Oracle-TikTok partnership is by no means a done deal

Despite the air of optimism swirling around Oracle and TikTok’s new partnership, the video-sharing app’s continued presence in the US is far from assured.

The companies announced over the weekend they have received Washington’s tentative blessing for their somewhat convoluted agreement involving stake sales and cloud services. However, there is the not-so-trivial matter of getting the Chinese government on board too.

Under the proposed deal – rumours of which surfaced just over a week ago – TikTok parent ByteDance will create a new entity called TikTok Global, comprising its operations in the US and other markets outside China. TikTok Global will be majority owned by American investors, including Oracle and retail giant Walmart, which together will own 20 percent.

“All the TikTok technology will be in possession of TikTok Global, and comply with US laws and privacy regulations,” said Oracle, in a statement. “Data privacy for 100 million American TikTok users will be quickly established by moving all American data to Oracle’s Generation 2 Cloud data centers, the most secure cloud data centers in the world.”

The proposals seem to have been sufficiently adequate to stave off TikTok’s ban, which was due to come into effect on Sunday. In a brief statement, the US Commerce Department said it has delayed the ban until 27 September, which will give ByteDance a bit more time to firm up its agreement with Oracle.

On the one hand, this is good news for ByteDance for the obvious reason that it faced being booted out of one of the world’s most lucrative markets.

According to estimates from mobile data analytics company App Annie, TikTok averages more than 50 million weekly active users in the US. Between 7 September and 17 September, 154,000-200,000 people downloaded the app per day. However, data shared by Verizon showed that TikTok’s impending ban was having an impact on download numbers. According to the US telco, before the ban was announced in early August, TikTok was averaging 130,555 daily downloads from Apple’s App Store. After the announcement, that figure dropped to 91,447.

On the other hand though, ByteDance will now have to convince the authorities in Beijing to let it store technology developed in China in US-owned data centres, and subject it to US laws and privacy regulations.

The reason the US wanted to ban TikTok was because the government alleged that due to its Chinese ownership, ByteDance could potentially give the Chinese Communist Party access to American users’ personal information, including their location.

Now Beijing is effectively being asked to a swallow a pill that was too bitter for Washington.

“The critical algorithm that is central to ByteDance’s ability to offer superior video recommendations to users will be running in Oracle’s cloud and Oracle will have access to it,” said telecoms analyst Richard Windsor, in a Radio Free Mobile research note.

“If one flips the deal on its head and imagines a situation where a world-leading piece of US software was going to be run on Chinese servers where a Chinese company had full access to it, one can start to see why China might object,” he said.

Indeed, instead of ensuring TikTok’s survival in the US, all Oracle and Walmart might have achieved is giving China an opportunity to accuse the US of rank hypocrisy.