Updated 8/27/2020: Kevin Mayer has stepped down as TikTok CEO.
Updated 8/25/2020: TikTok and its Chinese parent company, ByteDance, have sued the Trump Administration over an executive order requiring sale of the video app maker to an American company.
Original story starts here:
Has any company gone through more whipsaw moments in the past year than TikTok, the suddenly huge and controversial social-media powerhouse in the crosshairs of both President Trump and potential acquirer Microsoft?
TikTok’s roots reach back to Chinese online giant ByteDance, which launched a short-form video company called Douyin in 2016, then spun off a version for the rest of the world called TikTok. In 2018, TikTok spent $1 billion to buy another up-and-coming short-video site, Musical.Ly, then merged that site’s users and creators into TikTok and shut it down.
TikTok was already hugely popular with tens of millions of tweens and teens around the planet when the pandemic hit. Many loved doing karaoke performances to hit songs, and were credited with breaking a number of big songs in the U.S. market, most particularly Lil Nas X’s Old Town Road, which had a record-setting run as the No. 1 single last summer.
Other creators flocked to the site because it was, effectively, wide-open territory for newcomers looking to find an audience: the site’s algorithms didn’t advantage early arrivals. Instead, if a video picked up heat, TikTok would amplify it across its fast-growing audience, allowing even new arrivals to rack up tens of millions of views on a particularly viral 15-second video on all kinds of topics far beyond music.
The company wooed away veteran Hollywood executive Kevin Mayer to be CEO after he lost out as next CEO of Disney, and charged him with helping the company move in sports, live events and other extensions of the brand into other corners of the video world.
But then the pandemic turned the world upside down. It hugely benefitted TikTok, one of the companies best positioned to profit from the locked-down lives facing many families for months at a time. Many adults tried it out, often with their children. Its quick-and-easy video-creation tools, brief content length, and sophisticated algorithms ensure a good user and creator experience in a way very different from older social-media platforms.
TikTok was the most downloaded app in 2020’s first quarter, according to App Annie, a mobile data and analytics company. Last week, TikTok was No. 2 among most-downloaded apps on Apple’s App Store, and No. 4 on Google’s Android Store, App Annie said.
Another analytics company, Sensor Tower, estimates the site has more than 800 million users, and the app has been downloaded more than 2 billion times worldwide.
But TikTok’s rapid growth has come amid growing criticism and regulator scrutiny, none more challenging than when U.S. President Donald Trump started saying he would “ban” the site, though it remains unclear what mechanism he might legally use to do that.
One possibility is pushing through a designation by the U.S. government’s Committee on Foreign Investment in the United States (CFIUS) that would effectively for Apple and Alphabet to remove the app from their mobile app stores, which would dramatically impact app adoption. U.S. Treasury Secretary Steven Mnuchin confirmed CFIUS was investigating the 2017 Musical.ly deal.
Whether that sort of maneuver would work is far from certain, but it’s been enough to force ByteDance to look at a variety of options to weather the political storms.
Last weekend, Microsoft confirmed that it was pursuing a purchase of TikTok operations in the U.S. and three other English-speaking territories. A conversation between Microsoft CEO Satya Nadella and Trump on Sunday cleared the way for Microsoft to try to conclude a deal within the next 45 days, according to comments by Trump and an extraordinarily unusual Microsoft blog post.
News of the potential acquisition sent Microsoft stock soaring Monday even higher than its already hefty $1.6 trillion market capitalization. Though some have pointed to Microsoft’s long history of failed consumer-facing services, acquisitions and products, TikTok could nestle in nicely with some of its successes, including the business-facing social-media site LinkedIn, its Surface laptops and tablets, its vast Xbox and PC gaming ecosystem, the hugely popular Minecraft game, and even its significant investment in immersive mixed-reality technologies such as Hololens.
Trump said he wanted to ban TikTok from the United States because of national security concerns. Other critics say TikTok vacuums up prodigious amounts of user data to optimize the videos and ads it shows users, including very young ones. Worse, because TikTok is owned by a Chinese company, critics say it is required by Chinese law to share all user data with that country’s increasingly intrusive government surveillance.
TikTok executives have repeatedly denied the charges, and say their data is stored offshore abd not shared with the Chinese government.
Trump’s pressure has stirred its own set of critics, who suggest he may be motivated more by ire at a group of young TikTok fans of K-pop who loudly bragged that they had helped make a Trump political rally in Tulsa, Okla., earlier this summer an ignominious, public debacle.
The worst blow TikTok has taken lately happened when India banned the app, along with about 100 other Chinese-owned mobile programs, after the two Asian giants had a lethal military confrontation on the disputed Kashmiri border. The ban cost TikTok as many as 200 million users, and opened opportunities in the giant Indian mobile market for short-video competitors such as Triller. Triller also just filed suit against TikTok, alleging patent infringement.
“We’re just moving into a tech-focused landscape where the proposed acquisition is as much political as it is business,” said Ryan Ford, executive VP and chief creative officer of Cashmere Agency, which creates marketing, social-media and brand strategies for Hollywood projects such as Disney’s Black Panther, Hulu’s Atlanta and TNT’s Claws. “It’s just going to continue to happen. We’re going to have these rocket-ship platforms take off and these older platforms” try to acquire those platforms to refresh and expand their audiences.
TikTok’s users, especially young ones, haven’t focused on the fact that it was owned by a Chinese-based company, Ford said. And it’s likely they still don’t care as they continue to create new content at astonishing rates. TikTok’s global reach feels normal for young gamers and others used to having virtual friends sprinkled across the globe.
“If you’re 12 years old, you’re already living in an international environment,” Ford said. “You already have friends you game with who are international. This thing of being disconnected from the world is a very foreign idea, excuse the pun, to a young person.”
Regardless, the political pressure is forcing ByteDance and Tiktok to look at a variety of ways to tamp down criticism and fend off new, or newly energized competitors.
Last week, TikTok said it plans to further expand a Creator Fund to $2 billion worldwide as it strives to retain talent, “to encourage those who dream of using their voices and creativity to spark inspirational careers,” according to a company blog post. Half that fund would go to U.S.-based creators over three years.
TikTok also said it expects to hire 10,000 people in the United States and has begun opening offices around the world. The company also signaled that it was considering a new international headquarters, in cities such as New York, Los Angeles, Singapore, London, and Dublin.
And Triller isn’t the only competition for TikTok’s short-video crown. Earlier this month, Facebook shut down Lasso, its TikTok competitor, even as Instagram, the Facebook subsidiary and a direct TikTok competitor, is preparing to launch another clone, Reels. To boost Reels, Instagram reportedly is offering six-figure deals to some prominent TikTok creators to entice them to jump over.
In another blog post this week, TikTok’s Mayer has fought back more directly, taking a swipe at Facebook and its CEO Mark Zuckerberg for their notorious habit of bald-faced knockoffs of competing products.
“Facebook is even launching another copycat product, Reels (tied to Instagram), after their other copycat Lasso failed quickly,” Mayer’s post says. “But let's focus our energies on fair and open competition in service of our consumers, rather than maligning attacks by our competitor – namely Facebook – disguised as patriotism and designed to put an end to our very presence in the U.S.”
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