Is TikTok a good buy? It depends on what's included

TIKTOK is going to get acquired - or die trying.

The hit video app appears headed for a shotgun wedding, with President Donald Trump having forced its owner, the Chinese tech conglomerate ByteDance, to sell TikTok to an American acquirer or be barred from operating in the country.

On Monday, the president - acting as a combination of investment banker, regulator and backroom Mafioso - said he would approve a bid by Microsoft for TikTok's US operations, provided that both parties meet his as-yet-unspecified demands and a Sept 15 deadline.

There are a million questions still swirling around a possible TikTok-Microsoft deal. But the most glaring question is that nobody I have talked to has figured out exactly what "buying TikTok" will mean, or whether what many experts consider TikTok's golden goose - the complex algorithms that make the app so addictive - would be included in a deal.

A Microsoft spokesperson declined comment. A TikTok spokesperson, Ashley Nash-Hahn, declined to offer details about the parts of TikTok's technology that were and were not up for sale.

"While we do not comment on rumours or speculation, we are confident in the long-term success of TikTok," she said in a statement.

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Some corporate acquisitions are straightforward. In the simplest kind of deal - say, a big restaurant buying a smaller restaurant - the acquirer buys everything on the other company's balance sheet: all its assets and liabilities, including its kitchen equipment, its secret recipes and any real estate it owns. Lawyers and bankers try to place a value on those things and estimate the company's future cash flows. Then they hash out terms, negotiate a price and sign a deal.

A TikTok acquisition is far more complex.

For starters, even though TikTok has gone to great lengths to distance itself from its Chinese parent company, it is still very tightly integrated with ByteDance's Chinese operations.

As The Information recently reported, most of TikTok's core features were developed by ByteDance's Chinese engineers using a suite of shared software tools - known as zhongtai or "central platform" - that is available to all of ByteDance's more than two dozen apps.

And most of the important decisions about TikTok's operations and strategy have been made by executives in China.

Separating TikTok from ByteDance would, by definition, require untangling many of these Chinese connections, which could present problems. Many of TikTok's top US executives, including chief executive Kevin Mayer, are new to the company and still getting up to speed.

And while TikTok does have engineers based in the United States who could theoretically help with the technical untangling, many of the engineers with the deepest knowledge of its systems are presumably Chinese nationals in Beijing.

And what about the algorithm? By all accounts, TikTok's core algorithm - which selects videos for the central feed that users see when they open the app, called the "For You Page" (FYP) - could be the most valuable asset the company owns.

Eugene Wei, a long-time tech executive and blogger, likens TikTok's FYP algorithm to the Sorting Hat from the Harry Potter series - a "rapid, hyper-efficient matchmaker" that analyses users' behaviour and places them into personalised niches, based on their interests.

The FYP algorithm is TikTok's secret sauce, and a big part of what makes it so accurate is ByteDance's global reach. Every swipe, tap and video viewed by TikTok users around the world - billions and billions of data points a day - is fed into giant databases, which are then used to train artificial intelligence (AI) to predict which videos will keep users' attention.

Sometimes, that might mean showing American users videos made in India or China. (I once fell into a delightful rabbit hole of TikTok dances by multigenerational Chinese families.) Other times, it could mean using data from one country's users to inform another country's recommendations. It could even mean using data gleaned from a different ByteDance app - such as Douyin, the Chinese equivalent of TikTok - to inform what TikTok users are shown.

ByteDance considers itself, first and foremost, an AI company. And the nature of building AI is that the more data you have, the better your algorithms generally are. Would an American TikTok algorithm, trained only on American users' data, be less addictive? It is certainly possible.

But even if ByteDance was willing to part with TikTok's algorithms and the machine learning models they rely on - a big if - it is not clear that a US acquirer would be able to recreate TikTok's magic right away.

Karl Higley, a recommender systems engineer who previously worked at Spotify, said that without access to historical data - data about what TikTok's users swiped, tapped and lingered on weeks or months earlier - a new, Americanised TikTok might essentially need to start from scratch.

"In order to personalise the app for existing users, they're going to need historical data for US folks unless they want to wipe the slate clean, which would be a terrible user experience," he said.

US tech giants, of course, are no slouches when it comes to building addictive algorithms. And it is possible that an American-owned TikTok could rebuild the app's core technology without users even noticing a difference. But it is not trivial work, and it could take months or years to do - months or years in which Facebook, Snapchat and other competitors would be nipping at TikTok's heels.

And if users sensed that their algorithm was degrading in the meantime, or showing them fewer interesting videos than it once did, they could be tempted to jump ship.

In addition to recreating TikTok's algorithms, a US acquirer would also need to work quickly to preserve TikTok's other valuable asset: its creator culture. TikTok is home to a large, vibrant community of creative talent, some of whom make a full-time living from the app. Those people are attracted to TikTok partly because the platform gives them a way to reach a mass audience.

But they are also attracted to it because TikTok has cultivated an aura of cool through advertising, striking partnerships with music festivals and other popular events, and hosting exclusive parties for TikTok creators at industry events like VidCon.

Already, Facebook is reportedly trying to poach popular TikTok creators for Instagram Reels, its new TikTok clone, by dangling six-figure deals in front of them. And if TikTok is acquired by Microsoft - a company not historically known for its youth appeal - creators could sense that it is time to move on.

TikTok could try to lower the risk for an acquirer by striking multi-year exclusive deals with its most popular American creators, the way that platforms like YouTube and Twitch have done. It could also accelerate its plans to let popular users earn money from the platform. But without a firm grip on its A-list talent, TikTok's acquirer will not be assured that the platform is not losing its edge.

Hank Green, a YouTube star and chief executive of the education company Complexly, who has more than 600,000 followers on TikTok, said that a TikTok acquisition could make creators more skeptical of the company's motives.

"One of the things about TikTok is they've been able to make lots of changes really fast, and people are open and receptive to that," he said. "If you see that change as coming from outside the ecosystem, that can feel like a foreign change."

Many of the people I spoke to agreed that even with the potential pitfalls and unresolved questions, the opportunity to buy TikTok is a once-in-a-decade deal for the right acquirer. Popular, growing social networks are exceedingly rare, and TikTok has already made itself a fixture of American culture in a way that few other apps ever have.

Connie Chan, a partner at the venture capital firm Andreessen Horowitz, said: "TikTok is compelling, not just because of its large and growing user base, but also because of its platform potential to expand into e-commerce and live-streaming. Video is a fantastic way to sell things and short videos are perfect for product discovery."

Mr Green, the YouTube star, agreed.

"If I had the opportunity to buy TikTok, I'd buy TikTok," he said. "There's so much value on that platform right now that is completely untapped." NYTIMES