TikTok's Chinese Owner ByteDance Finalizes US Joint Venture to Secure Data and Avoid Ban
TikTok's Chinese parent company, ByteDance, announced on Thursday that it has successfully concluded an agreement to establish a majority American-owned joint venture. This strategic move is designed to secure the data of US users and prevent a potential ban of the popular short-video application, which boasts over 200 million American users. The finalized deal represents a significant milestone for TikTok, concluding years of intense political and legal disputes that originated in August 2020.
Background of Political and Legal Challenges
The controversy began when former President Donald Trump sought to ban TikTok due to national security concerns. Although a law was passed in April 2024 requiring ByteDance to divest its US assets by January 2025 or face prohibition, Trump later chose not to enforce this measure, which had been upheld by the Supreme Court. The new entity, named TikTok USDS Joint Venture LLC, aims to enhance data privacy and cybersecurity protections for US user data, applications, and algorithms. However, ByteDance has provided limited details regarding the specifics of this divestiture.
Structure and Ownership of the Joint Venture
Under the terms of the agreement, American and global investors will collectively hold an 80.1% majority stake in the venture, while ByteDance retains a 19.9% minority interest. The three managing investors each possess a 15% share:
- Oracle, a prominent cloud computing company
- Silver Lake, a private equity firm
- MGX, an Abu Dhabi-based investment firm
Additional investors in the venture include Dell Family Office, Vastmere Strategic Investments, Alpha Wave Partners, Revolution, Merritt Way, Via Nova, Virgo LI, and NJJ Capital. A White House official confirmed to Reuters that both the US and Chinese governments have approved the deal, although the Chinese Embassy in Washington has not yet issued a comment.
Leadership and Operational Framework
Former TikTok USDS executives Adam Presser and Will Farrell have been appointed as Chief Executive Officer and Chief Security Officer, respectively. TikTok CEO Shou Chew will also serve on the venture's board. The joint venture will be responsible for retraining, testing, and updating TikTok's content recommendation algorithm using US user data, with the algorithm securely housed in Oracle's US-based cloud infrastructure.
Business Operations and Revenue Model
According to sources, ByteDance will maintain ownership of TikTok's US business operations while transferring control of the app's data, content, and algorithm to the joint venture. The venture will function as the backend operations for the US company, managing user data and algorithms. In contrast, a separate unit owned by ByteDance will oversee revenue-generating activities such as advertising and e-commerce. The new venture will receive a portion of the revenue in exchange for providing technology and data services.
Political Endorsements and Implications
Former President Trump praised the agreement in a social media post, describing TikTok as now owned by "a group of Great American Patriots and Investors, the Biggest in the World." He also expressed gratitude to Chinese President Xi Jinping for collaborating on the deal. Trump, who has over 16 million followers on his personal TikTok account, attributes the app's role in aiding his reelection campaign. Notably, the White House launched an official TikTok account in August, further integrating the platform into the political landscape.
This development underscores the evolving dynamics of global technology and data governance, as TikTok navigates regulatory challenges to sustain its operations in the United States.
