The TikTok paradox of power and precarity
TIKTOK owner ByteDance is at the top of its game with record profits, surpassing even Tencent and Alibaba. But it remains as vulnerable as ever to geopolitical forces, with the fate of TikTok’s US business hanging in the balance.
The paradox around TikTok reflects the broader challenge facing social media giants. Companies that harness data to personalise content have proven to be incredibly lucrative, yet the business model is clouded by the growing distrust around national security and child safety concerns. Throw geopolitics into the mix, and the picture gets even more complicated.
On Sunday (Apr 9), the Financial Times reported that ByteDance posted a record US$25 billion in Ebitda (earnings before interest, tax, depreciation and amortisation) in 2022, up 79 per cent. Its sales had risen 30 per cent to US$85 billion, boosted by increased advertising spend on TikTok and its Chinese equivalent Douyin.
TikTok has over 150 million monthly active users in the US alone; globally, it claimed to hit the one-billion user mark in 2021. A UK study indicates that users aged 15 to 24 spend as much as 57 minutes a day on TikTok.
Despite these successes, the trust and safety concerns around TikTok cast a shadow over the business – most notably with the US threatening to ban TikTok if its Chinese owners do not divest their stake. The app has also been banned on government devices by several countries, such as Australia and Norway.
In the US, fears have surfaced that user data collected by TikTok could be passed to the Chinese government, or that the app’s algorithms could be manipulated for foreign influence operations. China meanwhile has opposed a forced sale of TikTok – putting the company right in the eye of the storm of growing US-China tensions.
Beyond geopolitics, there is also great concern over TikTok’s young users. Earlier this month, the UK’s data watchdog fined TikTok £12.7 million (S$21 million) for failing to gain parental consent to use the data of children under 13. While TikTok does not allow children under 13 to create accounts, about 1.4 million of them were estimated to have used the app in 2020. The app’s uncanny addictiveness is also fuelling concerns over the mental health impact on teenagers.
These issues surfaced at the recent US congressional hearing, where TikTok CEO Chew Shou Zi was grilled for hours. Chew denied that the app shares data with the Chinese government and outlined efforts to improve safety for children. But while calm and eloquent, it appeared that he could not sway hostile lawmakers.
ByteDance is now at a critical juncture, where it will have to carefully navigate geopolitical tensions, and also do more to allay safety concerns. Its ability to do so will determine if the company can continue to grow on the global stage. This could also perhaps serve as a bellwether for other Chinese tech companies seeking to replicate their domestic success internationally.
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