Contrary to the claims of TikTok itself, a new law does not ban the social media behemoth outright from the country. That’s what lawmakers said was contained in the measure that President Joe Biden signed recently, along with military aid for Israel, Ukraine, and Taiwan.
Rather, the Protecting Americans from Foreign Adversary Controlled Applications Act would ban social media platforms in 270 days to 360 days. But only if they are controlled by a foreign adversary, as defined by either Title X of the United States Code — which specifically designates North Korea, Russia, Iran, and China as “covered nations” — or by the president.
In other words, only if TikTok is owned and operated by ByteDance or any other company based in one of the four “covered nations” will the platform be banned. Practically speaking, ByteDance has nearly a year to sell TikTok to a buyer in literally any of the other 191 countries on Earth.
Except TikTok continues to insist that the PAFACA is a categorical ban.
“Make no mistake — this is a ban: a ban on TikTok and a ban on you and your voice,” said TikTok CEO Shou Chew, who promised to fight the PAFACA in court. “Politicians may say otherwise but don’t get confused. Many who sponsored the bill admit a TikTok ban is the ultimate goal.”
TikTok’s true intentions, of course, are belied by the astounding amount of money ByteDance is leaving on the table rather than comply with the PAFACA, sell the app to a new buyer, and make bank.
Recall that when Elon Musk purchased Twitter, taking the company private in exchange for $44 billion in cash, the social media platform had 229 million monthly active users. In the decade prior to Musk’s acquisition, Twitter reported net losses every year but two, in 2018 and 2019, and annual revenue of just $5 billion.
Compare those metrics to TikTok, which boasts 1.5 billion monthly active users, $16 billion in revenue last year, and an obvious pathway to profitability, with ByteDance reporting an overall net profit of $40 billion last year, up 60% from 2022.
Even if Twitter’s $44 billion price tag was significantly overvalued, it stands to reason that TikTok, which has more than six times as many users and more than three times the revenue, could ask for hundreds of billions, not merely tens of billions.
According to the Wall Street Journal, ByteDance has estimated that TikTok comprises as much as half of the parent company’s total valuation, and back in December, ByteDance began to price share buybacks at $160 per share, or a total TikTok valuation of $268 billion.
“Other investors think ByteDance is worth less,” the Wall Street Journal reports. “In private equity markets where ByteDance shareholders sell their stakes, the prices were lower than $130 a share, according to data from Rainmaker Securities, a private-equity brokerage. That would value the Chinese tech giant at less than $215 billion.”
If TikTok is indeed worth half of ByteDance’s total value, that would conservatively value it at more than $100 billion. And even if ByteDance sold TikTok without its ultra-valuable algorithm, Kevin O’Leary is putting together a bid valuing the platform between $20 billion and $30 billion.
So with this much money waiting to be made, why wouldn’t ByteDance’s shareholders be chomping at the bit to sell?
ByteDance’s founder, Zhang Yiming, owns 20% of the company, with employees owning another quintile. The remaining 60% majority is owned by non-Chinese investors such as the Carlyle Group and Jeff Yass’s Susquehanna International Group, with Americans comprising three of the company’s five board members.
But ByteDance will not sell, passing up on a quarter-trillion dollar payday, because the Chinese Communist Party will not let it.
The CCP has overtly opposed the PAFACA and insinuated it would prevent TikTok’s algorithm from being sold on the grounds of Chinese export control rules. Despite the fact that American users contribute 25% of TikTok’s overall revenue, ByteDance has leaked that it would rather cease American operations entirely than sell TikTok. This is because although the company is technically privately owned under Chinese law, there’s no such thing as an actually private company under Chinese jurisdiction.
Like all Chinese companies, TikTok complies with the 2017 National Security Law that requires firms to “support, assist and cooperate with national intelligence efforts.” Although the company maintains that it doesn’t turn over private user data to the CCP, ByteDance publicly partners with the Chinese Ministry of Public Security. And even without permission from ByteDance, CCP cyber spies — among the best in the world — can easily access user data stored on Chinese soil.
Beyond its use as an espionage tool for the CCP, TikTok’s most pernicious purpose is proven in the fact that China doesn’t allow the app to operate in its own country. A fun house mirror version of TikTok, the app Douyin features a nearly identical user interface but none of the same content. While the TikTok algorithm cleverly oscillates between dumbed-down dances and intentional distortions of current events — consider the emotionally incontinent Westerners who rediscovered Osama bin Laden’s “Letter to America” and regarded it with reverence rather than revulsion — Douyin’s feed censors out and downgrades frivolity and instead promotes educational content.
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And whereas TikTok encourages young Americans to hate their country and stay online all day, Douyin limits young users ingesting a carefully curated stream of patriotic and pedagogic content to just 40 minutes per day.
TikTok’s value to the CCP is then twofold: it both allows the dictatorship to surveil its global enemies as well as brainwash our population into either stupidity or submission. To capitalists, TikTok’s value may be in the hundreds of billions, but to communists, that is priceless.
