S. entity in a deal estimated in the $14 billion range, which could reshape the platform’s dynamics. Analysts warn that this shift may alter the algorithm’s capacity to deliver global content trends and could significantly impact TikTok’s advertising revenue, which composed a significant portion of its overall earnings.
Experts anticipate that as TikTok retrains its algorithm using domestic data, the user experience in the U.S. may change, potentially diminishing overall engagement. With a separate U.S. algorithm in place, previously viral content from other regions may not seamlessly translate to the American audience, forcing brands to rethink marketing strategies and potentially pay more for visibility within the U.S. market.
The operational changes introduced by this agreement will also complicate ByteDance’s technology development. Maintaining distinct algorithms, workforces, and governance structures for U.S. and global operations will likely lead to increased costs and slower innovation.
Unlike the massive setback experienced in India—where ByteDance lost its largest market when TikTok was banned amid geopolitical tensions—analysts suggest the U.S. upheaval is less severe. Despite these challenges, TikTok has shown resilience in its growth trajectory.
However, the narrative surrounding TikTok—much like that of Huawei—reflects shifting governmental attitudes toward Chinese technology firms. While Huawei has found itself effectively barred from Western markets due to U.S. sanctions, TikTok operates under strict regulatory conditions, revealing a nuanced landscape for Chinese entities worldwide.
In contrast to the restrictions imposed on TikTok in the U.S., the company retains full control over Douyin, its Chinese counterpart, which continues to thrive within an aligned political environment. Douyin remains a cornerstone of ByteDance’s portfolio, thriving on the full integration of data and innovative potential.
Moving forward, ByteDance is investing in diversified ventures such as cloud computing and artificial intelligence, aiming to mitigate risks associated with its reliance on advertisement-based consumer applications. Observers note that the challenges facing TikTok are less about data security and more about the broader issues of cultural influence and speech governance within the U.S.
As TikTok continues to navigate this complex environment, the implications of its new structure may also serve as a model for other Chinese tech firms seeking to establish a foothold in a landscape characterized by increasing mistrust.
