Oracle & TikTok – Peak fudge.

ByteDance is playing a dangerous game

• TikTok’s deal with Oracle may not satisfy the concerns of the US administration meaning that the service ends up being blocked presenting an open goal to both Snap and Facebook.
• Oracle and ByteDance have announced a “technical partnership” that does not involve a full sale but where Oracle will manage and run all of the server-side activities that are required for the service to function.
• It will be Oracle’s job to ensure that the national security concerns of the US administration are met which is going to be tricky because I am not convinced that a partnership approach will be able to do that.
  • First, ownership: The US administration has called for a full sale of TikTok’s US operation and this is clearly not that.
  • Instead, a partnership implies that Oracle and some other investors will own a portion of TikTok USA but is unclear how much and who will have operational control.
  • However, I think that this is the concern that is most easily met.
  • This is because I don’t think the US administration cares that much if ByteDance has an economic interest in TikTok USA.
  • I think it objects to it having control of the company and access to the data which may end up in China.
  • It is this latter concern that is going to be the hardest to fix (see below).
  • Second, algorithms: This, I suspect will be the main sticking point.
  • It is not clear whether Oracle will have source code access to the algorithm because if it does not it will merely be the custodian of a locked box.
  • This is unlikely to satisfy the concerns of the US administration as Oracle will have no visibility on the data and what is happening to it.
  • It may even be difficult to know for sure whether it is being exported to China.
  • I suspect that access to the algorithm was the main sticking point with Microsoft which knows a thing or two about AI and is fully aware of just how crucial this piece is (see here).
  • I suspect that it was Microsoft’s instance on source code and algorithm access that cause ByteDance to reject its offer.
• The problem with this is that in the US administration’s eyes, Oracle not having access to the source code so that that can ensure that the data requirements are being met could well be unacceptable.
• Instead, it looks like ByteDance is relying on Larry Ellison’s public support for Mr Trump and some other minor concessions being enough to get the deal through.
• The real problem for ByteDance is that a deal that is acceptable to the US and unlikely to be acceptable to China and vice versa making a ban of TikTok in the USA more likely.
• The example of India demonstrates that users could quite quickly move over to rival services should TikTok no longer be available.
• There are no shortages of innovative apps waiting in the wings to fill any gaps left by TikTok should ByteDance fail to prevent a ban.
• Instagram and Snap are two that leap immediately to mind but there is no shortage of others.