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During the weekend there was a lot of confusion regarding the agreement reached between TikTok and some US companies to prevent the Chinese social network from being banned in the United States, as ordered by the Trump administration. Oracle and Walmart, TikTok’s main partners, released a draft agreement on Saturday and Trump enthusiastically approved it and postponed the TikTok ban to give the parties more time to close the deal.
On Monday, however, ByteDance, which is the Chinese company that owns TikTok, wrote in a statement that some of the information circulated over the weekend was “rumors” and questioned some elements of the deal that had been described. by Trump as an American hit.
What Oracle and Walmart Said
In the United States, key information about the deal came from a statement released Saturday by Oracle and Walmart, in which the two companies say ByteDance has agreed to create a new company, TikTok Global, which will be based in the United States and run the operations of the social network for users in the United States and for “the majority of users in the rest of the world.” Oracle and Walmart, which are a multinational cloud services company and the world’s largest supermarket chain, respectively, will buy 20 percent of this new company (US media say Oracle will have 12.5 percent and Walmart 7. 5). According to the two companies, TikTok Global “will be majority owned by US investors.”
Four Americans out of a total of five seats will serve on the board of directors and “all TikTok technology will be available to TikTok Global. In the new company, Oracle will provide the technology infrastructure and take care of security, while Walmart will provide its “multichannel sales capabilities” – an unclear term that suggests a development in the e-commerce sector. TikTok Global, the statement read, will create 25,000 new jobs in the United States and pay $ 5 billion in taxes. The company will also produce an artificial intelligence-based educational tool for children.
– Read also: Slack against Microsoft
What Trump said
Speaking to reporters at the White House, Trump said he approved the agreement reached between the Chinese and American companies, while the Commerce Department, which had announced that it would ban the download of TikTok starting at midnight Sunday, granted another week to finalize the deal. “I’ve given my blessing to the deal,” Trump said. “I approved the deal in theory.”
Trump also said the new company “will have nothing to do with China.” “It will be a completely new company. It will have nothing to do with any foreign land, no foreign country. ‘ Trump also said that TikTok has promised to create a $ 5 billion fund to “teach American children the true history of our country.” The five billion is likely to be the same as Oracle and Walmart have said TikTok Global will pay in taxes.
What TikTok said
In a Chinese press release published Monday on Toutiao, a news app he owns, ByteDance he wrote that it will retain an 80 percent stake in TikTok Global and that the news that the new company will have a US majority stake is “hearsay.” On this point, some analysts, in addition to the White House, have tried to reconcile the two versions with a complicated mathematical calculation: given that ByteDance is already 40 percent owned by several US investors, if we add the 20 percent stake that Oracle and Walmart will buy from TikTok Global, it turns out that in the end 53 percent of the investors in the new company are Americans. Analysts are skeptical of this calculation, also because it is not yet clear how these percentages will translate into effective control over the new company.
ByteDance also said that the agreement does not involve any technology transfer between TikTok and TikTok Global, and that the TikTok algorithm will remain under their control. Oracle will be able to inspect the TikTok code, and thus the algorithm as well, but only for “security” reasons. This point is important because the algorithm is the central part of the entire social media business. In addition, the algorithm and in general the control of the entire technological part of TikTok were the official reason why the US administration wanted to ban the application: to remove sensitive data of US citizens from the theoretical availability of the Chinese Communist Party. According to experts heard by BloombergAs long as the algorithm remains in the hands of ByteDance, the problem cannot be completely eliminated. Safra Catz, Oracle CEO, said she is “100 percent confident” in her company’s ability to keep US data safe.
– Read also: How the TikTok algorithm works
According to Bytedance, the five billion dollars in new taxes that TikTok Global would have to pay is actually an estimate based on sales forecasts and certain taxes that are already expected to be paid. On the merits of teaching history to American children, ByteDance said he knew nothing.
It seems that TikTok did well
According to Wall street journal, there are good reasons why China might like the deal reached on TikTok. In August, when Donald Trump signed his first executive order to ban TikTok in the United States, it appeared that ByteDance would be forced to sell its international operations and at least partially lose control of its algorithm. Under the deal, none of these will happen and this should allow the Chinese government to approve it. the Global times, an English-speaking nationalist tabloid under the Communist Party, wrote in an editorial published on Sunday that thanks to the ByteDance deal, it “is not out of the game” and avoided the worst case scenario.
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