ByteDance will shut down TikTok in the U.S. rather than sell it to an American company

The Senate passed the bill that would force China-based TikTok’s parent company to sell the social media platform under threat of a ban, a controversial move by U.S. lawmakers that is expected to face legal challenges and disrupt the lives of content creators who rely on the short-form video app for income.

Legislation on TikTok was included in a larger $95 billion foreign aid package for Ukraine and Israel and passed 79 to 18. President Biden swiftly signed the bill into law, making it operational.

The decision by House Republicans last week to attach the TikTok bill to the high-priority package helped expedite its passage in Congress and came after negotiations with the Senate, where an earlier version of the bill had stalled. So, at least in theory, ByteDance, the owner of social media, will be forced to sell social media. At least in theory.

Die Samson with all the Philistines!

It is not certain, however, that the owning company will follow advice and want to divest from social media; it might even follow Samson’s example and collapse rather than divest. If ByteDance, the company that owns TikTok, uses all available legal avenues to challenge the ban imposed by U.S. legislation, it may choose to close down the app in the country rather than sell it without its essential algorithms. This is at least according to SCMP reports.

According to sources close to the Chinese parent company, the algorithms on which TikTok is based are considered crucial to ByteDance’s overall operations, making a divestment of the app that includes its separation highly unlikely. The fear of divesting an industrial secret would outweigh the fear of losses.

Despite the fact that TikTok accounts for a small portion of ByteDance’s total revenues and daily active users, the parent company would prefer to close the app in the United States rather than divest it to a potential U.S. buyer, even if it meant a limited impact on its business.

The company does not intend to give up its core algorithm, which is considered a “secret” and a valuable asset.

ByteDance has already denied any plans to sell TikTok, and its CEO, Shou Zi Chew, has expressed confidence that the company will win legal challenges against the U.S.-imposed ban.

However, should forced divestment of the app become inevitable, ByteDance would face the complex issue of transferring the algorithms, whose intellectual property license is registered in China and difficult to separate from the parent company.

Moreover, China has already expressed its firm opposition to a forced divestment of TikTok, further hindering the process. The government would also prefer closure, if only to increase the agony of the government’s decision and impact the greatest number of individuals who are currently living as TikTok influencers.

The closure of TikTok in the United States would be a major blow to the company but would not jeopardize its survival. In fact, ByteDance continues to generate most of its revenue in China, thanks to the success of platforms such as Douyin, the Chinese equivalent of TikTok.

It remains to be seen how the situation will evolve and whether ByteDance will be able to avert a ban on TikTok in the United States or, if not, whether it will opt to shut down the app permanently on U.S. soil.