TIK TOK SALE WILL STRENGTHEN BIG TECH

Of­fload­ing the viral video app’s in­ter­na­tional busi­ness rep­re­sents a dis­as­ter for global com­pe­ti­tion ‘Zhang Yim­ing has clashed with the regime in the past and it would be a stretch to por­tray him as a Com­mu­nist Party stooge’

The Daily Telegraph - Business - - Front Page - ROBIN PAGNAMENTA

It seemed like a fairy-tale story of en­tre­pre­neur­ial flair and riches be­yond your wildest dreams. But fairy tales weren’t meant to end quite like this, and fresh-faced en­trepreneur­s in their 30s are not usu­ally forced into a street fight with the most pow­er­ful man on earth.

When Zhang Yim­ing, a 32-year-old Chi­nese grad­u­ate from Fu­jian, founded TikTok back in 2015, his com­pany ByteDance was just an­other scrappy, small tech­nol­ogy firm in Bei­jing’s bur­geon­ing start-up scene.

By this Jan­uary, how­ever, Zhang’s cre­ation – an ad­dic­tive short video shar­ing app fu­elled by a pow­er­ful AI rec­om­men­da­tion al­go­rithm he had crafted him­self – had mor­phed into a colos­sus that had irked Donald Trump.

Pro­pelled by a swelling army of one bil­lion users hooked on TikTok’s viral for­mula of pranks, dance and lip synch rou­tines, ByteDance had evolved into the world’s most valu­able start-up, worth an es­ti­mated $100bn (£77bn) and net­ting Zhang a $22bn for­tune.

It’s no sur­prise that Zhang had big dreams – plans to grow global rev­enue to over $1bn this year from $200$300m in 2019 and to lav­ish bil­lions of dol­lars on con­tent cre­ation and mar­ket­ing, to turn TikTok into a me­dia pow­er­house.

Now, as Zhang pre­sides over the ac­cel­er­ated carve-up of his em­pire and a forced sale of TikTok to Mi­crosoft amid pres­sure from the US pres­i­dent, those dreams lie in tat­ters.

Per­haps more im­por­tant for ev­ery­one else, Trump’s forced sale of TikTok’s in­ter­na­tional busi­ness, or­dered on July 31, rep­re­sents a dis­as­ter for com­pe­ti­tion in global tech, an in­dus­try that des­per­ately needs more not less of it.

Its big­gest ben­e­fi­cia­ries? Two of the world’s big­gest com­pa­nies, Face­book and Mi­crosoft, whose com­bined mar­ket cap of $2.2 tril­lion is al­ready higher than the GDP of Brazil and equiv­a­lent to the com­bined value of all of Bri­tain’s FTSE 100 com­pa­nies.

Of course, many com­pa­nies could do with a help­ing hand from the US gov­ern­ment, but these two are not among them.

By elim­i­nat­ing a key in­ter­na­tional com­peti­tor and hand­ing it to them on a plate, the move is a gift for Sil­i­con Val­ley’s giants.

As for Zhang, squeezed by the ris­ing geopo­lit­i­cal pres­sures be­tween Wash­ing­ton and Bei­jing, the best he can hope for now is a de­cent price for the as­sets he built and a clean end to the saga that will keep him out of the courts while re­tain­ing his Chi­nese busi­ness and sell­ing off the in­ter­na­tional arm that was most al­lur­ing to in­vestors.

Sino­phobes will point to the fact that many US tech com­pa­nies, in­clud­ing Face­book and Google, are ef­fec­tively locked out of China al­ready, and at ByteDance’s seem­ingly murky data col­lec­tion prac­tices.

But Face­book et al are hardly model cit­i­zens when it comes to the hoover­ing up of per­sonal data. Ei­ther way, the terms of Trump’s ex­ec­u­tive or­der – im­posed one month after his rally in Ok­la­homa was dis­rupted by a band of TikTok teens – nev­er­the­less seem crush­ingly un­fair.

US of­fi­cials may sound off about the need for more com­pe­ti­tion in global tech and haul up the odd chief ex­ec­u­tive be­fore Congress oc­ca­sion­ally for a grilling, but ac­tions speak louder than words.

TikTok’s run­away suc­cess had al­ready turned many in Sil­i­con Val­ley green with envy at the steady flow of ad­ver­tis­ing dol­lars to a Chi­nese com­pany. This move will do lit­tle to al­le­vi­ate the mo­nop­o­lis­tic po­si­tion of the tech giants and more to en­trench their power and dom­i­nance than any taken to check the in­dus­try in the past 10 years.

Mean­while, Zhang, a gen­uine en­tre­pre­neur and in­no­va­tor, is be­ing forced to bin his bold­est am­bi­tions. Build­ing a global ri­val to Face­book is an am­bi­tion many peo­ple would wel­come.

ByteDance had been plan­ning an ini­tial pub­lic of­fer­ing. A big chunk of its pro­jected value was staked on the ex­tra­or­di­nary global growth of TikTok, but any list­ing now will be far less ap­peal­ing with the com­pany be­sieged by geopo­lit­i­cal prob­lems.

More­over, ByteDance is no Huawei – the other Chi­nese com­pany to have emerged as a po­lit­i­cal foot­ball in the geopo­lit­i­cal fight be­tween Wash­ing­ton and Bei­jing.

While Huawei, a com­pany founded in the Eight­ies, has links to the Chi­nese state and mil­i­tary through its founder Ren Zhengfei, a for­mer Red Army of­fi­cer, ByteDance re­tains a very dif­fer­ent pro­file.

Zhang has clashed with the regime in the past and it would be a stretch to por­tray him as a Com­mu­nist Party stooge.

In­stead, a gen­uinely in­no­va­tive and suc­cess­ful Chi­nese start-up, which had grown through its sheer global pop­u­lar­ity among young peo­ple, has been shred­ded in a geopo­lit­i­cal min­cer.

The prob­lem now is that the fate of TikTok and Huawei are un­likely to be the end of the story.

While Mi­crosoft is set to gain a hot so­cial me­dia prop­erty that will al­low it to grab valu­able in­sights from user data, US tech­nol­ogy firms can ex­pect Chi­nese ret­ri­bu­tion too.

Ei­ther way, one thing seems clear. This fairy tale is un­likely to have a happy end­ing.

Donald Trump wears a mask on a tour of a Whirlpool fac­tory in Clyde, Ohio. The US pres­i­dent or­dered the sale of TikTok on July 31

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