TikTok’s true value

AS TIKTOK’S legal options in the US dwindle, the divest-or-ban deadline for its parent company ByteDance looms ever larger. Despite this, some observers insist that money will find a way. The business is too valuable for TikTok to simply vanish from US app stores overnight on Jan 19, surely.

Someone will buy TikTok, resolve the app’s national security risks and stave off its disappearance, is the belief. At least four deep-pocketed individuals have expressed their interest in the app, to date. President-elect Donald Trump might intervene, but to speculate on his decision-making is to court insanity, so let’s not for now.

Whether or not a sale happens will be illuminating, but for different reasons.

If someone buys TikTok lock, stock and algorithm, you will get an interesting numerical answer to the valuation question from what they paid, simple. Wedbush Securities analyst Dan Ives has estimated the app’s price tag at US$100 billion.

Without its legendarily addictive algorithm, TikTok will only be worth US$30 billion to US$40 billion, Ives believes. Any buyer would essentially be paying for its user data, as well as product operations and management, The Guardian reported sources as saying in April.

To wit, there is at least one sufficiently motivated buyer for a TikTok sans algorithm out there – former US Treasury secretary Steve Mnuchin has said that he believes the code could be “rebuilt” under US leadership if he buys it.

Insiders say that selling TikTok without its algorithm would be as legally complex and unworkable as selling the company with it, but all that is for sufficiently motivated lawyers to sort out.

With or without the algorithm, any resulting price tag for TikTok will provide interesting context for the US$300 billion that ByteDance ostensibly values itself at based on its latest share buyback offer, according to a Wall Street Journal report in November.

For now, China “firmly opposes” any forced sale of TikTok. People act like that this sort of posturing is set in stone, but really, all that is also for sufficiently motivated existing investors to figure out. ByteDance is backed by bold-faced names such as SoftBank, Sequoia Capital and Carlyle Group.

By not selling or reaching any other acceptable accommodation, ByteDance will have to walk away from TikTok’s 170 million users in the US and some very tantalising growth. TikTok’s US revenue hit a record US$16 billion last year, according to the Financial Times.

The withering of the US market will degrade the TikTok user experience elsewhere too, given the pervasive reach of American celebrity and pop culture that the platform stands to lose. The app already faces regulatory pushback and scrutiny in various countries and is banned in India.

Of course, ByteDance can technically afford to lose all of this; China makes up the bulk of its revenue. Even so, it didn’t become the most valuable private company in the world by being content with its domestic market.

If no terms can be reached despite all the money at stake and all the sufficiently motivated people involved, this outcome will tell us plenty too. It will give us an indication of the other competing motivations at play and what TikTok’s intangible worth to Beijing or ByteDance actually is. The most revealing answer of all, it turns out, has no number.