As U.S. political opposition hardens to TikTok, the globally popular video app from Beijing-based ByteDance Inc., some inside the company want to find ways to make the business appear to be less Chinese. That’s a smart move, aimed less at critics in Congress and more at two other East Coast power centers: Madison Avenue and Wall Street.
TikTok delivers short, user-generated videos to international audiences. A Chinese version, called Douyin, looks and functions similarly but is focused on domestic users. The company has been reducing the amount of content from China that appears on the broader service, the Wall Street Journal reported Monday.
The idea is to give TikTok a more independent, internationally focused business. Talk of a rebrand comes amid a U.S. foreign-investment review and criticism over the user data that TikTok gathers. Prominent U.S. senators have accused the company of censoring content on behalf of the Chinese government and called for a national security review into its 2017 purchase of social-media company Musical.ly. While founded in Shanghai, Musical.ly had an office in California. It was merged into TikTok in 2018, a move that helped it gain more than 100 million app downloads in the U.S.
One of the senators, Josh Hawley, tweeted after the WSJ report that TikTok “doesn’t need a rebrand, it needs to sever ties with China.” He’s currently the youngest senator, at 39 around a quarter-century older than Tik Tok’s core demographic. Yet he isn’t the target audience for ByteDance’s efforts.
For TikTok to be a true success, it needs to appeal to the likes of Nike, Coca-Cola and McDonald’s. Its advertising business is ready to take off because it has direct access to that all-powerful youth demographic. Yet big corporate names tend to be wary of risking their brands on a new content service. Allegations that TikTok is a tool for Chinese authoritarianism and censorship make it harder for ad execs to sell.
Martin Sorrell, founder of the world’s largest advertising firm, WPP Plc, is among those who see big money to be made from TikTok, especially as an opportunity to reach teenagers, he told Bloomberg. Sorrell also believes ByteDance should “probably not” be subject to a review by the interagency Committee on Foreign Investment in the U.S., which is chaired by the Commerce Department.
With a valuation of $75 billion, ByteDance is the world’s most valuable startup and counts SoftBank Group Corp. and Sequoia Capital among its shareholders, according to CB Insights. For those investors to cash out, ByteDance will need to list on an international bourse — Hong Kong and New York are leading contenders.
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ByteDance executives want to build up its international operations before considering an international public offering, Bloomberg wrote last month, after reports it plans an imminent Hong Kong listing. It has hired chiefs for its businesses in the U.S. and India and plans to expand in Australia and Europe. Doing so would help sell the idea that TikTok is not a Chinese content platform.
That would simplify making TikTok a separate entity, which ByteDance could then list at a lower and more easily digested market valuation. It could also make it easier to keep the core business — including Douyin and news aggregator Toutiao — close to home, remaining under Beijing’s watchful eye.
For such a spinoff to happen, TikTok has to be seen as a viable international company free from censorship and spying. It’s a business case as much as a political one. -Bloomberg
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