Why Trump’s Been Threatening Your Teen’s Favorite App

(Bloomberg) -- When U.S. President Donald Trump declared TikTok a threat to national security, there were more than a few Americans who thought, “What’s that?” Others were confused about how a Chinese-owned service mainly known as a way for teenagers to share short videos showing off their dance moves could become part of what’s been described as a digital Cold War. After Trump issued a pair of executive orders banning U.S. residents from doing business with TikTok and WeChat, another popular Chinese-owned app, the administration also began exploring restrictions on the two biggest Chinese digital payment platforms, Ant Group and Tencent Holdings Ltd.

1. What is TikTok?

The app, which has a sister app in China called Douyin, is a popular platform for lip-syncing and dance videos. Users can film and edit clips up to 60 seconds long inside of the app and share them immediately. TikTok’s central feature is the ForYou page, where algorithms generate an infinite scroll of videos based on a user’s behavior. Fans consider TikTok special because of the sense that anything can show up on your page.

2. How big is it?

Huge and growing fast, at least up till now. More than 2 billion users worldwide have downloaded the app, according to SensorTower estimates. In the first quarter, it generated the most downloads for any app ever in a three-month period, accumulating more than 315 million installs across the Apple Inc. App Store and Google’s Play store. Globally, the U.S. ranks third, with 8.2% of total downloads. Before India banned TikTok in June, the country led with almost a third of global downloads.

3. Why did India ban it?

TikTok was one of 59 Chinese-owned apps that were banned in June after India’s Ministry of Information said the services posed a threat to national security and India’s sovereignty. The move came days after a border dispute between India and China that left 20 Indian soldiers dead.

4. What’s Trump unhappy about?

Before issuing his order, Trump had cited national security in threatening to ban TikTok from the U.S. Some administration officials are concerned that the app is collecting huge amounts of data about American citizens and that China’s government could force ByteDance Ltd., as a Chinese company, to turn over the information. Earlier this year, the Pentagon ordered service members to delete the app from their phones, a move that was followed by some corporations including Wells Fargo.

5. Is that true?

Security experts say that almost every major social media app vacuums up a vast amount of data about users and their contacts. They say there’s not strong evidence that TikTok gathers more, or does more with it, than competitors. U.S. officials haven’t provided any proof that TikTok is sharing information with Beijing. The company has repeatedly denied that it turns over data. However, Chinese companies are required to share data with the government when asked.

6. What about WeChat?

WeChat, owned by Tencent Holdings Ltd., is a messaging platform that offers payment services and other features. WeChat doesn’t have a huge presence in the U.S., but it’s used by more than 1 billion people and has become of a staple of daily life in China. Trump’s executive orders pertain to any transaction over which the U.S. has jurisdiction and prevents transactions involving TikTok’s parent company ByteDance; they block all transactions involving WeChat but doesn’t amount to a broader ban on dealings with Tencent.

7. How about the payment platforms?

U.S. officials are concerned that Ant Group, which is preparing an IPO, and other Chinese fintech platforms will come to dominate global digital payments. That in turn could give China access to banking and personal data of hundreds of millions of people. Yet officials acknowledge that it would be difficult to move forward until they find a legally sound basis for taking action.

8. How do these fit into the broader conflict?

The White House has already added Huawei Technologies Co., the Chinese telecoms-equipment giant, to a list of restricted entities, citing similar data and national security concerns. Huawei has also denied that it shares sensitive information with the Chinese government. The day before Trump issued his order on TikTok, Secretary of State Michael Pompeo urged American companies to bar Chinese applications from their app stores, signaling that U.S. efforts to banish Chinese technology from U.S. computers and smartphones will extend broadly, with the goal of creating a “clean network.”

9. What’s happening with the TikTok ban?

The first phase of Trump’s ban on TikTok, which would make new downloads of the app unavailable on Apple and Google’s app stores, was set to take effect at midnight on Sept. 27. But a federal judge temporarily blocked the ban, ruling the U.S. government likely overstepped its authority. If the government chooses to appeal the decision, the case would go to the U.S. Court of Appeals for the District of Columbia Circuit, one level below the Supreme Court. The judge did uphold the next deadline, slated to take effect Nov. 12., which would enforce additional restrictions on TikTok and essentially render the app useless in the U.S. In the meantime, TikTok’s parent, ByteDance Ltd. is trying to work out a deal to sell the U.S. business to an American company and satisfy the administration’s national security concerns.

10. What’s happening with TikTok sale?

After months of talks with various suitors, including Microsoft Corp., ByteDance came to a deal with Oracle Corp. and Walmart Inc. to create a new entity called TikTok Global, with headquarters in the U.S. and a plan to list the group on the stock market in an IPO next year. A person familiar with the matter has said ByteDance will seek a valuation of $60 billion. But details about who will control the company and its valuable algorithm are still unclear. ByteDance has said it will hold an 80% stake of TikTok Global before any IPO, while Oracle has insisted that American firms will be majority owners and ByteDance won’t retain any control. ByteDance was valued at more than $100 billion in private markets earlier this year.

11. Is Trump going to permit that?

Trump gave an initial “blessing” for the deal between Oracle and ByteDance but then said he might rescind that approval if the Chinese company retains control of TikTok. He indicated he expected Chinese influence to be diluted by a future public offering of the new company. The proposal still requires formal approval from Cfius, a government panel that oversees foreign investment in the U.S., ahead of the the Nov. 12 deadline. Trump also needs to formally approve the final deal.

12. Has Trump forced a sale of an app before?

Yes. A similar situation unfolded recently with Grindr, a dating app popular in the LGBT community. Beijing Kunlun Tech Co. acquired the service in January 2018, but the Committee on Foreign Investment in the U.S. required the company to sell the business. Again, the concern was that sensitive information could be sent to entities in China. In March this year, Kunlun said it agreed to sell Grindr to San Vincente Acquisition LLC for about $608.5 million.

13. What’s been China’s reaction?

China has insisted that ByteDance remain in control of TikTok. The government also imposed a new slate of rules in September designed to prevent foreign governments from acquiring data stored locally, throwing a wrench into deal negotiations. China state-run media have denounced the sale as “an American trap” and a “dirty and underhanded trick.” A spokesperson for the Chinese Ministry of Foreign Affairs previously said that the precedent of acquiring a company under the pretense of protecting national security could lead to foreign countries targeting American companies, calling it the opening of a “Pandora’s Box.”

The Reference Shelf

• QuickTakes on cybersovereignty and the idea of a digital Cold War.
• A QuickTake on the U.S. campaign against Huawei.
• An examination of Trump’s call for the government to get a share of sale proceeds.
• How the TikTok showdown fits into the broader U.S.-China struggle.

©2020 Bloomberg L.P.