TikTok’s algorithm to be secured by Oracle under Trump deal
The US president intends to sign an executive order this week to formalise his approval of the transaction, the White House official says
[WASHINGTON] Oracle would provide security and help oversee the re-creation of a new US version of TikTok’s algorithm under a deal taking shape to sell the popular Chinese-owned app to a consortium of American investors, a White House official said, addressing a key concern raised by lawmakers in Washington.
The arrangement, outlined by the official on Monday (Sep 22), seeks to ensure that the American buyers control TikTok’s recommendation software in the US following a divestiture by its Chinese parent, ByteDance. Owners of the US-based TikTok would lease a copy of the algorithm from ByteDance that would then be retrained “from the ground up” with Oracle’s oversight, according to the official.
Data from US users would be stored in a secure cloud managed by Oracle with controls established to keep out foreign adversaries, including China, the official said. Beijing-based ByteDance would not have access to information on TikTok’s US subscribers, nor would it have any control over the algorithm in the US, the official said.
The setup will allow Oracle to see how the algorithm is behaving while the new US TikTok entity operates and controls it, the senior White House official told reporters on Monday.
The official downplayed the complexity of TikTok’s coveted recommendation engine, but it’s precisely that algorithm that has long been a complicating factor for any deal. The US law mandating a TikTok sale forbids ByteDance from any operational role in a new US app, including with the software. Chinese law, meanwhile, bars the export of such sensitive technology.
It’s unclear whether lawmakers who backed a qualified divestiture will accept the algorithm plan and whether the approach to fully disentangle TikTok from ByteDance is technically feasible. Oracle’s past work trying to secure US TikTok data under the companies’ partnership known as Project Texas was undermined by loopholes, part of the reason it was never formally approved by US regulators and adopted as a solution.
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This time, under the deal, Oracle will work in partnership with the US government on a wide range of issues, including algorithm retraining, application development and source code review, the official said. It was not immediately clear what role the government might have in oversight of the app, its algorithm and user data.
Part of Oracle’s role in overseeing the US-based algorithm would be to “ensure improper manipulation is prevented”, the official said, without elaborating.
Details on the security guardrails emerged as US President Donald Trump prepared to seal a long-awaited plan to sell the popular video-sharing platform to a consortium of American buyers. A sale would help Trump fulfil a campaign pledge while also removing a sticking point in US-China relations as the world’s two largest economies work to ease tensions over tariffs and export controls.
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Trump intends to sign an executive order this week to formalise his approval of the transaction, the White House official said, adding that a number of regulatory reviews still need to be cleared on both sides.
Still, Trump expressed confidence last week that all parties were on board. “I had a great call with President Xi and as you know, and approved the TikTok deal, and we are in the process,” he told reporters on Friday, hours after speaking with his Chinese counterpart, Xi Jinping. “We look forward to getting that deal closed.”
While Trump indicated that Xi had given his assent, the Chinese foreign ministry stopped short in a statement on Friday of offering its full endorsement.
“The Chinese government respects the wishes of the company in question, and would be happy to see productive commercial negotiations in keeping with market rules lead to a solution that complies with China’s laws and regulations and takes into account the interests of both sides,” the ministry said.
The signing of the executive order will declare the deal satisfies US national security needs and that it constitutes a “qualified divestiture” under the law, the official said. It will also extend by an additional 120 days from signing the deadline for ByteDance to sell, to allow more time for the deal to close. Trump had signed an order last week extending the deadline by 90 days to mid-December.
The full buyers group has not yet been finalised, the official said. But under the agreement, the new US venture would be majority owned by US investors, with ByteDance’s stake falling below 20 per cent to comply with the law requiring it to relinquish control.
Six of the seven seats on the US-based TikTok’s board would be held by Americans, the official said, without providing names of the directors. ByteDance would hold the final board seat, but it would be excluded from the new company’s security committee.
Trump has also floated the idea of the US receiving what he described last week as “a ‘fee plus’ for just making the deal”. Details of any fee structure, including the percentage the government might take, have not been finalised, the official said. But the new US entity will not have a board member handpicked by the US government, the official said, nor will the US government hold an equity stake in the venture.
Oracle is among the investors in a consortium that also includes Andreessen Horowitz and private equity firm Silver Lake Management, Bloomberg has previously reported. Retraining and securing the algorithm would further expand Oracle’s lucrative relationship with TikTok. The Austin-based company provides cloud services for the app and hosts user data in the US and other countries as part of the multi-billion-dollar Project Texas partnership.
Plans to safeguard the recommendation software and American users’ information take aim at national security concerns shared by many Republicans and Democrats in Congress who passed the law requiring ByteDance to divest or face a US ban. Those lawmakers say China could pressure ByteDance into sharing user data and using the app to disseminate propaganda – claims that the company and authorities in Beijing have repeatedly rejected.
Lawmakers who supported a TikTok ban have promised to scrutinise any algorithm plans. Representative John Moolenaar, the Republican head of the House Select Committee on China, said last week after the framework TikTok deal emerged that he remained concerned it “may involve ongoing reliance by the new TikTok on a ByteDance algorithm and application that could allow continued” control or influence by China’s Communist party. BLOOMBERG
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