TikTok Gets Trump’s Blessing


Internet social media service TikTok reached a deal to partner with US tech giant Oracle and retail powerhouse Walmart on Saturday September 19, 2020 that garnered the blessing of US President Donald J. Trump. The deal calls for TikTok’s Chinese owner, Beijing based ByteDance, and Redwood City, CA based Oracle, Inc. to set up a partnership firm in the US. The deal would shift TikTok’s cloud and database services to US-domiciled Oracle replacing the infrastructure now used by ByteDance in Singapore.

AP featured image
FILE – In this Feb. 25, 2020 photo shows the icon for TikTok taken in New York. Privacy watchdogs say that the popular TikTok video app is violating a children’s privacy law and putting kids at risk. They filed a complaint saying TikTok is collecting personal information of kids under 13 without their parents’ consent, even after a $5.7 million FTC fine in 2019 over child-privacy law violations. (AP Photo)


The deal heads off sanctions from an Executive Order on Addressing the Threat Posed by TicTok signed by Trump on August 6, 2020 that was set to begin on Sunday September 20th. The order bans downloads and maintenance of TikTok’s app. The reprieve buys Oracle, Walmart and ByteDance time to form a company, presently believed to be headquartered in Texas, and prepare an infrastructure migration.

The US sanction order on TikTok also contained instructions for US companies to cease providing cloud and data services to the social media company by November 12, 2020. This will probably be rescheduled depending on what ByteDance, Oracle and Walmart inform the US Department of Commerce what they can realistically do.

President Trump stated on Saturday that he is pleased with the development. The US government has pushed back the enforcement of sanctions to the 27th. This will give the parties time to tighten their handshake into a regulatory presentation. If you feel like digging, read the August Executive Order to see what the diligence hurdles they have to satisfy are.

Now it’s up to the trio to accomplish a seamless transplant of one of the world’s largest social media video sharing services. Oh, and they have to make money at it. That latter part has worried market analysts in recent weeks as companies like Microsoft had also eyed partnering with ByteDance.


TikTok was the break out sensation app of the 2020 COVID-19 quarantine. Millions of bored Americans used it to release their energy and frustrations from living in isolation. The US government became concerned all that information revealing so many Americans candidly would be used by Chinese authorities. Assurances by ByteDance that the TikTok platform, whose infrastructure is located in Singapore, was separate from and not visible to the Chinese government in the same manner that the company’s domestic video sharing app, Douyin, which must conform to the PRC’s social scoring population monitoring regulations, failed to convince the U.S. government; thus Trump’s August order demanding that the company’s infrastructure be brought into an environment where US privacy and data mining law would prevail.

But these are big iron infrastructure and global retail and supply chain companies. They are not what technologists refer to as online “eyeball” facing companies like Facebook, Instagram, or Twitter.

Financial analysts understand the desire for these firms to enter into the lucrative space. But they politely question if this is not the 2020 version of when Time Warner purchased AmericaOnline in 2001. Analysts note that merger marked the beginning of a long and arduous decline for the once mighty early social media company. AOL became iconic because of the movie “Sleepless In Seattle” with the motto “You’ve Got Mail”. AOL and another early DotCom innovator Yahoo were eventually purchased by Verizon Communications. In December 2018, Verizon estimated that these acquisitions were “almost worthless”.


A similar tale beset the next generation of social media platforms like MySpace and Tumblr. They are now also shadows of their former glory. That “tech has a half-life” question probably hangs over the TikTok deal too. One can see this uneasiness reflected in the recent elevated volatility of the tech sector of the US equities market relative to other industries. But, that is the nature of competition in a free market economy.

For Oracle at least, this looks to be an expansion on the margin of the economies of scale of their already considerable Oracle Cloud back-office services business. It is the same reason Microsoft wanted TikTok. It would have bolstered their similar Azure services business.  For Walmart, the company has always been the brick and mortar version of online retailers like Amazon and Baidu.

Structurally, these are vertical integration plays. I have no information on what the comparative cost of operation hitting the expense sheet will be between the Singapore cloud farm and the coming American one; but the American business philosophy of owning end-to-end food chain seems to be the name of the game for this one.

Me? As a former CTO, I’d be looking at the operating margin numbers down to the micro-penny like a hawk. You win or lose these things big time depending on whether or not you can organically cross the zero line on the accounting.  If you don’t, long and arduous.

At least until the 27th of September, TikTok’s model business model to be the owner of eyeballs remains alive.  They can continue to be the creation point of a cacophony of random videos that fills the internet’s echo chambers. The Kings of the Valley game plays on.


*** This is a developing story.


Readers should also note that under a parallel Executive Order, another Chinese-owned messaging, social and payment service, WeChat, owned by Shenzhen-based Tencent Holding, Ltd. also has sanctions scheduled to begin on September 20. These sanctions are not affected by the TikTok deal just announced. WeChat has around one billion users world-wide (not a typo) who will be affected in some way by the US ban.


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