Short-form video app TikTok has chosen to partner with Oracle in order to save it’s US operations, according to a report from the Associated Press.
The information came from someone reportedly familiar with the deal, though neither Oracle nor TikTok’s parent company ByteDance have yet to comment on the situation.
The deal comes a week before the September 20th deadline set by the Trump administration requiring ByteDance to sell TikTok’s American operations to a US company or risk being banned over national security concerns.
Oracle was part of a group of companies bidding on the deal, which only recently was expected to go to corporate technology rival Microsoft.
Why is TikTok being forced to sell its US operations?
The Trump administration first took aim at TikTok earlier this summer, when the president made several comments both online and to the media suggesting that he would ban the app over national security issues.
This was followed by 2 executive orders that would ban both TikTok and WeChat, another Chinese-owned social media app, if parent companies ByteDance and Tencent failed to sell their US operations to American-owned businesses within 45 days.
The administration’s national security argument hinges on the collection of user data that all social media platforms engage in. This includes a variety of information about what users do while on a platform, normally in order to determine how to better target ads to them.
The fear is that the Chinese government could order companies like TikTok and WeChat to hand over information for the purposes of gathering intelligence. Though TikTok has routinely replied that they do not store US user data in China and would not hand this information over if requested by the Chinese government, the administration, as well as many privacy experts, remain unconvinced.
Secondary concerns about TikTok also exist, including allegations that the platform censors videos critical of the Chinese government and pushes propaganda.
A lot remains unclear about the Oracle deal:
There is no shortage of questions about TikTok’s alleged deal with Oracle, including whether the arrangement will actually involve the sale of some or all of TikTok’s assets. However, the unknown person familiar with the deal said that an outright sale of TikTok is unlikely.
This is consistent with earlier reports from the South China Morning Post which indicated that ByteDance would not sell or transfer the app’s algorithm, forcing any potential buyer to develop their own algorithm for US operations. The decision follows the introduction of new export controls by the Chinese government, which now require official government permission for technologies like TikTok’s algorithm to be sent offshore.
It is unclear in what way, if any, Oracle plans to clear this roadblock and furthermore, whether US officials will approve any partnership that does not amount to an outright sale. The deal must ultimately be approved by the Committee on Foreign Investment in the United States, which is charged with vetting deals with potential national security implications.