00:00Today on Forbes, Trump's TikTok deal seems like a repackaged version of the one the Biden White
00:06House rejected. After years of unsuccessful negotiations, TikTok's Chinese parent company,
00:13ByteDance, appears to have finally found a White House it can sweet talk. The tech giant seems
00:19poised to retain control over a number of TikTok's core business functions in the U.S., including
00:25its advertising, e-commerce, and recommendation systems, despite an executive order signed by
00:30Trump saying that, quote, TikTok's United States application will be operated by a newly established
00:36joint venture based in the United States. The Chinese firm will also retain approximately 50%
00:42of the new U.S. TikTok's revenue through a set of revenue-sharing agreements between the new U.S.
00:48TikTok entity and its former parent. Trump's executive order declares that the new TikTok
00:54will have, quote, no operational relationship with ByteDance, despite reporting showing that
01:00the deal will enable ByteDance's continued control over advertising and e-commerce, and despite
01:05revenue-sharing agreements that will allow ByteDance to continue to own, control, and profit from
01:11TikTok's recommendations algorithm. Much of the Trump-TikTok plan recalls a draft agreement that
01:17ByteDance negotiated with the Biden administration in 2022, and which Forbes exclusively reported in
01:232023. In that agreement, too, the Chinese parent company would have retained visibility into,
01:30and in some cases control over, key functions at the new U.S. entity, including decisions about
01:36budgeting, asset sales, debt, and bankruptcy. But even in the draft agreement that the Biden
01:42administration rejected, ByteDance would have ceded some control over TikTok's U.S. advertising and
01:47e-commerce arms to the new U.S. TikTok entity. Known as Project Texas, the earlier ByteDance proposal
01:54centered around the creation of a new U.S. legal entity known as TikTok U.S. Data Services, or USDS.
02:02That entity, ByteDance said, would be physically and technologically separated from the rest of TikTok
02:07and ByteDance, and its data would be sequestered away from ByteDance in a U.S. data center managed by
02:13Oracle. It appears that the so-called sale of limited TikTok assets that make up the proposed
02:20Trump deal may be little more than a sale of TikTok USDS. Project Texas was a centerpiece of
02:27TikTok CEO Shozi Chu's testimony to the House Energy and Commerce Committee in 2023. But the Biden
02:34administration ultimately didn't buy it. A senior Biden administration official told Congress nearly a
02:39year after Chu's testimony that the proposal, quote, would still allow TikTok's algorithm, source code,
02:46and software development to remain in key measures in China, and it would allow Chinese employees and ByteDance
02:52employees to continue to have influence over TikTok's operations. Congress ultimately agreed.
02:59Nearly a month after the official's testimony, it passed a law requiring TikTok to be sold or banned.
03:05The law said specifically that a new post-sale TikTok could not have any, quote, operational
03:11relationship with ByteDance, a reference to, and rejection of, Project Texas's premise.
03:18The primary differences between Project Texas and Trump's sale may be semantic. Since the law's
03:24passage, lobbyists at ByteDance and its allies have had more than a year to repackage the proposal's
03:30terms as a, quote, sale that might meet the letter, if not the intent, of Congress's law.
03:37Casting the arrangement as a, quote, sale of U.S. TikTok rather than a spinoff or a limited set of
03:42TikTok's U.S. functions gives the impression of a more comprehensive deal than the actual reported
03:48contract terms may deserve. ByteDance's continued control of advertising on TikTok could be particularly
03:55concerning from a national security perspective. A Reuters report published in late September said
04:00that a, quote, division that will continue to be wholly owned by ByteDance will control U.S. TikTok's
04:06revenue-generating business operations such as e-commerce and advertising. In 2023, Forbes reported
04:12that Chinese state media organizations had run ads on TikTok reaching millions of Europeans with CCP
04:19propaganda. If ByteDance does retain control over TikTok's U.S. advertising, it might use that control
04:25to serve CCP propaganda to U.S. TikTok users, too. For full coverage, check out Emily Baker White's piece
04:33on Forbes.com. This is Kieran Meadows from Forbes. Thanks for tuning in.
04:49Thanks for listening.
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