Just in the morning of September 26 Beijing time, U.S. President Trump issued an executive order announcing that the new version of TikTok U.S. operating program complies with relevant U.S. legal requirements and will ensure TikTok continues to operate in the U.S. A joint venture will be responsible for TikTok U.S. data security and content security, U.S. Vice President JD Wans said the joint venture is valued at $14 billion.
It is understood that the joint venture refers to the "TikTok USDS Joint Venture" (TikTok USDS Joint Venture), not the overall business of TikTok in the United States. According to previous reports by Bloomberg, the valuation of TikTok's overall U.S. business is close to $40 billion.
The new operations plan has previously been repeatedly by the U.S. media, but all are local details and are not presented globally.The observer network integrates the presidential order of Trump, Chinese and foreign media reports, and the information obtained by Professor Shenyang of the International Politics Department of the University of Phuket from authoritative sources, in the form of images, exclusively presented the complete TikTok U.S. operations new program.
Observernet
Algorithm controlled by byte + joint ventures responsible for data security
TikTok’s next operating plan to be implemented in the U.S. involves two subjects. On the left side of the figure is the “Bit Bounce TikTok American Company” (BD TikTok US), which is the main operating company in the new scheme, and the scope of business includes commercial and related operating activities (e-commerce, brand advertising, etc.), global interconnection and product and engineering technology support. The subjects are 100% owned by Bit Bounce.
On the right side of the picture is another entity in the two entities: TikTok United States Data Security Joint Venture (TikTok USDS Joint Venture), which was injected into U.S. data security, content security, software security (such as the app’s shelf approval) and related domestic to comply with U.S. legal requirements.
Under the plan, the joint venture will hold 19.9% of the shares by byte jump to comply with U.S. law; byte jump global shareholders total 30.1% of the shares; new investors total 50% of the shares. Byte jump is still the company’s largest single shareholder. The board of directors has set up a total of 7 seats, including byte jump 1 seat, byte jump 2 seats existing global shareholders, new investor 3 seats, plus 1 independent director appointed by the board of directors.
On the algorithmic side, byte jumping continues to own the intellectual property rights of the TikTok algorithm and will authorize the "TikTok US Data Security Joint Venture" to use the relevant intellectual property rights and charge the latter a licensing fee.
ByteDance TikTok USA establishes revenue sharing mechanism with new joint venture
The new operating model is also concerned about how the profits will be distributed in the future.We can refer to the operations of other tech companies to promote the interest distribution pattern of the parties under the new TikTok scheme.
According to Shen Yi, a professor at Fudan University, ByteDance continues to engage in commercial and other related operational activities (such as e-commerce, brand advertising, cross-border business activities, etc.) through TikTok's US subsidiary "Byte TikTok America". These businesses are the main source of income for Douyin and TikTok.
The U.S. joint venture's data security and content security are all costly. data security means a lot of spending involving self-building rooms and cloud services, and this part of the operating costs are very high in the Internet companies with hundreds of millions of users.
At the same time, content security requires hiring a large number of reviewers. According to a 2019 report by The Information, a sizable percentage of ByteDance employees are engaged in content moderation. The new joint venture will be an important expense whether it is self-built or outsourced.
Observers understand that due to the non-profit nature of data security and content security, there will also be a commercially reasonable income sharing arrangement between the two subjects to safeguard the operation of the joint venture.
From the “cloud” to the “cloud”.
This latest scheme is similar to Apple’s “cloud-on-cloud” operations in China. Because TikTok’s data security service provider Oracle is headquartered in Texas, it is also known as “cloud-on-cloud.”
At the press conference of the Madrid talks, the relevant officials of the Chinese National Network Communications Office said that the two sides "solved the issue of TikTok through TikTok U.S. user data and content security business commissioned operations, algorithms and other intellectual property rights licensing, the basic consensus."
Wang Xiaobo, a researcher at China’s International Economic Exchange Center, said that such business models are more common in global technology, entertainment and other industries.For example, in order to meet China’s legal and compliance requirements, Apple has commissioned iCloud services to operate the Chinese market since 2018; Microsoft has commissioned Century Interconnect to operate and sell Microsoft cloud services in China including Azure since 2012; Bolshevik Studios has commissioned Nine Cities and Netway to operate the game “Wonder World” in China; Disney has commissioned Shanghai International Theme Parks and Resorts Management Co., Ltd. to perform the management duties of Shanghai Disney Resorts.
Among them, Apple doesn’t even have a stake in the business entity “Cloud On Guangzhou Technology Limited”, which is a 100% Chinese state-owned enterprise.
The essence of the "trust operations" model is that the local government is limited to the development of foreign multinational companies locally due to security, compliance and other considerations.In the past, more foreign companies had to adopt the "trust operations" model when entering the Chinese market.
Take the automotive industry as an example. Thirty years ago, China adopted a protective policy in the face of powerful foreign car companies, requiring foreign car companies to enter the Chinese market and must jointly invest with Chinese companies. But with the gradual strength of Chinese auto companies, this policy restriction was eventually lifted, and even other countries began to take protectionist measures against China's automotive industry. For example, when BID entered India, it established a local joint venture company, Olectra Greentech, adopting a "delivery operation" model.
Now, with the growth of China's economy and Chinese technology enterprises, it is now the turn of other countries to impose restrictions on Chinese enterprises and require Chinese enterprises to adopt the "entrusted operation" mode.