What’s the big deal with TikTok anyway? More than I can say here. But this memo is a start to understanding the different forces at play, only few that have been covered here.
The current controversy over TikTok is not just a technical policy problem; it’s a pressing issue that demands urgent action. The debate over TikTok’s ownership structure reveals underlying tensions over national security, corporate governance, and social media’s increasingly global nature. Such a backdrop underscores the need for swift action.
China’s mastery of collecting and mining first-party data is central to its commerce and technology industries. […] Reports have suggested that data collected by Chinese commerce companies has been used for discriminatory purposes and surveillance. The inseparable relationship between some Chinese tech companies and the government has intensified concerns about data’s potential use in matters of national security. (2PM)
Project Texas, a sweeping effort by TikTok that cost $1.5 billion to mitigate national security concerns in the United States, is a quintessential example of digital solutions to geopolitical challenges at their best and worst. The effort was meant to separate TikTok’s United States business from its Chinese parent company, ByteDance, by ensuring that American users’ data would be stored on Oracle’s cloud infrastructure and creating a separate subsidiary in the United States. However, new evidence shows that such efforts would be more symbolic than substantive.
According to Texas Monthly, Project Texas’s operations would be monitored by an in-house committee approved by the U.S. government called TikTok U.S. Data Security. Project Texas would essentially act as a firewall, ensuring that the Chinese government couldn’t access U.S. user data and that Oracle would oversee it all. (Mashable)
Several former TikTok employees told Fortune that data continued to be sent to ByteDance executives in Beijing even after starting Project Texas, with the “stealth chain of command” remaining in place. One former data scientist explained that sending spreadsheets of sensitive user data from the United States to ByteDance staff in China was a regular procedure, raising questions over the efficacy of the proposed separation of data efforts.
The seriousness of the problem has been compounded by the passage of the Protecting Americans From Foreign Adversary Controlled Applications Act (U.S. Congress), a harsh ultimatum that ByteDance must divest TikTok’s United States business or face a ban. The legislative move reflects Congress’s frustration over technical mitigation efforts and its call for a more fundamental makeover of TikTok’s ownership structure.
Oracle’s potential role in this drama is particularly intriguing and I will not be opining beyond what has been reported. As TikTok’s chosen technology partner for Project Texas, Oracle was positioned as the guardian of American user data. However, the relationship raises questions about data privacy and corporate control. While Oracle represents a U.S.-based alternative to Chinese ownership, critics might argue that transferring vast amounts of user data from one large technology company to another doesn’t necessarily resolve fundamental privacy concerns.
Oracle’s deep ties to the U.S. intelligence community add another layer to this situation. The company has a long history of providing database and cloud infrastructure services to various intelligence agencies, including the CIA and NSA. Oracle’s Government Cloud offerings are specifically designed to meet the stringent security requirements of intelligence operations. This background makes Oracle an appealing partner from a national security perspective, but it also raises questions about the extent of potential government surveillance and data access under Oracle’s stewardship of TikTok’s user data.
The stakes are enormous. TikTok’s 170 million U.S. users represent a massive audience and a thriving ecosystem of creators, advertisers, and businesses dependent on the platform. The Indian experience, where TikTok was banned in 2020, offers a cautionary tale. While domestic alternatives emerged, they struggled to replicate TikTok’s success, and ultimately, established U.S. platforms like YouTube and Instagram became the primary beneficiaries of TikTok’s absence.
ByteDance’s resistance to selling TikTok highlights the complexities of forced divestment. The company argues that TikTok’s success is inextricably linked to its underlying technology and algorithms, which are subject to Chinese export controls. This creates a catch-22: a sale that satisfies U.S. security concerns might strip TikTok of the very features that made it successful, while a sale that preserves TikTok’s functionality might not adequately address national security concerns. This resistance underscores the intricate balance that must be struck between national security and technological innovation in the current geopolitical landscape.
The debate over TikTok’s future also reflects broader questions about the relationship between social media platforms and national security. While concerns about potential data access by the Chinese government are legitimate, they exist alongside similar concerns about data privacy and algorithmic influence that apply to all social media platforms, regardless of ownership. This broader perspective is crucial in understanding the multifaceted nature of the issues at hand and the need for comprehensive regulatory frameworks.
Project Texas’s apparent failure to satisfy U.S. lawmakers points to a fundamental disconnect between technical solutions and political concerns. While TikTok invested heavily in creating a data governance structure that would theoretically address security concerns, the company couldn’t overcome the fundamental trust deficit created by its Chinese ownership. This suggests that corporate structure and national origin matter more than technical safeguards in an era of increasing techno-nationalism.
The potential Oracle ownership scenario presents its challenges. While Oracle’s U.S. base might satisfy national security concerns, questions remain about whether the company could maintain TikTok’s innovation and user experience. Oracle’s enterprise-focused business model differs significantly from the consumer-oriented social media space, and there’s no guarantee that Oracle’s corporate culture would support the rapid innovation that has characterized TikTok’s success. This detailed analysis provides a nuanced understanding of the potential outcomes of different ownership scenarios.
The TikTok controversy is not just about a particular platform; it’s about setting key precedents for how democratic nations interact with foreign-owned technological platforms. The outcome of this affair is likely to profoundly affect future investment patterns in technology companies, in addition to determining international standards of data governance. This is a turning point that is likely to decide the course of future regulation of technology, underscoring the need for more sophisticated policy approaches to regulate technology. This paragraph by the South China Morning Propaganda was fascinating:
Instead of acknowledging the poor treatment of a legitimate Chinese business operating in the US, some people point to the absence of foreign social media platforms in China and allege exclusionary practice. To clarify, China has the same set of regulations for both domestic and foreign companies. If US companies stayed out of the Chinese market because they were unwilling or unable to comply with local regulations, it is their choice and not, as some claim, due to the barriers Beijing set up. (SCMP)
While a binary option of imposing a sale or a ban addresses short-term security issues, it is not a medium-term approach to managing similar challenges in the future. As technology increasingly integrates globally, policymakers must design more sophisticated mechanisms that balance national security objectives with the benefits of cross-national technology transfer. This requires a cautious and judicious approach, emphasizing the need for scrutiny in technology regulation.
Currently, TikTok’s fate is in limbo in the face of divergent visions of technology governance and national security. Whether via Oracle’s purchase or a different arrangement, the company’s future will likely differ from its heritage. The challenge is in determining a practical path that protects the innovation and creativity that brought TikTok to fame while, at the same time, addressing genuine security issues in a more complex global technical sphere. TikTok is back online.
Research and Writing by Web Smith
Editor’s Note: I am returning to form after a slow recovery from a December 2024 heart incident that continues to impact me in ways that have diminished my capacity. Sorry about that, I’m good though.
Sources:
- Tax Policy Center
- The Wall Street Journal
- Bureau of Labor Statistics
- Bloomberg Retail Analysis
- Business Insider – Amazon and USPS Analysis
- CNBC Trade Coverage
- Federal Reserve Consumer Confidence Index
- Harvard Business Review
- New York Times Brand Coverage
- Retail Dive
- Deloitte Retail Outlook
- McKinsey Supply Chain Reports
- U.S. Customs and Border Protection
- Financial Times
- Fortune – Defense Industry Outlook