ByteDance won't allow TikTok's algorithm to be part of a sale; Microsoft is rejected as suitor

As the deadline for a forced sale or shutdown of the U.S. operations of the TikTok video-sharing app fast approaches, ByteDance is said to have decided its algorithm won't be part of any sale that happens.


Update (September 13, 7:30 p.m. ET): ByteDance rejected Microsoft's offer to ta over the U.S. operations of TikTik, leaving Oracle the sole known bidder. Microsoft confirmed the rejection in a statement posted to its web site. The Wall Street Journal is reporting Oracle will become TikTok's "trusted tech partner" in the U.S., not the outright owner.

September 20, the date by which U.S. President Donald Trump has ordered ByteDance to either sell TikTok  to a U.S. company or see the service banned from the U.S. market, is looming. Today, September 13, The South China Morning Post is reporting (based on an unnamed source that the SCMP says was briefed on the Chinese company's boardroom discussions) that ByteDance has decided TikTok's algorithm won't be included as part of the sale.

So now the question is will a sale still happen by Tuesday, Microsoft's self-imposed deadline for completing the discussions with ByteDance? Will Microsoft and Walmart, Oracle -- with close ties to Trump -- and/or various TikTok investors still see enough value in TikTok to push forward with a purchase? And for how much?

Even before today's report about terms around the algorithm, there were questions whether a sale would happen at all. The Wall Street Journal reported on September 9 that ByteDance was discussing with the U.S. government various possible arrangements that would allow TikTok to avoid a full sale of its U.S. operations. And before that, the Chinese government had put in place steps designed to make a sale to a U.S. company more difficult, if not impossible.

Microsoft and its customer Walmart have not officially said why they're interested in teaming to buy the TikTok video-sharing service. There's been a lot of speculation that Walmart is interested in TikTok for commerce/advertising advantages. Microsoft, many believe, want a piece of TikTok because it would provide the company with a lot of valuable consumer data which Microsoft could use to fuel its AI/big data work. According to one report, Microsoft originally was interested simply in hosting TikTok in Azure in the U.S. when it kicked off talks with ByteDance months ago.

TikTok has shared some information publicly on how its "For You" algorithm works, and detailed some of the signals it uses to recommend what potential users might want to watch next. Everyone on social media has an opinion about whether there's still value in TikTok for potential buyers if the algorithm isn't part of the sale. 

In early August, via a blog post, Microsoft officials said they planned to continue discussions with TikTok's parent company, ByteDance, about taking over parts of TikTok's operations. Microsoft execs said they'd complete the discussions no later than September 15, 2020, and during that time, Microsoft plans to continue discussions with the US government, including President Donald Trump, who has ordered ByteDance to divest itself of its US TikTok operations in the name of security.  

Microsoft doesn't have much of a consumer presence beyond Xbox/gaming at this point, as it has pivoted to become first and foremost an enterprise company under CEO Satya Nadella. There's been speculation that Microsoft could still see value in TikTok by letting it mostly run as an independent entity like it has LinkedIn, which it bought in 2016 for $26.2 billion. While Microsoft officials regularly tout LinkedIn's revenue contribution to the company, in July Microsoft laid off 960 LinkedIn employees.