This summer, President Donald Trump threatened to ban TikTok, the astronomically popular app mostly known for teenage nonsense videos, over “national security” concerns related to its Chinese ownership. It appeared that the only way TikTok could continue to delight its more than 100 million users in the United States would be to sell its operations here to an American company.
On Saturday, Trump blessed a deal that will allow TikTok to remain in business in the U.S. The database corporation Oracle and Walmart will be “trusted technology partners” in a new TikTok Global, of which they’ll own 20 percent, and other American investors will supposedly make TikTok’s Chinese parent company, ByteDance, a minority owner going forward. This new entity will be based in the U.S., reportedly hire 25,000 more U.S. workers, and put Oracle in charge of securely hosting U.S. users’ data to address concerns over cybersecurity.
There’s a lot we don’t know. We don’t know how TikTok’s practices will be audited. We don’t know how much actual power Oracle and Walmart will have over TikTok’s operations. Even if TikTok goes on a U.S. hiring spree, we don’t know whether the stuff that really matters—TikTok’s highly effective video-feed algorithm and underlying software—will also make the move to our shores, or if it will continue to be coded in a country where social media platforms double as tools of surveillance and censorship.
We probably will know more of this soon, as the deal vies for final approval by U.S. and Chinese officials. TikTok has always been more of a theoretical security and privacy concern than a proven one—and therefore a useful foil for a president who has been ratcheting up his frequently xenophobic criticisms of China. At the same time, plenty of experts have raised valid concerns about the app’s potential to expose users’ data to the Chinese government, and perhaps the agreement’s terms will stop up some of the security holes.
Regardless: The deal still stinks. Here’s why.
1. It’s misleading. Although the Chinese government objected to an outright sale of TikTok and its valuable algorithm, the deal supposedly gives American companies and investors 53 percent of the equity in the new company—what the administration can pitch as “American control.” The New York Times reports, however, that ByteDance will hold an 80 percent stake in the new company. It’s only when you count the investors like Sequoia Capital and Coatue Management that already had ByteDance stakes that it looks like majority U.S. ownership. At a rally in Fayetteville, North Carolina, on Saturday, Trump said, “It’ll be a brand-new company. It will have nothing to do with any outside land, any outside country. It will have nothing to do with China.” Instead, it appears TikTok Global will very much still be a Chinese company.
2. It’s grafty. Oracle beat out Microsoft for ByteDance’s favor as it scrambled to put together the least disruptive deal that would persuade Trump to sign off. Microsoft, which already runs one social network and has plenty of experience with consumer-facing products, seemed like the obvious buyer, assuming TikTok would sell. Since it wouldn’t, enterprise-focused Oracle offered ByteDance something else tantalizing: a Trump connection. Oracle co-founder Larry Ellison is a major Trump supporter, has hosted high-dollar campaign fundraisers, and reportedly helped put the whole hydroxychloroquine idea in the president’s head. Oracle CEO Safra Catz and executive vice president Ken Glueck have also donated to Trump and served on the administration’s transition team after 2016.* Since then, the administration has repeatedly gone to bat for Oracle’s interests, as my colleague Aaron Mak recently recounted. Although Oracle is a major player in cloud computing, it’s a rung below giants like Microsoft, Google, and Amazon. But it now has a piece of the hottest new social network in the world.
3. It’s ridiculous. After he threatened to ban TikTok, Trump said that a deal should include a “very substantial” finder’s fee for the U.S. Treasury. That would be unusual for any negotiation between two private companies, but now it might be worse. On Saturday, Trump said TikTok would “be making about a $5 billion contribution towards education,” which would go into a fund to teach “the real history, not the fake history” of the United States. The president has lately been attacking the 1619 Project, the New York Times Magazine package and education curriculum about the role of slavery in America’s founding—a baffling, nakedly political concern of Trump’s that has nothing to do with tech policy or trade.
Even if the deal does seem to include $5 billion in taxes, the propaganda fund might just be some Trump-rally wish projection. But that’s basically what this whole deal has been: another crisis involving a foreign specter invented so that Trump can solve it. That “solution” involves the minimum number of deck chairs moved around to do so and few of the core real-life issues actually resolved, with the bonus of rewarding one of Trump’s political allies with what’s essentially a sole-source cloud-computing contract. Did Trump really want to take away the TikTok kids’ nacho tables just for this?
Correction, Sept. 20, 2020: This post originally misspelled Safra Catz’s last name.