Business News Deals Digital Legal Top Stories

TikTok’s Oracle deal has Donald Trump’s “blessing”, though confusion remains over an accompanying educational fund

By | Published on Monday 21 September 2020


Donald Trump has given his “blessing” to the deal proposed by TikTok owner Bytedance in response to all the concerns expressed in Washington over allegations that the Chinese government has access to the video-sharing app’s global audience and userbase. Though there remains some mixed messaging around the specifics of that deal and the exact position of the Trump government which had, of course, threatened to ban the use of TikTok within the US.

More details about that deal – which centres on the previously announced alliance between TikTok and American technology firm Oracle – have emerged in recent days. A standalone business based in the US will run TikTok’s operations outside of China. Both Oracle and supermarket giant Walmart will have a stake in that US-based company, which will then IPO on an American stock exchange within the next year.

Prior to the IPO, China-based Bytedance will own 80% of the global company, while TikTok’s technology and algorithm will still be wholly owned by the main Bytedance business.

However, because 40% of Bytedance’s stock is currently controlled by American investors, technically the new TikTok Global company will be majority owned by Americans. And the idea is that with Oracle getting involved on the technology side, Americans can be assured that the Chinese authorities don’t have access to their data.

So basically TikTok’s grand plan is designed to placate Team Trump in at least three ways. First by having Americans technically own more than 50% of TikTok Global. Secondly, with the promise of an IPO within the US within the year. And thirdly, by arguing that Oracle’s involvement overcomes the data protection issues that were the official reason for banning the app in the first place.

There are other sweeteners too though. Oracle is headed up by Larry Ellison, one of the few tech sector chiefs who has publicly supported Trump. Plus, the new TikTok Global business has made some commitments on hiring lots of new American employees, paying lots of tax within the US and funding a big fat new education initiative.

Given Trump’s comments to the effect that the proposed deal had his “blessing”, it seems that list of goodies was sufficient to circumvent the ban. Though, as noted, there does seem to be some confusion about some elements of the deal, mainly in relation to the extra sweeteners.

For example, Trump this weekend indicated that TikTok had not only committed $5 billion to a new education fund, but that the fund would be used to enable an initiative the President announced last week that will provide young Americans with a “patriotic” education telling them the “real history of our country”.

Which basically means a version of American history palatable to Trump’s core supporters. So a version of American history full of the rumours and bullshit that has gone down so well with those voters ever since the President’s shift into politics.

However, sources on the TikTok side say that, while an AI-driven online education initiative is part of the proposal, there is no $5 billion commitment and no plans to fund Trump-esque history lessons. It’s actually possible that the $5 billion figure originates in a statement from Oracle on how much tax income the new TikTok company might generate for the US treasury if everything goes according to plan.

Whether these confusions could as yet scupper the deal from getting formal approval from the US government remains to be seen. On Friday, despite having received TikTok’s grand plan, the US government’s commerce department told Apple and Google to block new downloads of the TikTok app within the US as of yesterday. That demand was then put on hold for a week pending a full review of the TikTok/Oracle proposal.

Nevertheless, with the actual ban put on hold and Trump’s comments about the Oracle deal having his “blessing”, the interim boss of TikTok, Vanessa Pappas, yesterday published an upbeat post on the company’s blog.

She said that “while we strongly disagree with the implications of TikTok as a national security threat, we nonetheless understand the concerns”. She then listed various measures the company has introduced in the last year to allay concerns over what happens TikTok user-data, before formally commenting on the Oracle alliance.

“We’re pleased that today we’ve confirmed a proposal that resolves the [US government’s] security concerns and settles questions around TikTok’s future in the US”, she went on. “[That plan includes] working with Oracle, who will be our trusted cloud and technology provider responsible for fully securing our users’ data”.

“Both Oracle and Walmart will take part in a TikTok Global pre-IPO financing round in which they can take up to a 20% cumulative stake in the company. We will also maintain and expand the US as TikTok Global’s headquarters while bringing 25,000 jobs across the country”.

She concluded: “Our team works tirelessly to provide a safe and inclusive platform, and we’re THRILLED that we will be able to continue serving our amazingly diverse and creative community. This is just the beginning for TikTok, and we’re so excited to be with you in this journey for the long run”.