President Trump told reporters on AirForce One that he could use "emergency economic powers or an executive order" to ban TikTok from the US. The decision continues President Trump's antagonism with China. Other instances included raising tariffs which sparked the trade war, putting restrictions on companies like Huawei and ZTE and blaming it for the coronavirus.
Earlier, there were reports that Microsoft (Nasdaq: MSFT) was in talks to buy Tiktok from its parent company, ByteDance, for $50 billion. However, Trump was not clear on whether he would approve of a U.S. company buying TikTok. Bloomberg also reported that Trump was considering an order that would force ByteDance to divest its ownership of the app. On Monday, Microsoft confirmed that talks are in place and may reach a deal in September.
TikTok's Growth
TikTok has been remarkably successful and upended the social media landscape. It's similar to Vine in which people made short videos but that app was acquired by Twitter (Nasdaq: TWTR) and shut down in a short amount of time due to the company's cost-cutting focus. With TikTok's rise that seems like a poor decision as TikTok is now worth almost twice as much as Twitter.
TikTok was released in China in 2016 but became available in the U.S. in 2018 after merging with Musical.ly. Users upload short dance, lip-sync, comedy, and other types of videos that are under a minute long. The app's algorithm spits out recommendations based on what videos a user watches and engages with.
In the last couple of years, it's the most downloaded app on the Apple (NASDAQ: AAPL) app store. It has an estimated 800 million monthly active users. The app is impressive in its rapid growth and its appeal to the younger demographic. Additionally, it is opened an average of 8 times a day by active users, and users spend an average of 45 minutes a day on it.
TikTok's Controversies
However, the company is also controversial with some seeing it as closely tied to the Chinese government. It's already been banned in India. Content that is critical of the Chinese government has already been banned on the app. Companies like Amazon (Nasdaq: AMZN) have banned employees from using the app on work phones or PCs. Presidential candidate Joe Biden also told staffers to delete the app from work and personal devices due to security risks.
Other concerns about the app are that it aggressively mines user data which is more worrisome given its close ties to the Chinese government. Its privacy policy does state that it has the right to share any information with Chinese authorities. Engineers who've looked at the app's source code reveals that it's unusually intrusive in capturing users' hardware information, information about other apps, network-related information, GPS pin coding, and several other unusual features that are remotely configurable. All of this data has nothing to do with the actual, TikTok product.
TikTok has been proactive in trying to alleviate these concerns by headquartering its parent company, ByteDance, outside of China. It also hired a former Disney (NYSE: DIS) executive, Kevin Mayer, to be the CEO of TikTok. It also says that all TikTok data is stored outside of China and won't be shared with Chinese authorities.