Oracle - TikTok Deal Will Need China’s Approval

By Adriaan Brits Thursday, September 17, 2020

A few days ago, news broke out that Oracle closed a deal with TikTok to run its US cloud operations. At first, there were speculations that Oracle was one of the bidders to acquire TikTok.

In the end, Oracle has been selected to be TikTok’s “trusted tech partner.” So instead of taking over TikTok, Oracle will be managing TikTok’s cloud technologies in the United States. President Trump is likely to decide on the Oracle - TikTok deal this week, however, recent reports also note that China will have its say on the deal as well.

TikTok Deal Background

On August 6, President Donald Trump signed an executive order preventing all transactions with ByteDance and ordering that TikTok’s US operations can be only acquired by an American company. 

The executive order was supposed to enter into force within 45 days, but President Trump signed another EO later giving ByteDance 90 days to sell or spin off TikTok in the US, without replacing the initial deadline. 

“Per the 45-day period outlined in the Executive Orders, the Department of Commerce is operating under a deadline of September 20th,” Wilbur Ross, secretary of the Department of Commerce. 

Oracle, which has collaborated with the US government before, made a strategic play by forming a partnership with TikTok in the midst of US-China trade disputes. 

Larry Ellison, co-founder and CEO of Oracle, has been a vocal Trump supporter in the Silicon Valley. Ellison even hosted a fundraiser for Trump at his Palm Springs compound in February, and said in an interview with Forbes: “I support him and I want him to do well.”

On the same day, when Oracle news broke out, Microsoft said TikTok’s mother company ByteDance refused its acquisition bid. Microsoft was the leading bidder to acquire TikTok’s businesses across the US, Australia, Canada, and New Zealand. In place of being fully acquired by Microsoft, TikTok found a technology partner in Oracle.

Microsoft Losses Out

After months of pressure on TikTok to cut off its US operations, the Chinese social media platform has now formed a partnership with Oracle, and it’s not even a sale agreement. We still don’t know what Oracle’s”‘trusted tech partner” actually involves, and it’s not likely that Oracle will be running any important operations in TikTok's US division.

If Microsoft had managed to acquire TikTok, it would have completely cut off American TikTok from Europe and Asia; however, the deal with Oracle will leave it unchanged. 

Microsoft issued an official statement after its acquisition bid got rejected. 

“We would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combating misinformation,” the company said in its statement. “We look forward to seeing how the service evolves in these important areas.”

It’s unknown that the deal with Oracle will make such changes.

What’s Next for TikTok?

Steven Mnuchin, Treasury Secretary, confirmed the deal between Oracle and TikTok, and it will be submitted to President Trump later this week. The deal means that TikTok will be saving its US business as well as preventing 1,400 of its employees from losing their jobs. 

Reuters reported that ByteDance is still to keep the majority stake in TikTok, and therefore, exercise control over the company. This news didn’t sit well with Trump, who stated that he did not favor the idea of ByteDance retaining control. It’s possible that his opinion was influenced by six Republican lawmakers who urged him to reject the proposal.

Moreover, ByteDance said that the deal doesn’t need just Trump’s approval, but one from China as well, Reuters reports. 

China won’t have direct access to user data, but It is debatable how much the deal with Oracle actually addresses the security and privacy issues. If Oracle’s “trusted tech partner” doesn’t involve writing the code for TikTok, it makes it easy for ByteDance to use a tracking malware if they choose to do so. Oracle will not rewrite the TikTok algorithm and handling moderation either, which leaves some room for ByteDance to maneuver.

Summary

After rejecting Microsoft’s bid, TikTok closed a deal with Oracle and made it its “trusted tech partner.” The deal will allow TikTok to keep its US operations, but many have questioned the deal with Oracle and what it really accomplishes. Moreover, this morning’s report shows that the Oracle deal is likely to need official approval from Beijing as well.

About the Author


Headshot for author Adriaan Brits

As an analyst of global affairs, Adriaan has an MSC from Oxford, with diverse interests in the digital economy, entertainment, and business. He is a specialist trainer in Advanced Analytics & Media

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