Last week we summarized a great conversation with Matthew Brennan. He’s an expert on China’s unique app ecosystem. And he’s written a book about TikTok called “The Attention Factory.”
When we spoke with Matthew, we brushed on why the U.S. has taken its hardline stance toward TikTok. The Trump administration banned the app, effective tomorrow (November 12), citing security concerns. Specifically, there were fears that data flowing through the U.S. version of the app would end up in Chinese government hands. Well, the news this week suggests the U.S. government’s enforcement effort is a bit lax, to say the least. And TikTok wants to know what’s going on.
A Charming Little Piece of Spyware?
TikTok’s questionable privacy is at the heart of the matter, at least ostensibly. And Brennan acknowledges that TikTok isn’t exactly privacy-friendly. But he also argues the fears are overblown. And tinged with politics.
“I think there’s a legitimate concern here. Some of it is hyped up and a little bit overblown,” Matthew said. “America does seem to be, to some degree, scared of the rise of China. In particular, the technological aspects of China’s rise are worrisome.”
Others, including tech entrepreneur Jason Calacanis, are far less sanguine. Last year he called the app “a front for the Chinese government.”
In response to the looming ban, TikTok’s U.S. operation scrambled to find a deal that would allow it to continue operating. After all, the app has become quite popular here among dancers, lip synchers, and other masters of the short-form video. And while the app’s demo skews decidedly young, its appeal is broadening. Even my 62-year-old classical musician brother has gotten in on the act.
Enter Oracle and Walmart. The tech companies struck a deal to step in as TikTok’s would-be saviors by serving as its “trusted technology partners.” This presumably provided enough cover to satisfy U.S regulators. The administration signaled its approved the deal in September. The Chinese government, on the other hand, has not yet signaled its approval.
Canceled, or Just Never Mind?
This week, press reports suggested that the ban may just fade away from neglect. And TikTok just wants to know what’s going on. The Verge reported yesterday that TikTok has petitioned a federal court to review the Trump administration’s actions. According to the company, after making a big splash about the ban, the administration has not responded to TikTok about its application for a 30-day extension. Or about anything, apparently.
TikTok said this in a statement provided to The Verge.
“For a year, TikTok has actively engaged with CFIUS in good faith to address its national security concerns, even as we disagree with its assessment. In the nearly two months since the President gave his preliminary approval to our proposal to satisfy those concerns, we have offered detailed solutions to finalize that agreement – but have received no substantive feedback on our extensive data privacy and security framework.”
Is it possible that amid the election, pandemic, and other pressing issues, the administration just forgot about TikTok?
Future Local Competitor?
If TikTok manages to survive the ban, via the Oracle-Walmart deal or some other mechanism, its future may be bright. In recent months it has made a number of moves to enable it to monetize its strong consumer engagement via a number of channels. The app has made a deal with Shopify, for example, to create commerce-enabled ads on the platform. Similarly, if the relationship with Walmart materializes, TikTok could be a channel for Walmart to compete more effectively with Amazon.
The company also launched a self-service ad platform aimed at U.S. small businesses. A clear move to compete with Facebook.
And TikTok’s monetization is in its early stages. As Matthew Brennan told us last week, it has a clear path with both eCommerce and advertising.
“At its heart, it is an advertisement business,” Matthew said. “And it’s quite similar to Facebook in terms of how that works. Time spent on the platform is the metric they want to maximize. The actual adverts themselves are quite compelling. And advertisers in China have found them quite effective.”