TikTok-Oracle partnership represents Chinese firm’s hard-fought fruit though it has no-pass risks: analysts
Published: Sep 15, 2020 02:06 PM

A TikTok logo. Photo: VCG

TikTok's Chinese owner ByteDance has chosen Oracle Corp as the US partner for its video-sharing app as Washington's deadline banning the app draws near, a move analysts said represents the hard-won efforts of the Chinese company amid a lack of trust between the world's two largest economies.

The deal still needs approval from the US government, and any flip-flop by the Trump administration will add uncertainty and challenges to the deal.

TikTok on Monday said in a statement it had submitted a proposal to the US administration, which "we believe would resolve the administration's security concerns."

"This proposal would enable us to continue supporting our community of 100 million people in the US who love TikTok for the connections and entertainment it offers, as well as the hundreds of thousands of small business owners and creators who rely upon TikTok to grow their livelihoods and build meaningful careers," said the statement.

Separately, Oracle confirmed Monday that it is part of the proposal submitted by ByteDance to the US Treasury Department over the weekend, in which the US software firm "will serve as the trusted technology provider," according to a company statement. 

"Oracle has a 40-year track record providing secure, highly performing technology solutions," the firm said. The Oracle confirmation followed US Treasury Secretary Steven Mnuchin's comments to CNBC that the US government plans to review the deal with Oracle this week. 

Mnuchin confirmed in the interview that the deadline for a TikTok deal was September 20 - not Tuesday as had been widely reported, as Trump threatened last week that TikTok would either be sold or banned in the US by Tuesday.

Neither TikTok nor Oracle would provide details of their deal, but it is widely believed that the technology partnership will help eliminate doubts of the Trump government on TikTok's data handling. The cooperation model is also a common practice adopted by multinational companies in localized operations. 

For example, Apple's iCloud data in China is mainly hosted by a Chinese cloud service company for storage and operation in Southwest China's Guizhou Province. 

Shen Yi, a professor at the School of International Relations and Public Affairs of Fudan University, told the Global Times on Tuesday that the teaming up of Oracle and TikTok represents the hard-won efforts of the Chinese firm amid a lack of trust between China and the US, with worsening bilateral ties in a wide range of areas. 

The deal, however, still faces many uncertainties considering the fickle attitude Trump has adopted on issues related to China. "Now the US presidential election is approaching, so it's hard to say if Trump will again play the China card and scrap the deal," said Shen.

Wang Chao, founder of the Wenyuan Institute for Politics and Economics, a Beijing-based think tank, expressed an optimistic view of the deal, saying "the Trump administration may approve TikTok's proposal excluding algorithm acquisition, as it will not only reduce the US government's data security concerns but also comply with China's latest technology export regulation." 

In addition to pushing TikTok to keep user data in the US, the Trump administration may continue to crack down on TikTok to gain more political benefits in the upcoming US presidential election, Wang said, noting that the US action on TikTok is "rogue politics."

Apart from Oracle, Walmart is still bidding for TikTok even though Microsoft, which joined with the retailer on the bid, is out of the game.

Walmart said in a brief statement on Sunday that the company continues to have an interest in a TikTok investment and continues discussions with ByteDance leadership. "We know that any approved deal must satisfy all regulatory and national security concerns," Walmart said, without revealing details about potential investment.

The company said on August 27 that the way TikTok has integrated e-commerce and advertising capabilities in other markets is a clear benefit. "We believe a potential relationship with TikTok in partnership with Microsoft could add this key functionality and provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising business," it said.

Addressing Walmart's potential role, Wang said that the supermarket chain attaches importance to TikTok's value for its e-commerce transformation so as to compete with Amazon.

In the e-commerce era, which is characterized by short video apps and live-streaming, TikTok has become a new channel for online sales growth. Wang said that domestic e-commerce platform Alibaba signs an advertising and e-commerce contract worth about 20-30 billion yuan ($2.9-4.4 billion) with TikTok's Chinese version Douyin each year.