TikTok’s CEO, Shou Zi Chew, ultimately had to defend his platform when he testified before the House Energy and Commerce Committee on March 23, 2023. Unsurprisingly, his testimony is a pivotal moment for the popular social media platform. As it searches for a path through the tricky U.S. regulatory thicket, the platform has ambitions to grow into new markets, too.
In recent years TikTok has come under increasing criticism from U.S. legislators worried that the popular platform is violating user data privacy. Warnings about TikTok date back more than five years. In retaliation, then-President Donald Trump responded by signing an executive order banning the app from appearing on U.S. app stores. Lawmakers concerned that the Communist Chinese government could obtain user data from the new platform’s 200 million American user base. They worried this might result in downright manipulation of their feeds.
As regulatory pressures have mounted, TikTok has tried to placate U.S. officials. The company deserves credit for making moves to rectify these issues. It hopes to take its algorithm and license it to a new, as yet unnamed, U.S. entity that the Trump administration once estimated would be worth $14 billion. While this licensing agreement clears the path for a smoother operating environment in the U.S., it’s equally focused on that here, too. Perhaps most importantly, it allows China to claim the result as a victory, demonstrating its capacity to export technology on its own terms and furthering its successes in broader trade negotiations.
In 2024, Congress passed a law that threatened to ban TikTok unless its parent company, ByteDance, transferred majority ownership and made significant changes to how TikTok operates in the U.S. This new measure marks the latest chapter in the broader saga between the U.S. and China over technology and data security.
ByteDance CEO Shou Zi Chew will play a central role in this new American endeavor. He will play the role of a director in the newly constituted body. This setup represents the best faith effort at this moment to comply with regulatory obligations while trying to uphold an air of business continuity.
Those same issues create enormous operational obstacles for the company. Managing to different U.S. and global algorithms, a bifurcated workforce, and parallel governance structures for different markets complicates matters even further.
“They’ve continued to show growth despite these challenges.” – Chris Stokel-Walker
Operational complexity TikTok US operations may be overstretched. It has to walk the line between regulatory demands and continue pushing the envelope with innovation on its platform.
“Running separate US and global algorithms, split workforces, and parallel governance adds engineering costs, slows innovation, and adds to the operational complexity.” – Charlie Dai
The continuation of TikTok’s success outside of Asian markets has been an increasingly important key to the company’s success. India’s loss in 2020 was an enormous blow to TikTok. Having recently lost its largest market with 200 million users, this was a bitter blow. The Indian government — perhaps feeling emboldened by geopolitical tensions building against China at the time — set its sights on TikTok, banning over 200 apps nationwide.
Even TikTok, currently in the eye of the regulatory hurricane, has not been fully unraveled. This incident is emblematic of larger efforts to police free speech, culture, and influence in the United States. Today the discussion around data security has moved to who should have ultimate power over the growing influence of the platform.
In short, TikTok is throwing everything at the wall to avoid getting banned in the U.S. or anywhere else. It’s currently hampered by increasing mistrust of Chinese technology companies. TikTok’s music licensing deal could set a precedent for other Chinese technology companies looking to establish themselves abroad. This action could greatly influence how they handle these types of scenarios going forward.
As TikTok works to reposition itself in the U.S. market and beyond, it must contend with an environment characterized by increasing mistrust toward Chinese technology firms. The licensing aspect of TikTok’s deal may set a precedent for how other Chinese tech companies seek to expand globally in similar situations.