Hard times for TikTok

TikTok parent Bytedance's booth at the China International Software Expo in Beijing. Picture: Reuters

A US TikTok ban seems very likely which means TikTok celebrities will have to look elsewhere.

For TikTok, there was always the festering issue of being part of the corporate structure of Chinese giant ByteDance Technology, which operates several mobile app entertainment platforms, and is one of the biggest news aggregators in China. Revenue in the first half of 2019 was an estimated $US7bn to $US8.4bn.

ByteDance is enormous. It operates offshoot companies in the US, Japan, UK, Hong Kong, Cayman Islands and in Singapore, but its most famous offering in the west is the social video platform TikTok.

TikTok is facing issues on several fronts, but its biggest problem is China’s 2017 National Intelligence Law which requires it to legally support China’s intelligence gathering activities.

Its own assurances that it would never compromise the data of Americans and Australians and make it available to Chinese authorities seems hollow in light of that legal obligation.

That’s seen governments in the US, Australia and elsewhere take a hard look at TikTok, an action that could see it head in the same direction as Huawei with bans applied across the world.

This is not TikTok’s only problem. Its code has been the subject of reverse engineering and a claim on Reddit that its software vacuums up user personal data. It has been listed among 50 apps found to copy personal information from users’ clipboards on Apple devices. There are worries about its protection of children’s privacy. TikTok says it takes children’s privacy seriously.

In an interview with The Australian, TikTok Australia general manager Lee Hunter would not rule out TikTok formally breaking away from ByteDance and reforming as a western-based company to escape being an informant for the Chinese government.

Last week White House economic adviser Larry Kudlow reportedly said a move by TikTok to leave ByteDance would be a better option than a ban on the app, which was threatened by State Department Secretary Mike Pompeo earlier this month, says Reuters.

There are other reasons to suggest TikTok’s chances of survival are slim.

The ever-escalating hostility between the US and China suggests there will be little sympathy for TikTok, and little sympathy for other China-operated apps seeking leniency by US lawmakers.

The Trump administration is very clear that it is actively considering a ban that could take place within weeks. Given the US election is November, it would have to be soon.

In any case, a ban is snowballing. The US House of Representatives this week voted to ban TikTok on government-issued phones, the US Army, Airforce, navy and Coast Guard have reportedly implemented bans, as has Wells Fargo in the private sector. Both Republican and Democrat committees have warned staffers about it, says CNet.

There’s more – open hostility on the campaign front between Trump supporters and TikTok.

It may not be TikTok’s fault, but it was the platform used by Gen Z anti-Trump protesters to buy up tickets to Trump’s rally in Tulsa, Oklahoma, which left many seats at the rally embarrassingly empty.

That hostility erupted in recent days with the Trump campaign buying paid ads on Facebook critical of TikTok – “TikTok is spying on you”, one of the ads says.

According to USA Today, the ads say: “TikTok has been caught red handed by monitoring what is on your phone’s clipboard. Do you think we should ban TikTok? Sign the petition NOW!“

It may seem odd that the Trump campaign needs to do this, given a ban is already in the president’s sights. The risk, however, is a backlash among TikTok “celebrities” and users who have considerable sway among young US voters. That’s something the Trump camp would want to avoid.

There is a further factor – Facebook.

The Trump campaign would want relations between itself and Facebook to be as smooth as possible in the lead up to the November poll.

In shutting down TikTok, Trump would deliver an enormous prize to Mark Zuckerberg and Facebook who have wanted to capture the TikTok market for years.

Facebook has suffered a fall-off in interest among younger users who have flocked to other social media networks with Gen Zders being big TikTok users.

According to US reports, Facebook has spent almost two years building a TikTok lookalike platform called Instagram Reels with 15-second video clips. It already has launched Reels as a pilot in Brazil, France and Germany, and recently pounced into the India market with Reels when TikTok was banned there. It’s now planning to expand Reels to about 50 markets.

Facebook therefore would find it hard to disguise its glee if an all-out US ban happened.

The Trump Facebook page is a big advertiser on the Facebook platform with, according to Facebook metrics, a spend of $US52.7 million on ads between May 2018 and July 20 this year, and $US1.8m in the past week. Facebook has a big role to play in the coming weeks.

One of Donald Trump’s most ardent supporters in 2016, Republican investor Peter Thiel, sits on the Facebook board and is a strong advocate of monopolies.

“The opposite of perfect competition is monopoly,” he once wrote. “Whereas a competitive firm must sell at the market price, a monopoly owns its market, so it can set its own prices. Since it has no competition, it produces at the quantity and price combination that maximises its profits.”

Facebook has certainly been building a monopoly with acquisition such as WhatsApp and Instagram over the years. TikTok currently is a fly in the ointment of extending that monopoly with more advertising dollars.

In this environment with all these factors, it seems few will shed a tear for TikTok except maybe its users. It reportedly wants to hire 10,000 staff in the US but that may remain a dream.

TikTok stars will presumably jump ship to another platform. There are several music video platform options, but Facebook/Instagram is in the box seat given its size and the readiness of Reels.

A spokesperson for the Rybka Twins, Tegan and Samantha, one of Australia’s most popular TikTok acts, says if TikTok is banned in the US, they wouldn’t be surprised if an Australian ban follows.

She said people on the TikTok platform would likely pick the easiest transition to another platform.

Any proposal to ban TikTok in Australia is, of course, a separate matter to a US ban, and some of the heady issues at play in Silicon Valley may not be so dominant here.

Nevertheless TikTok faces a Senate inquiry and the Australian Government is concerned about foreign interference in Australia’s affairs. The government is also liaising with the Five Eyes intelligence group on the security issues involved.

With all these factors running against it, it’s really hard to see TikTok lasting in its current form. Maybe ByteDance will sell it completely. There is a report that ByteDance US investors want to buy it. TikTok will be the subject of big headwinds even if this happens.