ByteDance Prefers TikTok Shutdown in US if Legal Options Fail, Sources Say

TEMPO.CO, Hong Kong - TikTok owner ByteDance would prefer to shut down its loss-making app rather than sell it if the Chinese company exhausts all legal options to fight legislation to ban the platform from app stores in the U.S., four sources said.

The algorithms TikTok relies on for its operations are deemed core to ByteDance's overall operations, which would make a sale of the app with algorithms highly unlikely, said the sources close to the parent.

TikTok accounts for a small share of ByteDance's total revenues and daily active users, so the parent would rather have the app shut down in the U.S. in a worst-case scenario than sell it to a potential American buyer, they said.

A shutdown would have a limited impact on ByteDance's business while the company would not have to give up its core algorithm, said the sources, who declined to be named as they were not authorized to speak to the media.

It said late on Thursday in a statement posted on Toutiao, a media platform it owns, that it had no plan to sell TikTok, in response to an article by The Information saying ByteDance is exploring scenarios for selling TikTok's U.S. business without the algorithm that recommends videos to TikTok users.

In response to a Reuters request for comment, a TikTok spokesperson referred to ByteDance's statement posted on Toutiao.

Morray is CEO of Interlude Studios, which relied on TikTok to launch careers of artists like singer ASTN.

TikTok's CEO Shou Zi Chew said on Wednesday the social media company expects to win a legal challenge to block legislation signed into law by President Joe Biden that he said would ban its popular short video app used by 170 million Americans.

The bill, passed overwhelmingly by the U.S. Senate on Tuesday, is driven by widespread worries among U.S. lawmakers that China could access Americans' data or use the app for surveillance.

Biden's signing sets a Jan. 19 deadline for a sale - one day before his term is poised to expire - but he could extend the deadline by three months if he determines privately owned ByteDance is making progress.

ByteDance does not publicly disclose its financial performance or the financial details of any of its units. The company continues to make most of its money in China, mainly from its other apps such as Douyin, the Chinese equivalent of TikTok, separate sources have said.

The U.S. accounted for about 25% of TikTok's overall revenues last year, said a separate source with direct knowledge.

Reuters interviewed more than half a dozen investment bankers who said it was tough to value how much TikTok is worth compared with like-for-like competitors Meta Platforms' (META.O), opens new tab Facebook and Snap (SNAP.N) as TikTok's financials are not widely available nor easy to access.

ByteDance's 2023 revenues rose to nearly $120 billion in 2023 from $80 billion in 2022, said two of the four sources. TikTok's daily active users in the U.S. also make up just about 5% of ByteDance's DAUs worldwide, said one of the sources.

REUTERS

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