Bytedance

TikTok Considers Changes to Distance App From Chinese Roots — Wall Street Journal

ByteDance Ltd. is considering changing the corporate structure of its popular short-video app TikTok, as it comes under increasing scrutiny in its biggest markets over its Chinese ties.

Senior executives are discussing options such as creating a new management board for TikTok or establishing a headquarters for the app outside of China to distance the app’s operations from China, said a person familiar with the company’s thinking.

TikTok, which has shot to global fame over the last two years thanks to its catchy dancing and lip-syncing videos, is owned by Beijing-based ByteDance, one of the world’s most valuable technology startups. ByteDance, whose secondary shares have valued the firm at $150 billion in recent weeks, counts big-name U.S. investors such as Coatue Management and Sequoia Capital among its backers.

The app has seen a surge in downloads as the coronavirus kept millions of people locked up in their homes and eager for distractions. About 315 million users downloaded TikTok in the first quarter of the year, the most downloads ever for an app in a single quarter, according to research firm Sensor Tower, bringing its total to more than 2.2 billion world-wide.

But as TikTok grows in popularity—and an increasingly assertive Chinese government raises hackles in foreign capitals—regulatory pressure on the app is intensifying.

Officials in several countries have expressed concerns with the large volumes of user data TikTok collects, with some speculating that ByteDance could be compelled to share it with the Chinese government. TikTok has repeatedly denied receiving Chinese government requests for user data and said it wouldn’t respond if asked.

The U.S. State and Defense departments already prohibit employees from downloading TikTok on government devices. On Tuesday, Secretary of State Mike Pompeo hinted at a possible ban for TikTok and other Chinese apps during an interview with Fox News.

In Australia, the chair of a legislative committee looking into foreign interference through social media named TikTok among the platforms that might be called to appear.

“What’s needed is a really clear understanding from the platforms about their approach to privacy and their approach to content moderation. That’s one of the objectives of this inquiry,” Jenny McAllister, the chairwoman of the committee, told an Australian radio station on Monday.

The government in India, one of TikTok’s largest markets, banned the app over cybersecurity concerns following violent clashes along the two countries’ disputed border.

Most recently, TikTok surprised observers by reacting more strongly than Western tech companies to Beijing’s imposition of mainland-style internet controls in Hong Kong.

Where Twitter Inc., TWTR 0.88% Facebook Inc., FB 0.38% and Alphabet Inc.’s Google said they would pause responses to data requests from Hong Kong police, TikTok pulled out of the city entirely—a move some describe as part of the effort to distance the app from China.

“ByteDance is the first of China’s tech giants to make it big outside China, but the company that is the envy of China’s tech world is finding that success has a higher price perhaps than failure,” said Peter Fuhrman, the chairman of investment advisory firm China First Capital.

ByteDance managed to outperform its more established Chinese peers such as Alibaba Group Holding and Tencent Holdings in their quests to go global despite spending less on investments, he added.

ByteDance’s discussions about changing how TikTok is run are still in their early stages, but setting up an independent TikTok management board would allow a degree of autonomy from the parent company, the person familiar with the firm’s thinking said. This person wasn’t aware of any discussions around a corporate spinoff.

TikTok had also been considering opening a new global headquarters as early as December, The Wall Street Journal reported at the time. Singapore, London and Dublin were considered as possible locations. Recent events accelerated such plans, the person said.

TikTok currently doesn’t have a global headquarters. Recently installed Chief Executive Officer Kevin Mayer is based in Los Angeles.

The hiring in May of Mr. Mayer, a longtime Walt Disney Co. executive, put an American face on the Chinese company, whose website lists offices in 11 cities world-wide—none of them in China. The company says it doesn’t allow Chinese moderators to handle TikTok content.

ByteDance nevertheless has a long way to go to convince its critics. Any change to the corporate structure has to be significant enough to separate TikTok from any entanglements with mainland China, and has to cut off mainland Chinese staff from accessing user data, said Fergus Ryan, an analyst at the Australian Strategic Policy Institute. TikTok’s privacy policy says that user data can be accessed by ByteDance and other affiliate companies.

“Will the new structure be designed so as to remove any leverage Beijing can have over it? I find that hard to imagine,” Mr. Ryan said.

https://www.wsj.com/articles/tiktok-considers-changes-to-distance-app-from-chinese-roots-11594300718?mod=hp_lead_pos7

TikTok Searches for Global Headquarters Outside of China — Wall Street Journal

Bytedance Inc. is considering setting up a global headquarters for its hit video-sharing app TikTok outside of China, part of continuing efforts to shake off its Chinese image, people familiar with the company said.

Singapore is one city being considered, the people said. Other possible locations include London and Dublin, with no American cities on the shortlist, one person said. TikTok currently doesn’t have a headquarters, although its most-senior executive is based in Shanghai and its main office, which runs U.S. operations, is in Los Angeles.

Senior executives at Beijing-based Bytedance—a startup valued at $75 billion, which owns numerous apps including TikTok—have been brainstorming ideas to rebrand TikTok as it comes under mounting scrutiny from U.S. lawmakers over national-security concerns. A headquarters outside of China would also bring TikTok closer to growing markets either in Southeast Asia or Europe and the U.S.

Known for its viral short videos of lip-syncing teenagers and funny pet antics, TikTok rose from obscurity to the top of U.S. app-store download charts in early 2019, and has also caught fire elsewhere including India and Japan. Global downloads for TikTok outstripped Facebook Inc. ’s Instagram and Snap Inc. ’s Snapchat in 2019, according to mobile-data aggregator App Annie. It had 665 million smartphone monthly active users world-wide in October, up 80% from a year earlier, App Annie said, with about 20 million of those users in the U.S.

The app’s spectacular rise has attracted attention from American senators, concerned that its Chinese roots could lead to it censoring content to appease Beijing. Bytedance’s 2017 acquisition of the startup Musical.ly, a move key to TikTok’s rapid success because of Musical.ly’s popularity in the U.S., is under review by the Committee on Foreign Investment in the United States for potential national-security risks.

The move to establish a global headquarters outside China has been discussed internally for months, one person said. However, the effort is “only accelerating because of the things happening in the U.S.,” the person added, referring to the recent scrutiny of TikTok there.

In response to questions, a TikTok spokeswoman didn’t directly address the search for a global headquarters, but said its teams around the world have increasingly been given more control over local operations.

“We have been very clear that the best way to compete in markets around the globe is to empower local teams,” she said. “TikTok has steadily built out its management in the countries where it operates.”

Locating TikTok’s headquarters outside China is unlikely to relieve pressures on Bytedance in the short term, said Peter Fuhrman, the Shenzhen-based chairman and founder of investment advisory firm China First Capital.

“That’s like dressing a panda in a business suit. It’s unlikely to fool anyone,” said Mr. Fuhrman, who described the firm as a victim of increased U.S.-China political tensions. “They’ll still be in congressional crosshairs and still subject to the same stringent content rules within China itself.” Bytedance has also faced pressures inside China from authorities seeking to restrict content deemed objectionable to the government.

In Singapore, the company has taken up two floors of prime office space in the city state’s central business district, according to real estate consultancy Savills Singapore. The 64,000-square foot space is in the same development housing investment advisory firm Rothschild & Co., and global banks such as UBS and Deutsche Bank. It first started operations in a WeWork office in downtown Singapore in December 2018.

Singapore is popular among foreign technology companies seeking a base in the region, with its large multilingual tech workforce and strong government support. It is the Asia-Pacific home to Alphabet Inc. ’s Google and Facebook, and Chinese technology giant Alibaba Group Holding Ltd. has a large presence there.

Southeast Asia is a top choice for Chinese companies looking to expand globally because of its cultural similarities, said Patrick Cheung, a founding partner at ZWC Partners and investor in Chinese tech startups.

A search on Bytedance’s hiring website on Dec. 23 showed 68 jobs posted for both Bytedance and TikTok in Singapore, the largest number of open positions for any city outside China. A fifth of those roles involved artificial-intelligence research as TikTok seeks to hire scientists in big data and natural-language processing. Bytedance uses AI to power some of TikTok’s recommendation algorithms. Other positions revolve around hiring staff to set content-moderation rules.

The global headquarters for another Bytedance product, a Slack-like corporate messenger app called Lark, is also in Singapore.

In London, where Bytedance was hiring for 38 positions including investment professionals and business-development staff, the company has made moves to poach talent. In October, TikTok hired Ole Obermann, a music industry veteran and former executive vice president at Warner Music Group, to head up its global music division.

Dublin stands out for pairing a favorable tax environment with a deep talent pool. Ireland’s capital is already the site of Facebook’s largest office outside of Menlo Park, and the European base for companies including Google and Twitter.

Bytedance acquired London-based AI music-composition startup Jukedeck this year. The startup’s founder and chief executive, Ed Newton-Rex, currently heads Bytedance’s new AI lab in Europe and wrote on LinkedIn last week that the team is hiring.

Bytedance launched TikTok in international markets in August 2017, modeling the service after its hit Chinese short-video app Douyin. Three months later, the company purchased Musical.ly, which started in China but grew popular in the U.S. It later merged the two apps.

—Yoko Kubota and Georgia Wells contributed to this article.