After years of unsuccessful negotiations, TikTok’s Chinese parent company ByteDance appears to have finally found a White House it can sweet talk.
The tech giant seems poised to retain control over a number of TikTok’s core business functions in the U.S., including its advertising, e-commerce, and recommendations systems, despite an executive order signed by Trump saying that “TikTok’s United States application will be operated by a newly established joint venture based in the United States.” The Chinese firm will also retain approximately 50% of the new U.S. TikTok’s revenue, through a set of revenue-sharing agreements between the new U.S. TikTok entity and its former parent.
Trump’s executive order declares that the new TikTok will have “no operational relationship” with ByteDance, despite reporting showing that the deal will enable ByteDance’s continued control over advertising and e-commerce, and despite revenue-sharing agreements that will allow ByteDance to continue to own, control, and profit from TikTok’s recommendations algorithm.
Much of the Trump TikTok plan recalls a draft agreement that ByteDance negotiated with the Biden Administration in 2022 (and which Forbes exclusively reported in 2023). In that agreement, too, the Chinese parent company would’ve retained visibility into — and in some cases, control over — key functions at the new U.S. entity, including decisions about budgeting, asset sales, debt, and bankruptcy. But even in the draft agreement that the Biden Administration rejected, ByteDance would have ceded some control over TikTok’s U.S. advertising and e-commerce arms to the new U.S. TikTok entity.
Known as Project Texas, the earlier ByteDance proposal centered around the creation of a new U.S. legal entity known as TikTok U.S. Data Services (U.S.D.S.). That entity, ByteDance said, would be physically and technologically separated from the rest of TikTok and ByteDance, and its data would be sequestered away from ByteDance in a U.S. data center managed by Oracle. It appears that the “sale” of limited TikTok assets that make up the proposed Trump deal may be little more than a sale of TikTok U.S.D.S.
If ByteDance does retain control over TikTok’s U.S. advertising, it might use that control to serve CCP propaganda to U.S. TikTok users, too.
Project Texas was a centerpiece of TikTok CEO Shou Zi Chew’s testimony to the House Energy and Commerce Committee in 2023 — but the Biden Administration ultimately didn’t buy it. A senior Biden Administration official told Congress nearly a year after Chew’s testimony that the proposal “would still allow TikTok’s algorithm, source code, and software development to remain in key measures in China, and it would allow Chinese employees and ByteDance employees to continue to have influence over TikTok’s operations.”
Congress ultimately agreed. Nearly a month after the official’s testimony, it passed a law requiring TikTok to be sold or banned. The law said specifically that a new, post-sale TikTok could not have any “operational relationship” with ByteDance — a reference to, and rejection of, Project Texas’s premise.
The primary differences between Project Texas and Trump’s sale may be semantic. Since the law’s passage, lobbyists at ByteDance and its allies have had more than a year to repackage the proposal’s terms as a “sale” that might meet the letter, if not the intent, of Congress’s law. Casting the arrangement as a “sale” of U.S. TikTok, rather than a spinoff of a limited set of TikTok’s U.S. functions, gives the impression of a more comprehensive deal than the actual reported contract terms may deserve.
ByteDance’s continued control of advertising on TikTok could be particularly concerning from a national security perspective. A Reuters report published on Friday said that a “division that will continue to be wholly owned by ByteDance will control [U.S. TikTok’s] revenue-generating business operations such as e-commerce and advertising.” In 2023, Forbes reported that Chinese state media organizations had run ads on TikTok reaching millions of Europeans with CCP propaganda. If ByteDance does retain control over TikTok’s U.S. advertising, it might use that control to serve CCP propaganda to U.S. TikTok users, too.
Among the largest questions remaining about Trump’s TikTok deal is whether it will mirror another set of terms from the rejected Biden agreement — ones that would give the U.S. government unprecedented power over the app’s data and decision-making, including veto power over executive hiring, and changes to the app’s privacy and content policies. The White House has said that the deal will not involve a U.S. government taking a “golden share” or equity in the new U.S. entity, but questions remain about whether the deal contains special U.S. government access to data or control over policy.