ByteDance decided not to transfer algorithms and technologies to Oracle as part of a deal announced over the weekend to keep social media app TikTok operating in the U.S.
The United States President Donald Trump said that he approved a deal on Saturday that will see the creation of a U.S.-headquartered firm called TikTok Global with Oracle and Walmart taking minority stakes. It will make Oracle secure cloud providers of the TikTok and host United States user data.
However, the deal does not include any transfer of algorithms and technologies, according to a statement from ByteDance on Monday. However, Oracle can instead check the source code.
As the source code forms the basis for applications and software and allowing inspections of source code is a common practice to address local data security concerns.
The TikTok’s recommendation algorithm has been a key driver behind its growth, helping to suggest other videos to users and keep them hooked within the app.
It has also been confirmed by the ByteDance that it would do a small round of pre-IPO (initial public offering) financing. It will make TikTok Global an 80% holding subsidiary of ByteDance giving it majority control. Oracle and Walmart deal include working toward a public listing in the U.S. within a year.
Mr. Donald Trump said over the weekend that the new TikTok Global will “have nothing to do with any outside land, any outside country, it will have nothing to do with China. It will be totally secure. That will be part of the deal.
However, the Chinese-based ByteDance’s majority ownership of TikTok appears to contradict that. Whereas ByteDance is 40% owned by U.S. firms therefore Trump administration can technically claim TikTok Global is now majority-owned by U.S. money.
Last month, as the TikTok deal appeared to be coming to a conclusion, China threw a spanner in the works by updating its list of technologies subject to export restrictions. One of the technologies on the list related to recommendation algorithms.
ByteDance said it would comply with the rules after Beijing made this move.
The United States claimed that TikTok represents a national security threat because it collects American users’ data which could be accessed by Beijing. TikTok has repeatedly denied the claim and expressed that it stores the data of Americans in the U.S. with a backup in Singapore.
However. Donald Trump issued an executive order in August that would have banned transactions with ByteDance and effectively shut down TikTok in the U.S. That was set to come into effect on September 20. However, the US Commerce Department in a statement said that it has delayed that by a week.