Bytedance: How TikTok’s proprietor tried, and failed, to cross the US-China divide

By Raymond Zhong

The Chinese language entrepreneur behind TikTok took ample precautions when he got down to straddle the tech world’s most treacherous divide: the one separating China’s tightly managed web from the remainder of the planet.

He made TikTok unavailable in China so the video app’s customers wouldn’t be topic to the Communist Celebration’s censorship necessities. He saved person knowledge in Virginia and Singapore. He employed managers in the US to run the app and lobbyists in Washington to battle for it on Capitol Hill.

None of that counted for a lot ultimately. With TikTok now negotiating a sale to Microsoft below intense strain from President Donald Trump, who mentioned on Monday that he was giving the go-ahead to such a deal, the digital wall between China and the US is proving to be larger than ever at this second of widening battle between the 2 international locations.

Solely this time, it’s the U.S. authorities, not China’s, placing up the barricades — an escalation that might foretell an much more restrictive time for firms in each nations.

ByteDance, the 8-year-old Chinese language social media big behind TikTok, is China’s first actually international web success story. The corporate’s founder, Zhang Yiming, 37, started pushing to broaden abroad early on, believing that solely an organization with worldwide attain may stay on the technological edge.

However TikTok ended up resonating with American youngsters when even a platform for brief viral movies is topic to political scrutiny. Underneath China’s chief, Xi Jinping, the Communist Celebration has emphasised its final authority over Chinese language individuals and companies. Suspicion by no means dissipated that TikTok — irrespective of what number of non-Chinese language executives it put in cost — may be unable to resist strain from Beijing to give up person knowledge or manipulate content material.

Related doubts already hold over many different Chinese language tech firms. TikTok’s sudden change of fortune may drive them to re-evaluate their very own worldwide ambitions.

Chibo Tang, a companion in Hong Kong at enterprise capital agency Gobi Companions, mentioned that, more and more, his recommendation to Chinese language tech firms was to avoid the US when increasing abroad — to observe as a substitute the Chinese language authorities’s diplomatic overtures and investments in locations resembling Southeast Asia, the Center East and Africa.

“If you want to go out and tackle more difficult markets, sure, but obviously there’s consequences and additional costs,” Tang mentioned. “Going forward, Chinese entrepreneurs in these tech companies should be aware of that.”

One unnamed entrepreneur put ByteDance’s place in even starker phrases to Chinese language tech weblog Huxiu on Monday: “Once the U.S. business is lost, half of the space for thinking about globalization has vanished.”

As uncertainty swirled Sunday about whether or not Trump would permit Microsoft to proceed negotiations with TikTok, ByteDance issued a late-night assertion in China reiterating its dedication to going international.

“In the process, we are facing all kinds of complex and unimaginable difficulties,” the corporate mentioned. The assertion cited the tense geopolitical atmosphere, tradition clashes and, in an unusually direct jab at a competitor, “Facebook’s plagiarism and smears.”

Fb is rolling out a TikTok-like function referred to as Reels on Instagram, which it owns. The corporate’s chief govt, Mark Zuckerberg, has additionally argued that undermining American tech firms with extra regulation may permit Chinese language rivals to export their very own, very totally different values to the world. Fb declined to touch upon ByteDance’s assertion.

For Zhang of ByteDance, TikTok’s run-in with the Trump administration has been an schooling in authorities relations, though hardly his first.

Zhang falls on the geekier aspect of the tech founder spectrum. He repaired computer systems in faculty, and from previous interviews, he seems most at dwelling speaking about algorithms and the circulation of knowledge. He’s not a Communist Celebration member, he informed The Atlantic journal just lately.

For a few years, he echoed Zuckerberg in saying he ran a tech firm, not a media outlet, which meant he shouldn’t be imposing his personal judgments over content material.

“I can’t accurately decide whether something is good or bad, highbrow or lowbrow,” he informed Chinese language enterprise journal Caijing in 2016.

Zhang could have thought he was insulating himself in China. However the perils of that technology-driven strategy had been made clear in 2018, when Chinese language authorities shut down one in every of ByteDance’s oldest merchandise, a humor app referred to as Neihan Duanzi, for spreading vulgar materials.

“For a long time, we put too much emphasis on the role of technology and didn’t realize that technology must be guided by core socialist values,” Zhang wrote in a public letter of apology.

ByteDance’s in style information aggregator app, Toutiao, had additionally been below fireplace for saucy content material. In response, Toutiao started that includes extra tales about Xi on the prime of its feed.

By then, ByteDance had already begun increasing in Japan, India, Southeast Asia and past. TikTok was launched in 2017 because the worldwide version of Douyin, one in every of ByteDance’s Chinese language video apps.

TikTok had some early scrapes with overseas governments. In 2018, Indonesia quickly blocked it for internet hosting inappropriate content material. Regardless of the challenges, Zhang mentioned at an occasion in Beijing that yr that going international was the one option to entry the expertise and sources wanted for long-term success.

Zhang mentioned he had studied one other Chinese language firm’s fast progress abroad to see the way it could possibly be achieved.

Which firm? Huawei.

His alternative was prescient in hindsight, although maybe not in the way in which he supposed. The Trump administration has for years sought to undermine the large Chinese language maker of telecommunications gear and smartphones. It, too, has been referred to as a nationwide safety risk by White Home officers, who concern the Chinese language authorities may use Huawei gear for espionage.

Worldwide progress was prime of thoughts when Zhang started courting, a Chinese language-made lip-syncing app that had discovered success in the US and Europe. In late 2017, ByteDance agreed to purchase for round $1 billion. ByteDance would later merge the app into TikTok, giving it a toehold within the West that will ultimately propel it to wider success.

Based on individuals with data of the matter, the 2 events didn’t strategy the Committee on Overseas Funding in the US, or CFIUS, to hunt its blessing beforehand — a call that will later come again to hang-out ByteDance.

CFIUS usually evaluates overseas offers involving an American enterprise for doable nationwide safety dangers. Nevertheless it additionally claims jurisdiction over offers between overseas companies which have vital American operations.

As TikTok grew to become a smash hit in the US, issues arose about whether or not the app was censoring content material which may offend Beijing. Late final yr, The New York Instances and others reported that CFIUS was wanting into the deal. Washington politicians additionally started voicing fears that TikTok could possibly be a conduit for China to meddle in American elections.

With strain constructing, a few of Zhang’s buyers and advisers provided concepts for placing distance between TikTok and ByteDance, together with reorganizing TikTok’s company or authorized construction.

However as a substitute of a serious restructuring, Zhang opted for personnel modifications. This spring, he reshuffled ByteDance executives in China and mentioned he would personally commit extra time and vitality to Europe, the US and different markets. In Could, Liu Zhen, a former Uber govt in China who had been overseeing ByteDance’s international expansion, left the corporate. Zhu was changed as TikTok’s head by Kevin Mayer, a veteran Disney govt in the US.

ByteDance additionally embarked upon a lobbying push in Washington to promote the concept that TikTok’s allegiances had been with the US, not China. In conferences with lawmakers, lobbyists emphasised the app’s gentle, uplifting fare and the truth that a lot of its prime leaders had been American residents.

The Trump administration’s scrutiny continued unabated. After Trump failed to attract big crowds at a June reelection rally in Tulsa, Oklahoma, TikTok customers claimed to have pulled off a prank by registering for tickets after which not attending the occasion. In early July, Secretary of State Mike Pompeo floated the thought of banning the app over safety issues.

Inside weeks, Microsoft mentioned it had acquired Trump’s go-ahead for pursuing a deal to purchase TikTok’s U.S. operations. CFIUS had determined to order ByteDance to divest.

In a letter to ByteDance’s staff on Monday, Zhang made the latest turmoil sound extra like a technical matter than an existential risk caused by hostile geopolitical forces.

He wrote that the corporate had repeatedly emphasised that it was prepared to make technical modifications to handle U.S. issues, but the order to promote was made anyway. “We do not agree with this decision, because we have always insisted on guaranteeing users’ data security, the platform’s neutrality and transparency.”

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