According to the recent reports, Bytedance, the Chinese owner of the social video app TikTok has chosen Oracle as TikTok’s US technology partner. However, TikTok will not be sold to Oracle. ByteDance will not sell TikTok to Oracle or Microsoft and will not release its source code to any American company. Oracle is trying to work out a complicated deal. If the deal pulls through, it will make Oracle an integral part of TikTok U.S. business.
Oracle has confirmed that it has reached a deal with ByteDance: “Oracle confirmed the proposal that ByteDance submitted to the Ministry of Finance last weekend. According to this proposal, Oracle will become a trusted technology provider”. It is reported that the transaction still needs to be approved by the US government. As a result of this report, Oracle’s stock price rose by 6.86% yesterday.
Microsoft is out of the picture
Microsoft is completely out of the picture now and it already has an official statement. The Chinese government updated the technology export control list two weeks ago. The new export control restricts the export of technologies such as TikTok algorithms. Bytedance subsequently stated that it would strictly abide by Chinese regulations. According to a Chinese government official, “ByteDance can sell all TikTok products, but not its algorithm”. Actually, TikTok without its algorithm is technically useless.
A source familiar with the technology said that ByteDance uses the same source code for TikTok in all countries/regions and has been modified for different markets. The source said: “Theoretically, the US team can copy the algorithm, but it takes time to get users to do the same…”
Algorithmic restrictions force potential buyers (including consortia led by Microsoft) to reconsider purchase plans and valuations. Because if it is unable to purchase the algorithm, Microsoft will not be able to fulfill its commitment to national security issues.
A person familiar with the matter said that Microsoft’s plan is more ambitious than Oracle. Owning TikTok can help Microsoft have more influence on daily consumers. In addition to the Xbox game business, this area is where Microsoft mainly gives up chasing enterprise users. TikTok will also provide Microsoft with a treasure trove of data about young and mainly female users, for which there is currently not enough insight.
As of now, there is no guarantee that the U.S. government will approve the latest deal between Oracle and TikTok.