Microsoft faces technical challenges in TikTok carveout

Platform Economy: TikTok and US politics

Microsoft’s bid to carve out parts of TikTok out of the Chinese owner ByteDance will be a technically complex endeavour that could test the patience of the Trump administration, according to sources.

Trump has given Microsoft until the 15th of September to put together a blueprint for an acquisition that protects the personal data of Americans saved on the short-video app, and he’s issued an order to ban it outright if there is no deal.

Microsoft is negotiating a transition period which will give it the time to ring-fence TikTok technologically from ByteDance after they agree to a deal, we reported earlier this month.The fresh break that Trump and lawmakers have publicly mentioned could take more than a year to achieve.

TikTok is technically and functionally similar to ByteDance-owned Douyin, which is available only in China, and shares specialised resources together with it along with other ByteDance-owned properties, individuals familiar with the issue said.

ByteDance began working on their technological separation a few months ago amid scrutiny in the US government, a source familiar with the process told Reuters. It began planning for a split as part of a plan to shift its own power from China, Reuters has reported.

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While the code for the program, which determines the look and texture of TikTok, has been separated from Douyin, the host code remains partially shared along with other ByteDance goods, the source said. The server code offers basic functionality of the apps such as information storage, algorithms for moderating and advocating content and the management of user profiles.

To guarantee uninterrupted TikTok support, Microsoft would probably need to rely upon ByteDance’s code while it reviews and revises the code, and goes to a new back-end infrastructure to serve users, based on cyber security specialist Ryan Speers in River Loop Security, which supplies services including cyber security due diligence for bargains.

CFIUS

Any continuing operational or technical reliance of this US business entity on the Chinese firm after the sale generally would have been unacceptable to the Committee on Foreign Investment in the United States (CFIUS), stated Aimen Mir, former Deputy Assistant Secretary of the Treasury responsible for CFIUS, now a partner in the law firm Freshfields Bruckhaus Deringer.

In the past, CFIUS has demanded adoption of increased protections pending a sale, including separation of the US company from foreign sellers into the furthest extent possible, he said.

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Another challenge Microsoft faces is how it will transfer what is seen as TikTok’s secret sauce, the recommendation engine which retains users glued to their screens. This engine, or algorithm, forces TikTok’s “For You” page, which recommends another video to watch based on an analysis of user behaviour.

TikTok utilises recommendation algorithms that are said to be separate from Douyin, based on two sources knowledgeable about the issue. However, what makes it tick is content and consumer information that’s fed into the platforms core algorithm.

DuBois is a partnership adviser at Ignition Partners.

Microsoft’s discussions for the acquisition of the US, Canada, New Zealand and Australia operations of TikTok complicates a separation. Not merely would TikTok need to get separated from ByteDance, it might have to be broken up from TikTok’s other regions. This adds to the technical challenges due to the number of data involved.

TikTok had said its user information was stored from the US, with a copy in Singapore, independent from the remainder of the provider.

The proposed timeline makes consummating a deal quite challenging, stated Karen C. Hermann, a bargain attorney at Venable LLP: “It can sometimes take months and months just to identify the business needs of the divested business, what IP and other assets it uses exclusively, and what assets and IP it shares with other businesses in the company group.”

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The team at Platform Executive hope you have enjoyed the ‘Microsoft faces technical challenges in TikTok carveout‘ article. Initial reporting via our content partners at Thomson Reuters. Reporting by Echo Wang in New York and Paresh Dave in San Francisco. Additional reporting by Katie Paul in San Francisco. Editing by Kenneth Li and Grant McCool.

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