TikTok Considers Changes to Distance App From Chinese Roots--Update
10 July 2020 - 12:02AM
Dow Jones News
By Liza Lin and Shan Li
ByteDance Ltd is considering changing the corporate structure of
its popular short-video app TikTok, as it comes under increasing
scrutiny in its biggest markets over its Chinese ties.
Senior executives are discussing options such as creating a new
management board for TikTok or establishing a new headquarters for
the app outside of China to distance the app's operations from
China, said a person familiar with the company's thinking.
TikTok, which has shot to global fame over the last two years
thanks to its catchy dancing and lip syncing videos, is owned by
Beijing-based ByteDance, one of the world's most valuable
technology startups. ByteDance, whose secondary shares have valued
the firm at $150 billion in recent weeks, counts big-name U.S.
investors such as Coatue Management and Sequoia Capital among its
backers.
The app has seen a surge in downloads as the coronavirus kept
millions of people locked up in their homes and eager for
distractions. About 315 million users downloaded TikTok in the
first quarter of the year, the most downloads ever for an app in a
single quarter, according to research firm Sensor Tower, bringing
its total to more than 2.2 billion world-wide.
But as TikTok grows in popularity -- and an increasingly
assertive Chinese government raises hackles in foreign capitals --
regulatory pressure on the app is intensifying.
Officials in several countries have expressed concerns with the
large volumes of user data TikTok collects, with some speculating
that ByteDance could be compelled to share it with the Chinese
government. TikTok has repeatedly denied receiving Chinese
government requests for user data and said it wouldn't respond if
asked.
The U.S. State and Defense departments already prohibit
employees from downloading TikTok on government devices. On
Tuesday, Secretary of State Mike Pompeo hinted at a possible ban
for TikTok and other Chinese apps during an interview with Fox
News.
In Australia, the chair of a legislative committee looking into
foreign interference through social media named TikTok among the
platforms that might be called to appear.
"What's needed is a really clear understanding from the
platforms about their approach to privacy and their approach to
content moderation. That's one of the objectives of this inquiry,"
Jenny McAllister, the chairwoman of the committee told an
Australian radio station on Monday.
The government in India, one of TikTok's largest markets, banned
the app over cybersecurity concerns following violent clashes along
the two countries' disputed border.
Most recently, TikTok surprised observers by reacting more
strongly than Western tech companies to Beijing's imposition of
mainland-style internet controls in Hong Kong. Where Twitter Inc.,
Facebook Inc., and Alphabet Inc.'s Google said they would pause
responses to data requests from Hong Kong police, TikTok pulled out
of the city entirely -- a move some describe as part of the effort
to distance the app from China
"ByteDance is the first of China's tech giants to make it big
outside China, but the company that is the envy of China's tech
world is finding that success has a higher price perhaps than
failure," said Peter Fuhrman, the chairman of investment advisory
firm China First Capital.
ByteDance managed to outperform its more established Chinese
peers such as Alibaba Group Holding and Tencent Holdings in their
quests to go global despite spending less on investments, he
added.
ByteDance's discussions about changing how TikTok is run are
still in their early stages, but setting up an independent TikTok
management board would allow a degree of autonomy from the parent
company, the person familiar with the firm's thinking said. This
person wasn't aware of any discussions around a corporate
spinoff.
TikTok had also been considering opening a new global
headquarters as early as December, The Wall Street Journal reported
at the time. Singapore, London and Dublin were considered as
possible locations. Recent events accelerated such plans, the
person said.
TikTok currently doesn't have a global headquarters. Recently
installed Chief Executive Officer Kevin Mayer is based in Los
Angeles.
The hiring in May of Mr. Mayer, a longtime Walt Disney Co.
executive, put an all-American face on the Chinese company, whose
website lists offices in 11 cities world-wide -- none of them in
China. The company says it doesn't allow Chinese moderators to
handle TikTok content.
ByteDance nevertheless has a long way to go to convince its
critics. Any change to the corporate structure has to be
significant enough to separate TikTok from any entanglements with
mainland China, and has to cut off mainland Chinese staff from
accessing user data, said Fergus Ryan, an analyst at the Australian
Strategic Policy Institute. TikTok's privacy policy says that user
data can be accessed by ByteDance and other affiliate
companies.
"Will the new structure be designed so as to remove any leverage
Beijing can have over it? I find that hard to imagine," Mr. Ryan
said.
Write to Liza Lin at Liza.Lin@wsj.com and Shan Li at
shan.li@wsj.com
(END) Dow Jones Newswires
July 09, 2020 09:47 ET (13:47 GMT)
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