TikTok launched in 2016 and quickly became one of the most popular social media apps, with over 1 billion monthly active users. It allows users to create and share short videos set to music. The app is owned by ByteDance, a Chinese company founded in 2012. While TikTok’s popularity has skyrocketed, concerns have grown around its Chinese ownership and the potential security risks that could pose for user data.
TikTok’s ownership by a Chinese company has sparked fears that user data could be shared with the Chinese government, allowing it to track or exert influence over users. There have been calls to ban TikTok in various countries, and even a proposed sale of TikTok’s US operations, due to distrust in its Chinese ownership. While TikTok maintains that user data is secure and not shared with China, its complex corporate structure and ties to ByteDance have kept concerns alive.
TikTok’s Origins
TikTok was created by the Beijing-based tech company ByteDance. ByteDance launched the short video app Douyin in China in September 2016. Douyin quickly gained popularity in China for its fun tools allowing users to create and share 15 second videos.
Seeing the success of Douyin in China, ByteDance developed a version for markets outside of China called TikTok. TikTok launched in 2017, first in markets like Japan, Thailand, and Vietnam. TikTok then became available worldwide after merging with the lip-sync video app Musical.ly in August 2018 (BBC).
While Douyin and TikTok have the same general premise of short form video sharing, they operate on separate networks in order to comply with Chinese internet restrictions. TikTok was strategically designed to appeal to audiences outside of China and experienced rapid growth globally thanks to its viral spread on social media.
Rise of TikTok
TikTok saw a meteoric rise in popularity worldwide starting in 2018. According to the Influencer Marketing Hub, TikTok had just 55 million users in 2018, but that number grew exponentially to over 1 billion monthly active users in the summer of 2021 [1]. The COVID-19 pandemic certainly accelerated adoption, as people turned to TikTok for entertainment during lockdowns.
A key factor behind TikTok’s growth is its popularity among younger demographics. As of 2023, about 67% of TikTok’s active users are under 30 years old [2]. The app is particularly popular among Gen Z, with 41% of U.S. TikTok users between ages 10 and 19. TikTok has secured its spot as one of the most downloaded apps worldwide, with users spending an average of 52 minutes per day on the platform as of 2022 [2].
Concerns Over Chinese Ownership
TikTok’s Chinese ownership by ByteDance has raised data privacy and national security concerns, especially in the United States. TikTok collects large amounts of user data, including browsing and search histories, location information, and device identifiers (Why Countries Are Trying to Ban TikTok). There are concerns that the Chinese government could access this data under Chinese law. US policymakers fear TikTok could be forced to support Chinese intelligence work like censoring content or accessing data (Why does US see Chinese-owned TikTok as a security …).
The US government has pressured ByteDance to sell TikTok or spin it off from its Chinese parent company to address these data privacy and national security concerns. In 2020, then President Trump threatened to ban TikTok if it did not find a US buyer. This pressure led to negotiations for Microsoft and Oracle to take ownership stakes in TikTok.
Attempted Sale to Microsoft
In August 2020, amid rising tensions between the U.S. and China and concerns over data privacy, President Trump issued executive orders threatening to ban TikTok unless it was sold to an American company. Microsoft emerged as a top bidder to take over TikTok’s operations in the U.S., Canada, Australia, and New Zealand. According to Microsoft CEO Satya Nadella, negotiations were like “the strangest thing I’ve ever worked on” (BBC). A deal was reached in principle, but failed to materialize by the September 2020 deadline amid complications over software security reviews and negotiations with Beijing over TikTok’s algorithms (Reuters). While Nadella has said another bid is unlikely, some analysts think Microsoft may still have an interest if TikTok is forced to divest its U.S. operations.
Oracle Partnership
In September 2020, amid growing concerns over TikTok’s Chinese ownership, Oracle announced a deal to partner with TikTok to run its US operations.[1] This came after an executive order from then-President Trump threatened to ban TikTok unless its US operations were sold to an American company. Under the proposed deal, Oracle would become TikTok’s “trusted technology provider,” storing all US user data on Oracle cloud servers.[2]
While hailed as a win by TikTok and Oracle, the exact details and implications of the partnership remained unclear. It was not characterized as an outright sale, and ByteDance would retain ownership. There was confusion over how much control Oracle would have over TikTok’s algorithms and operations. Concerns also lingered over whether user data would be protected from access by ByteDance and the Chinese government.[3] The deal still needed to be approved by the Trump administration and pass regulatory hurdles.
TikTok Global Created
In September 2020, TikTok’s parent company ByteDance reached an agreement with Oracle and Walmart to create a new company called TikTok Global that would run the TikTok service worldwide. This deal was made in response to concerns from the US government about the Chinese ownership of TikTok.
Under the deal, ByteDance would retain a majority stake in TikTok Global. However, public trading of shares in TikTok Global was also planned, which would eventually reduce ByteDance’s ownership. Oracle and Walmart agreed to take significant equity stakes in TikTok Global as part of the deal. Walmart said it would take a 7.5% stake and Oracle would own 12.5%.
The creation of TikTok Global was an attempt to address US data security concerns by allowing American companies to control some of the operations. TikTok Global would be headquartered in the US and store user data there. However, the complex corporate structure meant that ByteDance still had substantial control over TikTok Global.
Ongoing Uncertainty
Despite the creation of TikTok Global, concerns remain over China’s potential influence on the app. This stems from ByteDance still owning 80% of TikTok Global even after the deal with Oracle and Walmart (NY Times). Some U.S. lawmakers argue that ByteDance retains too much control under the current structure, leaving TikTok vulnerable to the Chinese government’s demands if it chose to exert influence (AP News).
There have been bipartisan calls in Congress to mandate a fuller divestment from ByteDance to eliminate doubts over Chinese ownership. As long as ByteDance maintains majority control, critics believe TikTok’s data and algorithms could potentially still be accessed and manipulated by Beijing (Washington Post). However, TikTok maintains that its investor base today is predominantly American and that Chinese government officials have no access to TikTok user data.
The Complex Ownership Structure
TikTok Global was created in 2020 as a new U.S.-based company to satisfy the Trump administration’s national security concerns over TikTok’s Chinese ownership. TikTok Global aimed to give U.S. investors majority ownership and control over TikTok’s U.S. operations.
According to The Truth About TikTok, ByteDance, TikTok’s parent company, was set to initially retain an 80% stake in TikTok Global. U.S. investors Oracle and Walmart would take a combined 20% stake in the new company.
However, some sources indicate the ownership breakdown may have shifted over time. While specifics remain unclear, it appears ByteDance has reduced its stake, while Oracle, Walmart, and other U.S. investors have increased their stakes.
Despite the presence of U.S. shareholders, ByteDance is believed to remain the majority and controlling shareholder of TikTok Global. While the CEO is American, most observers agree that ByteDance still exhibits significant control and influence over TikTok Global and the TikTok app.
Conclusion
The ownership of TikTok remains complex and uncertain. Currently, TikTok is owned by ByteDance, a Chinese company founded by Zhang Yiming. However, due to data privacy concerns related to Chinese ownership, TikTok’s operations in the U.S. and other countries are now overseen by TikTok Global, which was created through a partnership between ByteDance, Oracle, and Walmart. Though ByteDance still owns 80% of TikTok Global, Oracle and Walmart have minority stakes in the company.
The future of TikTok’s ownership remains unclear. Negotiations around fully divesting TikTok from Chinese ownership have stalled. Some possibilities for the future could include:
- ByteDance maintaining majority ownership but making additional concessions to address data privacy concerns
- A further restructuring of TikTok Global to reduce ByteDance’s ownership stake
- A sale of TikTok’s U.S. operations to a consortium led by American investors
- TikTok being shut down in the U.S. if no agreement can be reached
For now, TikTok continues to grow rapidly under its current fractured ownership structure. But with data security concerns remaining, the question of who will ultimately control this popular social media app is far from settled.