On the face of it, TikTok makes for an unlikely threat to national security.
With its snackable, seconds-long videos of viral dances and comical voice-overs, it is one of the most used apps in the west, and embedded in the culture of a generation of young people. It now claims more than 1bn users worldwide and is estimated to generate more than $10bn in revenue.
Yet the app and its Chinese owner, ByteDance, are again at the centre of a gathering geopolitical storm as governments in North America and Europe launch fresh restrictions and consider outright prohibitions on its use over fears it could be used to gather data on behalf of the Chinese state.
In the US, national security concerns have been simmering since ByteDance paid $1bn for the popular app Musical.ly in 2017, merging it with its TikTok platform to cater to its youthful American user base.
The US Committee on Foreign Investment, or Cfius, opened an investigation into the acquisition in 2019, only months after the Trump administration had placed Chinese telecoms group Huawei on the “entity list”, dramatically limiting its ability to do business in the US, saying its 5G mobile networks posed a threat to national security.
As the app surged in popularity in the summer of 2020, then president Donald Trump vowed to ban it based on concerns that the Chinese government could use the platform to “build dossiers of personal information for blackmail and conduct corporate espionage”.
ByteDance executives got a brief reprieve in June 2021, when President Joe Biden revoked a series of executive orders by Trump to ban a range of Chinese apps, including TikTok.
Now however, against the backdrop of fraying relations between China and the US, the app is firmly back in the crosshairs of lawmakers in Washington and beyond. This week, the White House gave federal agencies a 30-day deadline to ensure TikTok is removed from government devices. More than half of the US states have ordered their officials to do the same.
The EU’s executive branch and European parliament earlier banned the app for staff in February, and Canada followed suit this week. TikTok called these restrictions “misguided.”
On Wednesday, the Republican-led House foreign affairs committee passed a bill that, if approved by both Houses of Congress, would give Biden the authority to ban TikTok completely in the US. The bill was opposed by the Democrats on the panel, and it remains unclear if it would ever reach the president’s desk.
But the message from China hawks in Congress is clear: like Huawei before it, TikTok is a threat and must be stopped. “Anyone with TikTok downloaded on their device has given the [Communist Party of China] a backdoor to all their personal information,” says Michael McCaul, the Republican chair of the House foreign affairs committee. “It’s a spy balloon into their phone.”
TikTok is scrambling to broker a deal with the Biden administration that the social network says would safeguard the private data of Americans, but these concerns are poised to come to a head when the company’s chief executive Shou Zi Chew faces Congress at the end of this month.
People familiar with TikTok’s operations told the Financial Times that the company’s future rests on how Shou performs in front of the House energy and commerce committee on March 23.
Staff are feverishly preparing him for the appearance, where it is expected he will be grilled not only on access to user data by the Chinese Communist party, something the committee has said TikTok has “knowingly allowed”, but also on the impact of the app on children, and whether the company can keep kids safe from online and offline harms.
“There is certainly an element within the Biden administration that is of the view that nothing would be enough, short of a divestiture or a flat-out ban, regardless of the protections we put in place,” a senior TikTok employee with knowledge of the negotiations says.
TikTok insists it is separate from its Chinese owner, but ByteDance undeniably has a tight grip on the company.
Employees have ByteDance emails, use proprietary ByteDance software and have to follow the “ByteStyle” — its internal code of conduct. Hundreds of Chinese engineers, product developers and operations staff in Shanghai and Beijing keep the app running.
ByteDance has clear links to the state. The Chinese government has a “golden share” in ByteDance’s main Chinese entity, with the 1 per cent stake taken by government-run investment vehicles gaining the state control over content on Douyin, the Chinese version of TikTok.
It also gave them influence over the appointment of Communist party official Wu Shugang as one of the entity’s three directors. Wu previously said he wished to “cut off the dog head” of liberal Chinese people with western values.
Under local laws, Chinese companies may be compelled to disclose data to the state, as well as to restrict the transfer of sensitive data across borders.
To some in the Biden administration, the case against the company is open and shut. “I don’t use TikTok, and I would not advise anybody to do so because of these concerns,” US deputy attorney-general Lisa Monaco said at Chatham House in February.
“China has been quite clear that they are trying to mould and put forward the use of norms around technologies that advance their privilege [and] their interests . . . which are fuelled by and directed towards an authoritarian approach to their government.”
TikTok says it has never provided data to the Chinese government and never would. But on December 22, the company admitted staff in China and in the US had accessed users’ data inappropriately in the summer of 2022. At least two reporters, including an FT journalist, were part of this probe, where personal data, including location information, was used to try to identify internal leaks from staff.
The tracking took place only months before the company declared in October it would never “target” any members of the US government, activists, public figures or journalists.
TikTok later said the individuals involved had left the company.
TikTok’s grand plan to allay lawmakers’ concerns — and guarantee its future — hinges on its efforts to physically fence off user data from China.
In Europe, it plans to open three data centres to store data from more than 150mn European accounts locally, rather than in the US and Singapore. Two of these will be in Dublin, where it has invested more than €600mn into the sites, and a third is yet to be finalised.
In the US, TikTok has spent more than $1.5bn on “Project Texas”, a corporate restructuring plan to safeguard user data through a partnership with US cloud software group Oracle.
In the coming months, all user data will be routed to Oracle Cloud, and new user data will be stored exclusively on its server. Oracle has begun a review of TikTok’s source code, the technological architecture underpinning the app, to assess its security risk. Under current proposals, third parties, including Cfius and the US government, will have approval authority over parts of TikTok’s business.
TikTok US Data Security Inc is being created as a new subsidiary of TikTok governed by an independent board of directors who will oversee teams of staff in engineering, product operations, trust and safety, legal, security and privacy.
The company estimates the proposals will cost up to $1bn a year, including paying staff, third-party auditors and source code inspectors. It said its “measures go well beyond what any peer company is doing today”.
Yet the US is now holding up the deal after years of negotiations, according to two senior TikTok employees.
“All the technical professionals at the Cfius committee have signed off on the TikTok-Oracle deal, but there is one holdout at the political level . . . and so the deal is at an impasse as a result,” one of them adds.
Data collection is not the only concern for lawmakers. On Douyin, the Chinese version of the app also owned by ByteDance, children under 14 view primarily educational content rather than entertainment.
“The algorithms that determine what you see on TikTok [are] determined out of Beijing by China,” Mark Warner, the Democratic chair of the Senate intelligence committee, said in February.
“If you look at what Chinese kids are seeing on their version of TikTok, which emphasises science and engineering, versus what our kids and kids around the world are seeing, it is dramatically different. So both from a data collection, and from frankly, a propaganda tool, it is of huge concern.”
So far, the geopolitical concerns do not appear to have hampered TikTok’s astronomical growth in the west, with the US, UK and Europe as its largest markets.
Most of TikTok’s income is derived from advertising, with an increasing number of marketers moving from traditional platforms such as Facebook and Instagram.
Four advertisers the FT spoke to said the current tensions had not had an impact on spending on the platform.
“Security concerns about TikTok are nothing new. If users actually understood the data the app collects from them, then no one would use it, but ignorance is bliss,” says Ben Foster, managing partner of digital at media agency The Kite Factory.
For advertisers, it is about being where the eyeballs are, and the average US user spends about 90 minutes a day on TikTok, driven by its powerful recommendation algorithm.
“It is hard to advocate for moving away from TikTok when the prevailing wind is driving users to the platform,” says David Balko at ad agency Tribal Worldwide. “The truth be told, wherever the audience is, brands will congregate.”
The extraordinary popularity of the app among young people could act as a kind of shield from lawmakers eager to ban it completely. In an interview with Bloomberg, Gina Raimondo, the commerce secretary who is overseeing a policy to make it harder for China to gain sensitive US technology related to AI, suggested that a total ban would be political suicide: “The politician in me thinks you’re gonna literally lose every voter under 35, forever.”
With their bill granting Biden the right to do that, House Republicans are eager to ensure the nuclear option remains on the table. They will be hoping Shou gives them fresh ammunition in his congressional appearance later this month.
The senior TikTok employee believes the future of the company hangs in the balance. The government wants to appear “open for business when it comes to foreign investment”, the employee says, but “there are others who I think want to take a harder line . . . It’s just a question of which view will prevail.”
Additional reporting by Ryan McMorrow in Beijing
Can TikTok convince the world it is not a tool for China? Republished from Source https://www.ft.com/content/c8903308-4da1-4a13-a50a-fe96bbf9b5a2 via https://www.ft.com/companies/technology?format=rss