Hong Kong News

A whole world on a single island
Thursday, Oct 01, 2020

TikTok’s algorithm not for sale, ByteDance tells US: source

TikTok’s algorithm not for sale, ByteDance tells US: source

Chinese tech company decides not to sell or transfer code behind the popular video-sharing app, source says.

ByteDance , the Beijing-based parent company of TikTok, will not sell or transfer the algorithm behind the popular video-sharing app
in any sale or divestment deal, according to a source briefed on the Chinese company’s boardroom discussions.

With a looming US deadline for ByteDance to sell TikTok’s US operations, the source said: “The car can be sold, but not the engine.”

“The company [ByteDance] will not hand out source code to any US buyer, but the technology team of TikTok in the US can develop a new algorithm,” the source told the South China Morning Post. The source, who did not want to be identified, said ByteDance had notified US authorities and potential bidders of the decision.

If US President Donald Trump rejected the condition, there would be no possibility of selling TikTok and the app could turn dark for its American users after the Tuesday deadline for divestment, the source said.

The Trump administration has given ByteDance until September 15 to sell TikTok’s US operations or be shut down in the United States.

‘There will be no extension of the TikTok deadline,’ says US President Trump

The source said the “no algorithm” condition was now the bottom line for any discussions of sales or restructure of TikTok, following the introduction of new Chinese government export controls.

The Chinese government updated its technology export control list two weeks ago, requiring official permission for technologies such as TikTok’s algorithm to be sent offshore. ByteDance said it would strictly comply with the Chinese regulation.

There is some support in Beijing for excluding the algorithm from the TikTok sale. A government source, who is involved in regulating ByteDance but not directly involved in technology export controls, told the Post earlier this month that “ByteDance can sell all of TikTok but the algorithms”.

The exclusion of the algorithm would also force potential buyers – including a consortium led by Microsoft – to reconsider purchase plans and valuations.

A source familiar with the technology said ByteDance used the same source code for TikTok in all countries, with modifications for different markets.

“In theory, the US team can copy the algorithm, but it takes time for users to get used to the copied algorithm,” the source said. “With competition among similar apps heating up, it would be hard to catch up if you needed extra time [to make the algorithm work well].”

ByteDance and TikTok did not immediately respond to requests for comment.

US demands for TikTok may escalate decoupling and hurt businesses, says China expert


Trump said last week that he would not extend his September 15 deadline.

“We’ll either close up TikTok in this country for security reasons, or it will be sold,” he said on Thursday. “There will be no extension of the TikTok deadline.”

TikTok has filed a lawsuit against the US government over the order.

With its new export control rules, China is showing that it can influence the outcome of this deal in this case – and others like it.

Any Chinese seller of sensitive technologies such as the push of personalised information based on data analysis has to apply to a provincial level commerce authority, which would have up to 30 working days to approve the deal. If the outline of the deal were approved, the firm could start “substantive negotiations” with potential importers of the restricted technologies.

The firm would then have to submit any contract for review to the commerce authority, which would have 15 working days to make a decision. If approved, a technology export licence certificate would be issued.

The approval process could be shorter because local governments have been working to streamline procedures. It would take 19 working days to obtain an export licence certificate in Beijing after the required documents are filed, according to the municipal commerce bureau.

On Friday, Yan Ligang, head of the Beijing Municipal Commerce Bureau, declined to say whether his bureau had received any application from ByteDance about TikTok-related technology exports.

Newsletter

Quote of the Day

Change before you have to.

Jack Welch
Related Articles

Hong Kong News
×