The new US-based TikTok entity faces a critical challenge beyond data security: content balkanization. Separating US users from the global content feed could severely diminish the app's value, as international creators are key to the user experience. This logistical problem of cross-border content sharing is a major hurdle.
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Despite a law requiring TikTok's complete separation from its Chinese owner ByteDance, the approved deal maintains deep operational and financial ties. ByteDance retains a board seat and leases its core algorithm for royalties, effectively creating a superficial compliance that fails to address the law's original national security concerns.
The mandated sale of TikTok's US operations values the company at a fraction of its market worth (~$28B vs. an estimated $120B). This isn't a fair market transaction; it's a politically engineered deal that will hand a massive, near-guaranteed 300-400% return to a select group of connected investors.
On secondary markets, ByteDance is valued at ~2x next year's sales. In contrast, its direct US and Chinese competitors, Meta and Tencent, trade at multiples of 6-7x. This massive discount is primarily attributed to the persistent regulatory uncertainty surrounding TikTok's US operations.
Despite a potential US ownership deal, TikTok remains a national security risk because the core algorithm will still be licensed from China. Control over the information flow to Americans is the real issue, not data storage location, making the deal a superficial fix.
The US government's demand for TikTok to store American user data on US servers is identical to the policy China has long required of foreign tech companies. This rule is why platforms like Facebook, which refused to comply, are unavailable in China.
The multi-year delay in TikTok's U.S. divestment wasn't just negotiation. It involved the complex technical and logistical challenge of creating a new U.S. entity, migrating data and algorithms to Oracle's oversight, and solving the difficult problem of how to manage content flow with the global version.
Adam Mosseri suggests TikTok's biggest strategic risk is its attempt to replicate the Chinese 'super app' model. While this provides a proven playbook, it may fail in Western markets that prefer focused apps, potentially making TikTok too complex and bloated for users.
To address national security concerns, the plan for TikTok's U.S. entity involves not just data localization but retraining its content algorithm exclusively on U.S. user data. This novel approach aims to create a firewall against potential foreign manipulation of the content feed, going a step beyond simple data storage solutions.
The original moat of platforms like Facebook was the "social graph"—content from friends. The industry-wide shift to algorithmically recommended "unconnected content," pioneered by TikTok, has turned these platforms from active social tools into passive entertainment pipelines.
The forced sale of TikTok to a hand-picked group of political donors at a steep discount is not a genuine national security solution but a form of cronyism. It bypasses a competitive auction, enriches allies, and likely fails to sever the Chinese government's control over the algorithm, achieving the worst of all outcomes.
