TikTok's new U.S. entity would lease its algorithm from Chinese owner ByteDance under the terms of a proposed deal between the U.S. and China, a senior White House official tells Axios.
Why it matters: There had been some talk that ByteDance would be required to sell the algorithm in order to satisfy a 2024 law that demands TikTok be controlled by Americans or face a ban.
A pure sale, however, wouldn't allow ByteDance to continue operating TikTok in countries outside the U.S., which it plans to do.
- President Trump is expected to sign an executive order later this week to approve the proposed deal.
Zoom in: The current plan would be for ByteDance to create a duplicate copy of the TikTok algorithm, which then would be leased to a new joint venture controlled by a U.S. investor group led by Andreessen Horowitz, Silver Lake, and Oracle.
- Oracle then would verify the retraining of the algorithm and protect U.S. user data.
- U.S. users wouldn't need to re-download the app, which would continue to work with TikTok outside the country.
- The White House official says that the Chinese government approved those terms during a bilateral meeting last week in Madrid.
Between the lines: Some in Congress may object to the lease, given that the legislative language prohibited "cooperation with respect to the operation of a content recommendation algorithm."
- Expect critics to focus on "cooperation" while proponents focus on "operation of."
The intrigue: Several existing ByteDance investors remain in the dark, and even some sources close to the deal are unsure about all the specifics.
- The United States government would not have a board seat or equity stake in TikTok U.S., although both were discussed at one point. The new board would make final determinations on TikTok U.S. management, and would consist of new investors, existing ByteDance investors, and one ByteDance representative.
- Trump said in a Fox News interview aired Sunday that the investor group is expected to include Michael Dell, Lachlan Murdoch and Rupert Murdoch. Axios is told Trump was using shorthand for a firm affiliated with Dell, BDT & MSD Partners, and the Murdoch-controlled Fox Corp.
What to watch: Trump is extending his prior enforcement pause by an additional 120 days to finalize details.
The bottom line: TikTok was supposed to be sold or banned by this past January, but Trump has kicked the can several times. Now he's giving himself another four months to cross the finish line.
- Andreessen Horowitz, Oracle and Silver Lake either declined comment or didn't respond.
Editor's note: This story has been updated with additional detail on Oracle's role.
