US Officially Approves TikTok Deal; Bans WeChat

By Thomas Price Monday, September 21, 2020

After an already arduous path to finding a partner to host United States operations, it seems that there has finally been a major breakthrough in TikTok’s journey to reach the top of social media. On Friday, September 18, the US Department of Commerce announced that starting Sunday, any attempts to maintain or distribute the communications app, WeChat, or short-form video-based social media app, TikTok, will officially be prohibited. However, the following day, President Trump announced that he had approved the deal between ByteDance and Oracle. So, what exactly does this mean moving forward for both apps, and how does this affect the technology and social media market?

What the Ban and Deal Entail

The largest point of contention for the United States regarding both apps is major concerns over data security, specifically tracking and logging large amounts of it. TikTok boasts over 100 million users and WeChat around 19 million more, which resulted in the US, already in a highly tense situation with the Chinese Government, to take action and ban both apps

in effort to prevent a possible threat to national security. The ban on each of these apps will not punish those who have already downloaded them. Although users will still be able to use each app, they will no longer have access to updates moving forward. Under this context, the ban will most directly affect the app stores for both Apple and Android, who will no longer be allowed to list either apps on their marketplace for download. However, due to the recent approval of the deal between ByteDance and Oracle, this ban will not currently apply to TikTok.

The deal itself involves both Oracle as well as Walmart, who were previously in the running for the partnership with Microsoft before that eventually fell through. As it currently stands, Walmart and Oracle combined will have up to a 20% share in TikTok ownership and will be responsible for all US operations. The responsibilities of this will include having Oracle run and store all data on Oracle Cloud, with Walmart also being a commercial partner. Having data processed through Oracle Cloud should ensure that it would be secured from Chinese interest. Oracle will also become a minority investor in TikTok Global. As for employment coming from the deal, it will reportedly result in 25,000 new jobs across the US with President Trump stating that TikTok will be incorporated in Texas as a new company.

As for WeChat, owned by the Chinese company, Tencent, the restrictions from the Department of Commerce will affect the app operations more directly. It will be illegal to host or transfer any internet traffic through WeChat starting on the 20th of September. While this would have also been true for TikTok, the approval before the deadline for the Oracle and ByteDance deal kept any major issues from occurring for them. WeChat, on the other hand, has no such luxury of either time or possible partnerships with US companies in the near future. Additionally, WeChat has since released a statement emphasizing both the company’s disappointment in the decision and its plan to work closely with the United States Government to find parameters where it can come to a resolution that would involve continued support and updates for the US version of the app. 

Fallout From the Ban

Stocks were down almost across the board on Friday, with the Dow Jones dropping about .88%. The news of the ban capped off a week of modest gains in a generally downward trending stock market. Tencent, the owner of WeChat, actually ended the day slightly up at just over .54%, most likely due to its backing of a Chinese competitor to TikTok, Kuaishou, who has recently hired investment banks for a Hong Kong IPO. When looking at the jobs of employees at the US TikTok offices, the workers will still be able to receive their paychecks and benefits while working within the limits of the new restrictions. The deal with Oracle could possibly lead to a bump in American tech stocks the following week.

About the Author

Headshot of Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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