Abu Dhabi, UAEThursday 24 September 2020

FUTURE

Quicktake: What is TikTok and why is it being pressured to sell its US operations

The app was rolled out in the US in 2018 after ByteDance’s $1bn purchase of lip-synching app Musical.ly

The logo of TikTok is seen on the side of the company's new office space in Los Angeles. AFP
The logo of TikTok is seen on the side of the company's new office space in Los Angeles. AFP

The US President Donald Trump is reportedly close to a decision to approve Oracle’s possible alliance with the short-form video streaming app TikTok. On Wednesday, the Financial Times said that the Chinese video app will place its global business into a new company that has its headquarters in the US and Oracle will be a minority shareholder, although this has yet to be officially confirmed

Before Mr Trump reveals his decision, The National explains what the Chinese app that became a global sensation is and why it is being pressured to sell its US operations.

What is TikTok?

Launched in China in September 2016, TikTok is owned by Beijing-based technology firm ByteDance. It was rolled out in the US in 2018 after ByteDance’s $1 billion (Dh3.67bn) purchase of lip-synching app Musical.ly. It allows users to create and share 15-second videos while providing musical soundtracks.

Why is it popular?

The platform, which is known as Douyin in China, is popular with young audiences around the world as it allows them to create short-form videos that tend to have an extensive reach. TikTok is available in more than 140 countries and boasts of over one billion users worldwide. In the first quarter of this year, it amassed more than 315 million installs across Apple’s App Store and Google Play, according to app intelligence agency Sensor Tower. This was the highest amount of downloads an app has ever registered in a quarter.

Where are most of its users?

India, which banned TikTok in June, has been its biggest market in terms of user growth. India generated 611 million downloads till March 31 - 30.3 per cent of the total, data compiled by Sensor Tower showed.

TikTok’s home market China only ranked second, accumulating 196.6 million or 9.7 per cent of all downloads. The US accounted for nearly 165 million installations, or 8.2 per cent of the total.

Why is it selling its US operations?

TikTok started to actively look for a buyer for its US operations after Mr Trump issued an executive order last month banning businesses and US residents from using the app. In another executive order passed on August 14, the Trump administration directed ByteDance to sell its US assets within 90 days. Amidst all these developments, the company’s chief executive Kevin Mayer resigned on August 26.

Why could it be a prized possession?

TiKTok's market value could be about $50bn – 50 times its projected 2020 revenue of about $1bn, according to Reuters. The company said it had hired about 1,000 people in the US this year and plans to hire another 10,000.

In comparison, competitor Snap, which owns photo and video sharing platform Snapchat, is currently valued at $36bn or about 20 times its annualised revenue.

Who is leading the race?

California-based enterprise software giant Oracle is reportedly nearing a deal with TikTok. According to the latest report by The Financial Times, Oracle will now be a stakeholder in TikTok's global business and not just in the US. However, details of the agreement are not public yet.

“Oracle confirms that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider … Oracle has a 40-year track record providing secure, highly performant technology solutions,” Oracle said in a statement to The National.

The company’s billionaire co-founder, Larry Ellison, is one of the leading Silicon Valley entrepreneurs who openly supports Mr Trump. In February, he held a fundraiser for Mr Trump at his property in Coachella Valley, California.

Updated: September 16, 2020 05:02 PM

THE DAILY NEWSLETTER
Sign up to our daily email
Most Popular