TikTok owner ByteDance would prefer to shut down its loss-making app rather than sell it if the Chinese company exhausts all legal options to fight legislation to ban the platform from app stores in the U.S., four sources said.
The algorithms TikTok relies on for its operations are
deemed core to ByteDance's overall operations, which would make a sale of the
app with algorithms highly unlikely, said the sources close to the parent.
TikTok accounts for a small share of ByteDance's total
revenues and daily active users, so the parent would rather have the app shut
down in the U.S. in a worst-case scenario than sell it to a potential American
buyer, they said.
A shutdown would have a limited impact on ByteDance's
business while the company would not have to give up its core algorithm, said
the sources, who declined to be named as they were not authorized to speak to
the media.
It said late on Thursday in a statement posted on Toutiao, a
media platform it owns, that it had no plan to sell TikTok, in response to an
article by The Information saying ByteDance is exploring scenarios for selling
TikTok's U.S. business without the algorithm that recommends videos to TikTok
users.
In response to a Reuters request for comment, a TikTok
spokesperson referred to ByteDance’s statement posted on Toutiao.
Morray is CEO of Interlude Studios, which relied on TikTok
to launch careers of artists like singer ASTN.
TikTok’s CEO Shou Zi Chew said on Wednesday the social media
company expects to win a legal challenge to block legislation signed into law
by President Joe Biden that he said would ban its popular short video app used
by 170 million Americans.
The bill, passed overwhelmingly by the U.S. Senate on
Tuesday, is driven by widespread worries among U.S. lawmakers that China could
access Americans’ data or use the app for surveillance.
Biden’s signing sets a Jan. 19 deadline for a sale – one day
before his term is poised to expire – but he could extend the deadline by three
months if he determines privately owned ByteDance is making progress.
I’llByteDance does
not publicly disclose its financial performance or the financial details of any
of its units. The company continues to make most of its money in China, mainly
from its other apps such as Douyin, the Chinese equivalent of TikTok, separate
sources have said.
The U.S. accounted for about 25% of TikTok’s overall
revenues last year, said a separate source with direct knowledge.
Reuters interviewed more than half a dozen investment
bankers who said it was tough to value how much TikTok is worth compared with
like-for-like competitors Meta Platforms’ (META.O), opens new tab Facebook and
Snap (SNAP.N) as TikTok’s financials are not widely available nor easy to
access.
ByteDance’s 2023 revenues rose to nearly $120 billion in
2023 from $80 billion in 2022, said two of the four sources. TikTok’s daily
active users in the U.S. also make up just about 5% of ByteDance’s DAUs
worldwide, said one of the sources.
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