A proposal to avoid the banning of the popular social media app TikTok was submitted to the U.S. Treasury Department over the weekend.
The plan submitted by ByteDance, which owns TikTok, calls for the company to enlist Oracle as a “trusted technology provider” in order to address national security concerns raised about the video-sharing software by the Trump administration.
In August, President Trump issued an executive order barring U.S. businesses from doing business with ByteDance after Sept. 15.
Although details of the deal haven’t been released, it’s been reported that Oracle will be handling the data for TikTok’s 100 million American users. How much of the operations side of the business will remain with ByteDance remains unclear.
“This is real win for ByteDance,” said Jack E. Gold, founder and principal analyst of J.Gold Associates in Northborough, Mass.
“ByteDance thought it was going to have to sell TikTok or they were going to be put out business in the U.S.,” he told the E-Commerce Times. “Now they get to keep their IP and their user base and use Oracle as a data center for American data.”
“The deal will pad the wallets of the company’s major shareholders,” added Charles King, principal analyst at Pund-IT in Hayward, Calif.
“More importantly,” he told the E-Commerce Times, “it should end or subdue the potshots the company has suffered from President Trump and other critics.
Joining the Hip Crowd
A partnership with ByteDance would benefit Oracle, too.
“Oracle is frustrated at being behind the global top four hyperscalers in public cloud revenue (Amazon Web Services, Microsoft Azure, Alibaba Cloud, and Google Cloud) and has been vying with IBM to grow its cloud in two dimensions at once: expand its penetration in traditional enterprise and prove its cloud platform’s scalability and “hip factor” with well-known brands like Zoom,” wrote Forrester Vice President and Senior Analyst Jeff Pollard in a blog published Monday.
“Nothing is more hip than TikTok at the moment, and TikTok has 800 million monthly active users globally, putting a check mark by both of Oracle’s goals,” he noted.
If the TikTok deal is approved, it would finally give Oracle a seat at the consumer tech table, added Chris Emme, chief revenue officer of Tsu, a social media platform based in Norwalk, Conn.
Oracle will be part of the “fun tech” conversations, he continued, part of FAANG — which will now need to change its name — Facebook, Amazon, Alibaba, Netflix and Google .
“More challenging for that group than finding a new name will be the immediate entry of a new competitor,” he told the E-Commerce Times.
In choosing to hook up with Oracle, ByteDance spurned the advances of other suitors, most notably Microsoft and Walmart.
Emme maintained that a deal with Microsoft might have made more sense than the one with Oracle.
“It would have been incredibly valuable for Microsoft,” he explained. “It would have given them access to talent for content creation and a link to a young audience for media.”
“For Walmart,” he continued, “it put them one click away from facilitating transaction of products discovered by users on social media.”
Pund-IT’s King added that Microsoft has significant experience in consumer and entertainment markets that would have been applicable to managing TikTok. “TikTok is unlike any other Oracle business, and it’s unclear how and how well the company and its brand will fare under Oracle,” he said.
However, the Microsoft deal was a buyout, which, apparently, something ByteDance wanted to avoid. “This arrangement keeps TikTok intact,” Gold observed. “Oracle isn’t buying anything. TikTok is using the Oracle cloud.”
Data Security Concerns
All of ByteDance’s wheeling and dealing has been forced by national security concerns about the app.
“TikTok is much like other apps — there’s the potential for its sharing users’ personal info with China’s government,” explained Chlo Messdaghi, vice president of strategy at Point3 Security, a provider of training and analytic tools to the security industry, in Baltimore, Md.
“Even though the TikTok developers claimed they weren’t sharing data with the Chinese government and continually stressed that all servers were based in the U.S., the problem is that a government can enforce such sharing at any time if they’re so inclined,” she told the E-Commerce Times.
“We don’t have any evidence this actually happened,” she continued, “but that is why governmental workers were warned not to put the app on their phones. Protesters in Hong Kong were similarly warned.”
Erich Kron, a security awareness advocate at KnowBe4, a security awareness training provider, in Clearwater, Fla. noted the threat to consumer data posed by TikTok is relatively minimal. “However,” he told the E-Commerce Times, “for people that are employed by the government or military and are using these apps, the issues this sort of tracking and information collecting create could be significant and could pose a real threat to operational security.”
“While we don’t know the details behind the partnership between Oracle and TikTok, this will at least put an end to the proposed ban,” he added, “and by partnering with a U.S. organization, who will hopefully be able to better vet the activities of the application with the mind to protecting data, it may significantly reduce the threat of information and data theft and the influence of the Chinese government.”
Not Just a Kiddie App
Although TikTok’s target audience is a younger demographic, it’s not just about kid videos, observed Jamil Jaffer, senior vice president of partnerships and strategy at IronNet, network security company, in Mclean, Va.
“Like a lot of companies, they’ve been caught gathering data without telling users about it,” he told the E-Commerce Times. “They also gather data about the videos they stream. Who is a person talking to? Who are their friends? Who is in their family group? How do they behave in their videos? What are their frequent locations?”
“There’s a lot of data there,” he continued. “When you take that data and put it in the hands of a potential adversary, that data can be used not only against a person in the future, but it can be used to train artificial intelligence algorithms to better predict behavior going forward.”
“Videos of kids dancing doesn’t seem that problematic,” he said. “but the way the data is gathered and the uses to which that data might be put can be very significant and have a real impact on national security.”
“It’s not clear to me that the Oracle partnership will address the very real national security problems that the U.S. government has identified,” he added. “We need to know more, but as of right now, color me skeptical.”