Trump: US Treasury should get a cut in Microsoft’s TikTok deal

4 Aug 2020753 Views

Image: © Nongnuch Leelaphasuk/Stock.adobe.com

Donald Trump said that if Microsoft or another US company cannot agree a deal with TikTok by 15 September, the app will be banned in the US.

US president Donald Trump has given Microsoft the go-ahead to make a deal with social media giant TikTok – but only if the US gets a cut. It comes after days of debate about the app’s future in the US market.

On Saturday (1 August), Reuters reported that TikTok parent company ByteDance has agreed to divest the US operations of TikTok completely, after Trump announced plans to ban the short-form video app in the US.

US officials have claimed that TikTok poses a national risk because of the personal data it handles. In a statement, the White House said it has “very serious national security concerns” regarding the Chinese app, which currently has 100m users in the US.

Reports emerged late last week that Microsoft was in talks to buy TikTok’s US operation. In ByteDance’s proposal, it suggested that Microsoft could be in charge of protecting all of TikTok’s US user data.

Tweeting on Saturday about Trump’s concerns over TikTok, Republican senator Lindsey Graham commented: “What’s the right answer? Have an American company like Microsoft take over TikTok. Win-win. Keeps competition alive and data out of the hands of the Chinese communist party.”

A deal with Microsoft

While TikTok’s proposal specifically mentioned Microsoft, Reuters reported that the deal also allowed for a company other than Microsoft to take over TikTok in the US. ByteDance’s initial goal was to retain a minority stake in the US TikTok business, however that plan was rejected by the White House.

Over the weekend, Microsoft CEO Satya Nadella held talks with Trump. On Sunday (2 August), Microsoft published a statement confirming that it is continuing discussions regarding the potential purchase of TikTok in the US.

The company said that it “fully appreciates” the importance of addressing Trump’s concerns and is committed to acquiring TikTok subject to a complete security review and ensuring that the deal provides “proper economic benefits” to the US and the US Treasury.

Microsoft said that it is moving quickly to pursue discussions with ByteDance and will complete these discussions no later than 15 September.

Negotiating with Trump

Speaking on Monday (3 August), Trump said that he believes TikTok is “too big, too invasive”, however he doesn’t mind if a “big company, a secure company, a very American company” such as Microsoft acquires the hit app.

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“It’s probably easier to buy the whole thing than to buy 30pc of it,” he said. “How do you do 30pc? Who’s going to get the name? The name is hot, the brand is hot. And who’s going to get the name? How do you do that if it’s owned by two different companies?”

Trump said he thinks a deal to reimburse the US should be made as TikTok would be “a great asset” for Microsoft, but only if the company has the approval of the US.

“So it’ll close down on September 15, unless Microsoft or somebody else is able to buy it and work out a deal, an appropriate deal so the Treasury of the United States gets a lot of money. A lot of money,” Trump said.

As part of the proposed deal, Microsoft said that it would own and operate TikTok in the US, Canada, Australia and New Zealand, providing TikTok users with the experience they “currently love” while adding “world-class security, privacy and digital safety protections”.

The company said: “Microsoft appreciates the US government’s and president Trump’s personal involvement as it continues to develop strong security protections for the country. These discussions are preliminary and there can be no assurance that a transaction which involves Microsoft will proceed.”

Concerns in China

A report from the Wall Street Journal, meanwhile, said that the ultimatum put in front of the Chinese company by the US government is “hardening long-held suspicions in China that the US aims to sabotage the country’s efforts to grow its technology” and raising concerns that it could set a precedent for Chinese companies with global ambitions.

In a briefing, Chinese foreign ministry spokesperson Wang Wenbin said: “Stop politicising economic and trade issues, stop abusing the concept of national security and stop pursuing policies of discrimination and exclusion.”

Concerns have also been raised about how engineers would have to disentangle TikTok’s technical back-end from ByteDance’s sister-app for the Chinese market, Douyin. TikTok and Douyin share some of the code that drives the video platform’s recommendation engine, which the Wall Street Journal described as the “secret sauce” that makes TikTok so addictive for users.

People familiar with the company said that Douyin and TikTok’s algorithms are handled by engineers in Beijing and Shanghai. If TikTok was to be acquired by Microsoft in the US, sources said that the algorithms would likely diverge over time.

Commenting generally on the situation that has evolved in recent days, ByteDance said: “TikTok US user data is stored in the US, with strict controls on employee access. TikTok’s biggest investors come from the US. We are committed to protecting our users’ privacy and safety as we continue working to bring joy to families and meaningful careers to those who create on our platform.”

Kelly Earley is a journalist with Siliconrepublic.com

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