Uncertainty over sale of core algorithms complicates TikTok sale as Chinese government weighs in

Kip Kniskern

Microsoft Logo On Building

Reports from over the weekend were that a sale of TikTok’s US operations could be announced early this week have hit a setback. Uncertainty over new restrictions from the Chinese government on the export of artificial intelligence technology has complicated matters, the Wall Street Journal reported. China issued new restrictions late last week requiring a license in order to export such computing and data-processing technologies as text analysis, content recommendation, speech modeling and voice-recognition.”

ByteDance Ltd., TikTok’s Chinese owner, has said that it will comply with the new rules, but is seeking clarification if they actually apply to TikTok’s algorithms that help decide what videos to show users based on their use of the app. These AI based decisions are a unique feature of TikTok, and a core part of the technology. According to the WSJ, restrictions on these algorithms could change the scope of the potential sale:

“For bidders, the idea of buying TikTok without the algorithms completely changes the outlook on what the companies are bidding for, other people familiar with the situation said. They believe a large portion of the value of TikTok is in the suggestion algorithms that keep users glued to the app.”

Microsoft, for example, could still develop its own algorithms, buying TikTok’s operations for the users, but that could add complexity to the deal, and that “has reduced the chances that a deal could be completed soon.” President Trump, who announced a possible ban of the app amid rising tensions between his Administration and China, reiterated his demand for a cut of the deal, saying again that “I said that the United States has to be compensated — well compensated — because we are the ones that are making it possible, and so we should be compensated.”

It’s now unclear whether bids either from a Microsoft/Walmart partnership or from Oracle will be ready on time to meet President Trump’s deadline of September 20th before he “bans” TikTok from the US. How such a ban might work is also unclear, and TikTok has sued to have the executive order quashed.

Even without all the government interference, this is a complicated deal, one that under normal circumstances would take multiple months instead of just a couple of weeks to put together. As always, stay tuned to OnMSFT for all the latest news on TikTok and Microsoft.