TikTok's deal with Oracle and Walmart lets it cling on to its most valuable asset — its algorithm

TikTok's deal with Oracle and Walmart lets it cling on to its most valuable asset — its algorithm
TikTok's recommendation algorithm is considered its "secret sauce."Photo by Jens Kalaene/picture alliance via Getty Images
  • ByteDance's deal with Oracle and Walmart means it will retain control of TikTok's algorithms, the company said in a statement on Monday.
  • TikTok's recommendation algorithm is considered by experts to be the company's "secret sauce," and employees have referred to it as a "crown jewel."
  • China blocked ByteDance from selling the algorithm in late August by passing extraordinary new export restrictions.

TikTok's deal with Oracle and Walmart lets it keep control of its algorithm.

In a statement put out on Monday, TikTok's parent company ByteDance described numerous details about its deal with Oracle and Walmart.

In that statement, ByteDance said it won't be handing over any of its underlying technologies or algorithms to Oracle. "The current plan does not involve the transfer of any algorithms and technologies," the company said per CNBC's translation.
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TikTok's recommendation algorithm, which serves up videos it thinks users will like, has been a linchpin in its negotiations. Employees internally have referred to the algorithm as the "crown jewel" of ByteDance's success, and experts consider it to be the company's "secret sauce."

As ByteDance raced to strike a deal with American investors in the wake of Trump's August executive order commanding it to divest its US operations, the Chinese government upturned the negotiations. On August 28, China issued strict new export restrictions on various technologies including recommendation algorithms, temporarily snagging the sale talks.

In a deal announced last week, ByteDance doesn't appear to be selling its TikTok US operation as originally stipulated in Trump's executive order. Instead, it is allowing US firms Oracle and Walmart to buy 20% of the company, which will now be called TikTok Global and headquartered in the US.
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ByteDance also confirmed on Monday that Oracle will be able to audit TikTok's source code and any updates to the app, which was previously reported by Axios on Friday.

"Revealing source codes is a universal solution to data security challenges posed to multinational corporations," TikTok said per TechCrunch's translation. This appears aimed towards mollifying the Trump administration, which maintains it targeted TikTok in the executive order because as a Chinese-owned company it poses a security risk to American users.
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In the same vein, ByteDance confirmed Monday that TikTok Global will seek a US IPO — something Oracle and Walmart touted in their joint statement on the deal on Saturday. ByteDance said the US IPO will "further enhance corporate governance and transparency."

President Trump indicated to reporters on Saturday that he was happy with the deal, saying he had given his "blessing" to the parties involved. The deal still needs to be officially approved by the US and Chinese governments.

In its statement on Monday ByteDance also appeared to contradict two claims made by Trump: that TikTok Global would have "nothing to do with China," and that the deal would include a $5 billion fee for the US government to set up an education fund about America's "real history." ByteDance said it retained majority ownership of TikTok Global, and stated it had never heard about the $5 billion fee.
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