TikTok has set up a new US data protection branch to enforce a deal brokered by Donald Trump that would end the years-long geopolitical saga over the fate of the video app, while leaving its core US business in the hands of its Chinese parent company.
The new US-controlled joint venture, unveiled by TikTok on Thursday, will “protect the US content ecosystem and have decision-making authority for trust and safety policies and content moderation”, the company said.
TikTok said it has appointed a new seven-member board of directors for the joint venture, including Egon Durban, co-chief executive of private equity firm Silver Lake, Mark Dooley, managing director of Susquehanna International Group, and Kenneth Glueck, a top executive at Oracle.
Their companies are part of a consortium of US investors who will own 80 percent of the joint venture.
“The majority US-owned joint venture will operate under defined security measures that protect national security through comprehensive data protection, algorithm protection, content moderation and software assurance for US users,” TikTok said.
But the terms of the agreement give Beijing-based ByteDance direct control over the app’s core business lines in the US, including ecommerce, advertising and marketing.
Many of TikTok’s employees in the US will remain employed in units under ByteDance, two people familiar with the matter said.
“(The deal) protects the US market for TikTok and gives most of the economic benefits to ByteDance,” said an early investor in the Chinese company.
ByteDance’s valuation has swelled to about $500 billion in recent weeks in private markets transactions, two people familiar with the matter said.
Its shares traded at a valuation of less than $300 billion after the enactment of a law requiring TikTok’s parent to sell its stake in the app or face being banned in the US.
Critics argue that the final structure of Trump’s deal, while providing easier returns for American investors and introducing few new data protections for American users, appears to fail to fully address national security concerns.
“There remains a gap between the spirit of the compromise and the need for the statue,” said Brett Friedman, who served as chief of staff of the National Security Division at the Justice Department during the Biden administration.
He said: “There are bigger issues at play. We have an administration that wants to make a ‘grand bargain’ with the PRC (People’s Republic of China) and somewhat yield what they can agree on.”
Exactly a year ago, TikTok was briefly shut down for its 170 million US users after ban-or-disinvestment laws were implemented.
The Joe Biden-era law stems from concerns that the app could allow Beijing to manipulate the content viewed by users for propaganda purposes or access data for espionage purposes.
Trump, newly elected and charmed by its popularity among young voters on the platform, quickly brought the app back online, promising to “save” it.
Over the past 12 months, the President issued several executive orders that extended the deadline for striking a deal.
Vice President J.D. Vance was tasked with crafting a deal that would please the President while also gaining approval from Beijing.
The acquisition of TikTok’s US business attracted interest from major private equity and venture capital investors such as Andreessen Horowitz, Coatue and KKR, as well as tech groups such as Amazon and Perplexity.
The final deal is a majority joint venture between US investors Oracle, Silver Lake and Emirati investment vehicle MGX, each of which holds a 15 percent stake.
Other investors in the consortium include the family office of Dell Chief Executive Michael Dell and French entrepreneur Xavier Niel, as well as Susquehanna affiliates of General Atlantic and Jeff Yass, both of whom were previous investors.
ByteDance will take 19.9 percent of the new company, the most allowed under US law, TikTok confirmed on Thursday.
A ByteDance investor said he was having trouble understanding how the deal was priced, suggesting it was cheaper for new US investors and also allowed Trump to profit from his growing audience on the platform.
Vance has said that in this deal the value of TikTok’s joint venture is estimated at $ 14 billion. ByteDance is forecast to have 2025 earnings before interest, taxes, depreciation and amortization of $66bn on revenues of $192bn, according to a person familiar with the matter.
The value of the new US group may be the result of ByteDance’s continued control over TikTok’s core business lines.
The relationship between the US data security arm and ByteDance will be governed by complex contracts, with the Chinese group sharing a portion of US earnings with the joint venture, two people familiar with the matter said.
A key point of contention is whether Beijing will be able to maintain control over TikTok’s sophisticated recommendation algorithms.
The joint venture will license the algorithms from ByteDance, but then “will retrain, test and update the content recommendation algorithms on US user data,” TikTok said on Thursday. “The content recommendation algorithms will be secured in Oracle’s US cloud environment,” it added.
Oracle, led by Trump ally Larry Ellison, will also guarantee the security of American user data. TikTok’s US employees in teams like data security and content moderation will move to this new unit.
TikTok’s head of operations Adam Presser will be the chief executive of the joint venture, TikTok said. Presser, who is fluent in Mandarin, was a longtime lieutenant of TikTok CEO Shaw Zi Chew. Chew will also be on board.
TikTok said the security measures provided by the joint venture would also extend to its other US apps, including editing tool CapCut and social media app Lemon8.
The rest of the TikTok US team in e-commerce, advertising and marketing will remain under ByteDance. In early January, Chew established a Delaware limited liability company called TT Commerce & Global Services LLC, registering it at the address of TikTok’s US headquarters.
James Lewis, distinguished fellow at the Center for European Policy Analysis, said the US organization was created because ByteDance prioritized maintaining control of TikTok’s fast-growing ecommerce business.
“The law says very clearly that there can be no collaboration with respect to algorithms in disinvestment,” said Adam Conner, vice president of technology policy at American Progress, a non-partisan policy group.
But the law also gave the US President the authority to decide whether a proposed transaction complied with its provisions.
Trump has approved the new structure and helped win over Chinese President Xi Jinping, who also needs to sign off on the transaction. While Beijing has not yet publicly endorsed the final structure, China has given the green light to the outline of the deal.
China’s critics were “hoping to put TikTok out of business and some of the other social companies they were encouraging with those beliefs,” Lewis said. “China hawks are constantly losing because people would rather do business with China than break ties with it.”
“There are a lot of questions about who was chosen (to participate in the U.S. deal). We know there were other bids that were willing to pay more money,” Connor said. “The Trump administration ignored a law on the books, claimed broad executive power to do so, and chose donors and Trump allies to buy it at a discount.”
“If the new Congress has an interest in investigating, it is appropriate for oversight.”
Additional reporting by George Hammond in San Francisco and Ellie Olcott in Beijing
