Show an ad over header. AMP

The TikTok deal's for-show provisions and flimsy foundations

The new deal to rescue TikTok from a threatened U.S. ban — full of provisions aimed at creating the temporary appearance of a presidential win — looks like a sort of Potemkin village agreement.

How it works: Potemkin villages were fake-storefront towns stood up to impress a visiting czar and dignitaries. When the visitors left, the stage set got struck.

  • Similarly, many elements of this plan look hastily erected and easily abandoned once the spotlight moves on.

The big picture: TikTok's drama has unfolded as trade and security tensions between China and the U.S. deepen. The process has been driven by three demands from President Trump.

1. ByteDance, TikTok's Chinese owner, must sell it to a U.S. company. After Microsoft's effort to acquire TikTok failed, Oracle emerged as the leading bidder.

  • But the actual deal, according to reporting by Axios' Ina Fried and Dan Primack, involves ByteDance handing TikTok over to a newly constituted U.S. company named TikTok Global.
  • Oracle and Walmart will take 20% ownership of that company — valued, according to many reports, at between $50 and $60 billion. The rest of it will be owned by ByteDance's existing shareholders, who include both Chinese and U.S. investors.
  • Yes, but: On Saturday, Trump said of the deal, "It will have nothing to do with China," and that looks simply wrong.
  • ByteDance's Chinese owners will likely own roughly a third of the new firm, and its founder Zhang Yiming will sit on its board.
  • TikTok Global plans a U.S. IPO within the next year, and the deal's backers promise that will make the new company more transparent and ultimately more U.S.-owned.
  • It's still unclear exactly how TikTok Global will come into possession of TikTok's coveted recommendation algorithm, or how its U.S. operation will be able to vet it.

2. The deal must secure American users' data. ByteDance, as a Chinese company, can't protect U.S. users' data from Chinese government spying, the firm's critics charge.

  • ByteDance has long insisted that it stores all U.S. data outside of China's reach.
  • Under the new deal, Oracle will take over all of TikTok's cloud operations in the U.S. market. Oracle has a close relationship with the White House, and Trump says he's confident in its security capabilities.
  • A separate, U.S.-only board and security apparatus will oversee TikTok's U.S. operation to further placate U.S. concerns.
  • Yes, but: TikTok's security threat remained hypothetical, not evidence-based, and it's unclear how different in practice the new arrangement will be from the old.

3. The deal must benefit the United States. In August, Trump insisted that the U.S. Treasury get a cut of the deal.

  • It was never clear on what legal basis the president made this claim, which sounded like a shake-down to many observers.
  • Oracle's deal announcement cites a promise by TikTok Global to add 25,000 new jobs to its U.S. workforce and says that would ultimately funnel $5 billion in new tax revenue to the U.S.
  • The deal also involves an educational fund that the new TikTok Global plans to set up "to develop... an AI-driven online video curriculum." Most of the money for this effort is expected to come post-IPO.
  • Over the weekend Trump claimed that this fund would set aside $5 billion for his recently announced "patriotic education" initiative.
  • Yes, but: That last part was news to ByteDance. The jobs could materialize, but the Trump administration has a long record of extracting promises of jobs that never arrive — as happened with a 2017 Foxconn factory deal in Wisconsin.

The bottom line: Trump blessed the deal this weekend, but he got little of what he wanted.

  • "Make the owners sell to an American firm" has turned into a complex transaction with plenty of Chinese involvement and a lot hanging on an IPO that might never happen.
  • The U.S. won some security concessions, but no one can be sure that the TikTok threat — if it was ever real — has been eliminated.
  • The U.S. cut is deferred and conditional. The terms save the president's face but don't actually give him what he demanded.

Our thought bubble: The murk surrounding this process is a sign of just how far outside the norms of business everything about it has been from the start.

What's next: Between now and a Nov. 12 deadline, lawyers for all the parties will fill in the many blanks, seek to satisfy U.S. regulators' reviews, and try to make this deal fly. China, too, needs to bless the plan. Meanwhile, TikTok users' consumption of short videos and memes will continue undisrupted till after the election.

Fauci: Trump hasn't been to a COVID task force meeting in months

President Trump has not attended a White House coronavirus task force meeting in “several months,” NIAID director Anthony Fauci told MSNBC on Friday.

Why it matters: At the beginning of the pandemic, the task force, led by Vice President Mike Pence, met every day, but in the "last several weeks," members have held virtual meetings once a week, Fauci said, even as the number of new cases continues to surge in the country.

Keep reading... Show less

Universal mask use could save 130,000 lives in U.S.

Nearly 130,000 fewer people will die of COVID-19 this winter if 95% of Americans wear face masks in public, according to research published Friday.

Why it matters: “Increasing mask use is one of the best strategies that we have right now to delay the imposition of social distancing mandates," Dr. Christopher Murray of the University of Washington told the N.Y. Times.

Keep reading... Show less

Israel and Sudan begin normalization process after call with Trump

Sudan and Israel announced today that they will “end the state of belligerence” between them and start the process of normalizing ties.

Driving the news: The announcement came after a phone call hosted by President Trump with Israeli Prime Minister Benjamin Netanyahu, Sudanese Prime Minister Abdalla Hamdok, and the head of Sudan's governing council, Gen. Abdel Fattah al-Burhan.

Keep reading... Show less

We're all guinea pigs for Tesla's latest self-driving tech

Tesla is beta-testing its latest self-driving technology with a small group of early adopters, a move that alarms experts and makes every road user — including other motorists, pedestrians and cyclists — unwitting subjects in its ongoing safety experiment.

Why it matters: Tesla hailed the limited rollout of its "full self-driving" beta software as a key milestone, but the warnings on the car's touchscreen underscore the risk in using its own customers — rather than trained safety drivers — to validate the technology.

Keep reading... Show less

Trump removes Sudan from state sponsors of terrorism list

President Trump signed Friday an order to remove Sudan from the State Department’s state sponsors of terrorism list, senior U.S. officials tell me.

Why it matters: Trump’s signature paves the way for the U.S. and Sudan to move forward on a larger deal — which will also include a Sudanese announcement on normalizing its relations with Israel.

Keep reading... Show less

Big Ten football is back

The Big Ten football season kicks off tonight after months of a "will they, won't they" narrative.

The state of play: Each team will play eight regular season games, culminating in a ninth, cross-divisional matchup on Dec. 19 (i.e. the Big Ten Championship, but also No. 2 East vs. No. 2 West, etc.).

Keep reading... Show less

Child care crisis is denting the labor market

Reproduced from Pew Research Center; Chart: Axios Visuals

New data from the Pew Research Center shows that parents are being hit especially hard by the coronavirus pandemic, and as far as job losses go, mothers and fathers are faring equally poorly.

Why it matters: Economists have been warning for months that the pandemic could do long-term damage to the economy as people remain unemployed for longer stretches of time.

Keep reading... Show less

"This guy": Trump-Biden personal venom was on full display during final debate

Joe Biden twice referred to President Trump as "this guy," and Trump called the former vice president's family "like a vacuum cleaner" for foreign money.

Why it matters: The personal venom — during Thursday's final presidential debate, in Nashville — was a reminder that even during a more normal debate, nothing this year is normal.

Keep reading... Show less



Get Goodhumans in your inbox

Most Read

More Stories