ByteDance, the owner of TikTok, may choose to shut down the app rather than sell it if it exhausts all legal options to fight legislation banning the platform from app stores in the US, according to sources familiar with the matter. The company views the algorithms underlying TikTok as integral to its overall operations, making a sale of the app with algorithms highly unlikely.
While TikTok contributes only a small portion of ByteDance's total revenues and daily active users, the parent company is reluctant to sell the app to a potential American buyer. Instead, ByteDance would prefer to shut down TikTok in the US in a worst-case scenario, as this would have a limited impact on its business and allow it to retain control of its core algorithm.
ByteDance has not publicly disclosed its financial performance, but it continues to generate the majority of its revenue from its operations in China, particularly through apps like Douyin, the Chinese counterpart to TikTok. While the US accounted for about 25% of TikTok's overall revenues last year, the company's financials are not widely available, making it difficult to accurately value the app compared to competitors like Meta Platforms (formerly Facebook) and Snap.
TikTok shares the same core algorithms with ByteDance's domestic apps, such as Douyin, and separating these algorithms from TikTok's US assets would be a complex and unlikely option for ByteDance. Additionally, selling TikTok without its algorithms, including its highly valued recommendation system, would be unappealing to potential buyers and could significantly diminish the app's value.
Despite previous attempts by the Trump administration to ban TikTok, ByteDance has faced continued regulatory challenges in the US and other countries. China has indicated its opposition to a forced divestment of TikTok, citing concerns about technology export regulations and the protection of intellectual property.
In light of these challenges, ByteDance may struggle to attract buyers for TikTok's US assets if it chooses to sell the app without its core algorithms. However, the company's significant valuation and backing from prominent investors could provide it with financial stability and flexibility in navigating regulatory pressures and potential legal battles.
