facebookWhy does US President Donald Trump want to ban TikTok from the US and what does this mean for the company financially? - Seedly

Anonymous

07 Aug 2020

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Why does US President Donald Trump want to ban TikTok from the US and what does this mean for the company financially?

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Clara Ng

07 Aug 2020

Community Manager at Seedly

US President Donald Trump has signed an executive order to ban US transactions by ByteDance, the parent company of popular app TikTok. The app is best known for hosting short videos where its users - mostly made of Gen Zs, celebrities and creators – often dance or lip-sync to viral audio clips and is often described as a social network for all, including amateur video content creators. TikTok has some 100 million users in the US.

President Trump has also unveiled similar bans on Tencent, which is the operator of messaging app WeChat. These bans came amidst escalating tensions between US and China and will take effect in 45 days. US lawmakers and the Trump administration raised significant concerns over data collection since TikTok is subject to Chinese law, which meant that its parent company might be pressured to provide the Chinese government with user data when asked to, despite TikTok’s claims that its data from US users are not shared outside of the US. ByteDance has taken efforts to separate itself from the Chinese government, recently bringing on board Disney’s long-time executive Kevin Mayer as the chief executive of TikTok’s US operations.

This move by the Trump administration brings the US-China trade tensions into the technological sphere and could potentially drive Microsoft into the social-media sphere. It will also move Microsoft from its core competence of business-productivity tools.

However, ban orders remain unclear as what transactions are allowed to be covered till then are not clearly stated as of now. Meanwhile, ByteDance has clarified that the US government did not intent for the force sale of TikTok but to ban it.

In response to the ban, TikTok is now negotiating a sale with Microsoft Corp – of which Mr Trump has expressed support for the sale by Microsoft if the US government is able to gain an upper hand. The acquisition of TikTok’s US operations is ByteDance’s crucial chance to avoid a potential ban in the US. Microsoft has set its eyes on purchasing the ByteDance’s operations in US, Australia, Canada and New Zealand. Microsoft has until September 15th to seal a deal for the acquisition of TikTok operations in US.

TikTok’s global business is estimated to be worth $50 million. Analysts and bankers have estimated its US operations to be between $15 billion to $50 billion. According to CNBC, Microsoft’s TikTok acquisition of operations across US, Australia, Canada and New Zealand could cost Microsoft between $10 billion and $30 billion and the company will have a year to move over all of TikTok’s data and operations from China.​​​

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