Is time running out for TikTok?

India, where it has 300 million users, banned TikTok a month ago and the US could be the next to bar its teenagers from accessing it on their smartphones on national security grounds. The app was withdrawn from Hong Kong after the new security laws were introduced three weeks ago. TikTok said it was pulling out from the former British colony because, as a Chinese company, it could not refuse to comply with the new law and would have no choice but to provide data and details.

If WhatsApp and Twitter are tools of social communication and Facebook is social media, the best way to describe TikTok is social entertainment. TikTok is a viral shortform mobile video-sharing app whose viral videos have made it the fastest-growing social media platform outside China. It is projected to report revenues of between US$1 billion and US$1.4 billion this year.

The app has been downloaded over two billion times worldwide. Eight hundred million people around the world log on to TikTok every month, according to research firm Sensor Tower. Nearly half of its monthly active users are under 24 years of age. Within that group, the most active ones are teenagers — or those aged between 15 and 19. Young Americans graduate from TikTok to Snapchat, Instagram. For the older people — moms, dads and grandmas — there is Facebook as well as another smaller social network, Twitter, made famous by the constant tweeting of the 74-year-old US president.

TikTok is by far the best user of AI among the social networks. It got there by creating algorithms that recommend its short videos to users who participate in viral challenges, lip sync and dance to music, show off comedic skits, and share their takes on the world at large. The recommendations are incredibly addictive. An average new user can easily spend at least an hour on the app. Believe me, I tried one evening and got so engrossed I lost sense of time. The videos are so compelling that users get hooked quickly. Because TikTok has so many of them saved in the cloud and knows just what you want, it just keeps dishing them out to you at a very rapid pace.

Security threat

American officials have talked about banning TikTok for months now. The Trump administration’s line is that TikTok’s parent, Bytedance, is too close to Beijing’s intelligence apparatus, which uses big data analytics to scan every bit of information that TikTok collects from its users around the world. That clearly puts US data privacy and cyber security at risk. US Secretary of State Mike Pompeo told Americans earlier this month that they should use TikTok only “if you want your private information in the hands of the Chinese Communist Party”.

For its part, Bytedance insists that TikTok, which accounted for over 5% of its total revenues last year, is carefully siloed and, as such, neither its Beijing parent firm nor any of its Chinese subsidiaries have interaction with the video-sharing firm, which operates only outside China. TikTok says its servers are all based outside China and any data that it collects is not passed on to security agencies in Beijing.

Earlier this year, Walt Disney’s No 2 Kevin Mayer was hired as COO of Bytedance — even though he has no dealings with its Chinese operations — and as CEO of TikTok, a move that analysts say was made to mollify concerns that it is a tool of Beijing. But Washington has pooh-poohed the notion that TikTok operates as some rogue subsidiary that its owners in China have no control over.

The US Department of Commerce has been toying with the idea of putting the company on its “Entity List”, the same blacklist on which it put telecom equipment firm Huawei. This would make it harder for American firms to provide technology such as software to TikTok, for its app to be downloaded from Apple’s App Store or the Google Play store, or to provide software updates for the apps on their platforms.

Being on the “Entity List” will also prevent TikTok from accessing US services such as Amazon.com’s AWS or Microsoft Corp’s Azure. Still, Trump, who is seeking a second term in November, is well aware that TikTok is extremely popular among young Americans, though most are not of voting age. So, he has also deliberated the option of allowing the app to be used in the country as long as there are guarantees and protection in place that ensure Chinese intelligence is not siphoning the private data of US citizens.

Collecting data

Is TikTok really a risk to US national security? The Trump administration certainly thinks so. The app siphons off a lot of data on your phone without your consent, like what you have been up to on Instagram, Facebook Messenger or Snapchat. The data is then monetised by selling advertising or sold to marketers that may not necessarily be advertising on TikTok but just need your information to sell you something somewhere else some other time. Indeed, its algorithms are so sophisticated and powerful that US security officials fear that, someday, Beijing might want to weaponise them and push only the content that it wants Americans to see.

Here is how it collects data on you: When you sign on for a new account on TikTok, the app requires you to provide either a mobile phone number and email address or another social media account — Instagram, Facebook, Snapchat, Twitter — to register. It also asks you for your age and a photo as well as other biographical information. If you log in with Google, Facebook or another service, TikTok will receive profile information from them as well. It also uses cookies and beacons planted on your device to receive information on the other apps you use and all websites you visit or purchases you make.

If you post a video in which you are featured singing along with your friends, TikTok’s algorithm matches the photo that you provided when you signed on with the image from the video. Now it knows who your friends are and the algorithm can match your friends’ images with other images that it has collected, giving it a huge social graph. Similarly, it uses global positioning system data from your phone so it knows where you live, where your friends live and the places you frequent. Actually, it is quite scary what it knows — and there is very little it does not know — about you.

Earlier this year, Apple caught TikTok secretly spying on iPhones by accessing the universal clipboard on users’ devices. As long as TikTok is active on your iPhone while you are working on your Macbook, iPad or Mac, its app can read anything you copy on another device including your passwords, emails and financial information. This is because the Apple devices that you own continuously sync data with each other. Apple has since warned TikTok and will plug the loophole through its new iOS14 software update in September.

So, will Trump ban it? On the face of it, there is no clear national security case against TikTok even if plenty of circumstantial evidence has been piling up. Yet, put yourself in the shoes of candidate Trump. TikTok is another tool that gives him an advantage over Democratic Party rival Joe Biden. By banning TikTok, he looks tougher on China than Biden and, since most of TikTok users cannot vote yet, he is unlikely to lose any support.

And, oh, Trump has no love for TikTok. The mobile video app’s young users were recently blamed for the debacle that was the president’s campaign rally in Tulsa, Oklahoma, last month, which embarrassingly had mostly empty seats when he had been tweeting about packed crowds inside and outside the stadium just hours before he arrived there.

Spinning off TikTok

Who gains from TikTok’s ban? The biggest beneficiary would be Facebook, which has been busy creating a competitor to TikTok in-house called Instagram Reels, which is expected to be unveiled in August. Reels app is currently testing in France, Germany, Brazil and India. Facebook founder and CEO Mark Zuckerberg is a strong supporter of Trump and has defended Trump’s right to free speech whenever he has used Facebook to tout misleading information about coronavirus cures, election fraud and the motives of anti-racism protesters, among other things.

The White House has given itself until early August to articulate its TikTok strategy. It is more likely that some kind of compromise will be hammered out and TikTok will get a reprieve as long as it separates itself from its Beijing parent, incorporates itself outside China and commits to not sharing data with Chinese security agencies or working hand in glove with them.

Bytedance has reportedly talked to some of its US venture capital investors such as SoftBank Group, Sequoia Capital and General Atlantic about selling a majority stake in TikTok or selling the whole company to a bunch of investors who would eventually help in the IPO next year. As a US entity, TikTok could be worth US$20 billion to US$25 billion. By selling TikTok, Bytedance will get a huge sum of cash ahead of its own much-anticipated IPO in Hong Kong and Shanghai next year. And once TikTok is spun out of Bytedance, it can return to India, its biggest market.

A US listing will also allow TikTok, with its sophisticated algorithms and deft use of AI, to compete head-on with Facebook. It will also finally resurrect beleaguered Softbank that has been reeling since it pulled the IPO of coworking firm WeWork. If anyone could just make a 15-second video clip of the unfolding corporate drama, TikTok’s algorithms will push them to the world.

Assif Shameen is a technology and business writer based in North America.