TikTok Ban Looms

TikTok is one step closer to a potential nationwide ban in the United States, setting the stage for a high-stakes legal and political battle.

In April, President Joe Biden signed bipartisan legislation that could effectively shut down the social media app in the U.S. unless its Chinese parent company, ByteDance Ltd., relinquishes control. ByteDance has until January 19, 2025, to sell the app to an American buyer, a move the company has firmly opposed.

In response, TikTok and its content creators have filed lawsuits against the federal government in an effort to halt the ban. So far, their efforts have fallen short. On Friday, the U.S. Court of Appeals in the District of Columbia upheld the “divest-or-ban” law, asserting that TikTok's divestiture from ByteDance would allow "new owners to circulate the same mix of content as before without running afoul of the Act." The court further emphasized that the federal government's goal is "ending foreign adversary control, not content censorship."

Now, TikTok plans to escalate the fight to the Supreme Court, but the justices are under no obligation to hear the case.

Why is Congress targeting TikTok?

Lawmakers have raised alarms over TikTok's potential to compromise U.S. national security. Chinese law mandates that companies must share data with the government if requested, sparking fears that TikTok's user information could be exploited. There are also fears that TikTok could be used to manipulate content and influence public opinion in the U.S. This includes the potential for the platform to amplify misinformation, especially during critical events like elections

What is TikTok's response?

TikTok has vigorously pushed back against these accusations. The company argues that the law violates the First Amendment rights of its users and is based on "inaccurate, flawed and hypothetical information"

TikTok has characterized the legislative actions as a form of censorship that would silence the voices of over 170 million American users. The company emphasizes that the ban would devastate many small businesses that rely on the platform for marketing and engagement

“For the first time in history, Congress has enacted a law that subjects a single, named speech platform to a permanent, nationwide ban, and bars every American from participating in a unique online community with more than 1 billion people worldwide,” the company stated.

Can TikTok thrive without U.S. users?

Despite its massive U.S. user base of over 170 million monthly users, TikTok could likely survive a ban. The app is the most downloaded in more than 40 countries, and its global user base exceeds 1 billion. ByteDance also operates a similar app, Douyin, in China with a thriving user base.

However, losing the U.S. market would be a significant blow. The U.S. is the most lucrative market for social media platforms due to its high concentration of major advertisers. A ban could also jeopardize TikTok Shop, the company's fast-growing e-commerce venture in the U.S., which blends online entertainment with impulse buying.

Will ByteDance agree to selling TikTok?

ByteDance has repeatedly stated its resistance to selling TikTok. The app is a highly valuable and rapidly growing asset, central to the company's success. Its algorithms are considered proprietary and integral to ByteDance's overall operations; sources close to the company suggest they would prefer to shut down TikTok in the U.S. rather than divest it without these algorithms, citing the extreme complexity of separating them. Further complicating matters is the Chinese government's publicly stated opposition to any forced sale.

Political factors further complicate the situation. While President-elect Trump initially advocated for a forced sale of TikTok, he later reversed his position. This shift, coupled with his ties to prominent ByteDance investors like Jeff Yass (a major Republican donor with a 7% stake in the company), introduces significant unpredictability to the app's future.

Who might buy TikTok?

While ByteDance has made it clear that it is unwilling to sell TikTok, even if it were to agree, identifying a suitable buyer would be a challenge.

TikTok’s valuation varies dramatically depending on whether its coveted algorithm is included. According to Wedbush Securities analyst Dan Ives, TikTok could be worth as much as $100 billion with the algorithm intact. However, if the algorithm were excluded, the app’s value could drop to between $30 billion and $40 billion. For comparison, Elon Musk paid $44 billion for X (formerly Twitter) in 2022.

Potential buyers like Meta (Instagram’s parent company) or Alphabet (Google’s parent company) might seem like logical candidates, given their dominance in the tech space. However, both companies are already under intense regulatory scrutiny for monopolistic practices, making their involvement in a deal highly unlikely.

Oracle, which currently partners with TikTok to store U.S. user data, has previously expressed interest in purchasing the app. Yet with $76 billion of net debt on its books, Oracle would likely need substantial external financial support to afford such a deal.

Who stands to benefit from TikTok's ban?

If TikTok is banned or mishandled during a sale, competitors stand to benefit.

Meta's Instagram, with its TikTok rival feature Reels, is well-positioned to absorb displaced users. In fact, Trump has expressed concern that forcing TikTok's sale would unfairly benefit Meta. Notably, Trump's relationship with Meta CEO Mark Zuckerberg has appeared to improve in recent months, with the two dining together at Mar-a-Lago over Thanksgiving.

YouTube, owned by Alphabet, could also gain users and advertisers through its TikTok-like feature, YouTube Shorts. Shares of both Meta and Alphabet surged after the House passed the TikTok divestiture bill.

Even X (formerly Twitter) could see an influx of users and ad revenue, though its billionaire owner Elon Musk has spoken out against banning TikTok.

How does politics shape TikTok's fate?

The debate over TikTok has created deep political divisions. Republicans, for instance, are split on the issue. Wealthy Republican donors like Jeff Yass have financial reasons to oppose a ban, while anti-TikTok crusaders like Senator Marco Rubio and FCC Commissioner Brendan Carr have pushed for stricter measures.

TikTok's popularity only adds to the political complexity. With half of the U.S. population using the app — especially the influential Gen Z voting bloc — banning TikTok could alienate voters. Public support for a ban has waned, according to Pew Research Center data, even as political leaders ramp up their rhetoric.

China's response is another wild card. Beijing has warned that forcing a sale could set a dangerous precedent, allowing other nations to target U.S. companies under the guise of national security concerns. The fallout could extend to trade and diplomatic relations between the two superpowers.