Tic toc, TikTok.

On August 6, Donald Trump signed an executive order banning access to social media apps TikTok and WeChat from within the United States. The order is to take effect on September 20.

Such actions are not new. On June 29, India banned TikTok and 58 other apps developed by Chinese firms. And for years China has banned access to Google, YouTube, and Facebook. That, however, didn’t deter China from expressing its displeasure at being the target this time around. PYMTS.com reported,

Chinese state-run media has likened news of a potential TikTok sale to “open robbery” and branded the U.S. as a “rogue country.” China Daily, as cited by CNBC, has said there are “plenty of options” to respond to what it said is a “planned smash and grab” by the U.S.

Why the sudden concerns about TikTok and WeChat?

In a recent NPR interview, Hong Kong-based CNN senior producer James Griffiths, author of The Great Firewall Of China: How To Build And Control An Alternative Version Of The Internet, explained the rationale this way:

… there does seem to be some evidence that both of these apps gather a lot and lot of data on users—you know, not necessarily any more than other social media apps on peoples’ phones gather, but that is a lot of data … And then the argument is that as a Chinese company, there are obligations under Chinese law … also, there is a kind of extralegal obligations [sic] … pressure that Beijing can bring on these companies if it wants access to that data. And so Washington has argued that given that these companies have all this data, and China can in theory access it, that might present a national security risk if users such as … government employees or families of government employees are using these apps.

In an opinion piece for the New York Times, Tufts University assistant professor of cybersecurity policy Dr. Josephine Wolff validated security concerns—to a point:

No one knows better than the United States government that the data kept within its borders is highly vulnerable to Chinese cyberespionage. In 2015, Chinese hackers stole personal information belonging to more than 21 million people from the federal government’s Office of Personnel Management. In 2017, members of the Chinese military managed to steal records belonging to 145 million Americans from the U.S. credit bureau Equifax, according to charges filed by the Department of Justice earlier this year.

When the Department of Defense banned TikTok from government-issued smartphones, Wolff continued, that made sense. However, she argued,

… for the government to expand that ban to the phones of civilians in the United States, it needs to show some clearer indication that the app poses a real risk to its users. Otherwise, this just looks like an anti-competitive decision made to disadvantage a Chinese tech firm in the name of strengthening security … a retaliatory jab in the ongoing tensions between China and the United States.

(In the interest of fairness, I should reiterate that Wolff’s is an opinion piece, and point out that Mr. Trump and the Times editorial board are not exactly known for their mutual trust and respect.)

TikTok demographics

The executive order may not sit well with younger Americans, who make up TikTok’s sweet spot. The app boasted over 123 million U.S. users at the end 2019, Brandtastic reports. Worldwide, 26 percent of TikTok users are between 18 and 24, and half are under 34. Sixty percent are female and—not that you couldn’t have done the math in your head—40 percent are male.

It will be interesting to see if the TikTok order affects voting in November. While I doubt that it will, the political clout of the U.S. TikTok generation is indisputably on the rise. According to the U.S. Census Bureau:

Among 18- to 29-year-olds, voter turnout went from 20 percent in 2014 to 36 percent in 2018, the largest percentage point increase for any age group—a 79 percent jump.

Meanwhile, the order has sent U.S.-based TikTok content creators scrambling. TikTok poster Morgan Eckroth, who has racked up nearly four million followers, told ABC News, “I think it’s a big wake-up call for creators who haven’t necessarily diversified their platform usage.”

Yet TikTok’s days may not be numbered.

Facebook has launched its would-be answer to TikTok in the form of Instagram Reels. “Would-be,” because knocking of TikTok is by no means a cinch. Digital Trends noted:

According to a survey of influencers conducted by marketing agency Fanbytes, 75% of TikTok creators polled said they would not move their content to Instagram Reels, saying that Reels is essentially a clone of TikTok. Digital Trends spoke with half a dozen creators last week and received similar feedback. Creators said TikTok has preferable algorithms, as well as the coveted “For You” page, where content has the ability to grab more eyes, go viral, and grow audiences exponentially.

The timing of the launch is fortuitous. Development obviously began well before the executive order. But Instagram Reels won’t necessarily inherit a vacuum to fill. Microsoft is looking into purchasing TikTok’s U.S. operations on condition of its severing data-sharing ties with Chinese parent company ByteDance. The dollar amount of the potential transaction, which Mr. Trump said he would support, is yet to be determined, however, Forbes’s Trefis Team puts the number at “about $20 billion.”

Microsoft’s interest in TikTok is not difficult to fathom. Per Forbes,

Although TikTok has not yet started to meaningfully monetize its users (we estimate average revenue per user to be roughly $1 per quarter, versus about $33 for Facebook), it certainly has a lot of potential. TikTok users appear highly engaged, spending over 50 minutes on the app per day. That’s more time than Facebook and Snapchat users, who spend between 30 to 40 minutes. TikTok’s demographic, which is significantly skewed towards teens and young adults, could also prove valuable to marketers.

Mr. Trump has suggested that, if the sale goes through, the United States should receive a commission. While that’s not necessarily impossible, CNN Business and other media have pointed out that there’s no legal basis or precedent for that.

Microsoft has until September 15 to strike a deal. The clock is tiktokking.

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