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TikTok is at the heart of a wild geopolitical dogfight which means Microsoft might buy it. Here's what's going on.

TikTok is at the heart of a wild geopolitical dogfight which means Microsoft might buy it. Here's what's going on.

Isobel Asher Hamilton,Shona Ghosh

Tolga Akmen/AFP/Getty Images; Clancy Morgan/Business Insider

News broke on Friday that TikTok-owner ByteDance is being pressured by the Trump administration to divest its US business, and Microsoft was in the running to buy it up.
Trump then said on Friday he was banning the app, possibly as soon as Saturday. The ban has yet to materialize.
Trump's comments reportedly halted Microsoft's acquisition talks, but on Sunday Microsoft announced it was resuming discussions with TikTok.
Here's everything we know so far.

TikTok has had a turbulent 72 hours.

The wildly popular short video app has become the subject of increasing criticism in the US due to the fact it is owned by Chinese tech giant ByteDance, a fact which some officials and lawmakers including Secretary of State Mike Pompeo say make it a national security threat.

As US-China relations have deteriorated over the course of 2019 and 2020, TikTok is under mounting scrutiny.

On Friday this pressure erupted, with President Trump telling reporters he would ban the app imminently. His comments coincided with reports that ByteDance was in talks to sell off part of TikTok to interested investors — most prominently Microsoft.

Here is a timeline of what's been going on with TikTok:

For context, TikTok is wildly popular and hit 2 billion downloads in April.

Reuters

TikTok is outperforming Instagram in terms of downloads, and its short-form video clips regularly go viral on rival social networks.

TikTok has 200 million users in the US, but its Chinese roots have made US lawmakers uneasy.

The Committee on Foreign Investment in the United States in late 2019 contacted ByteDance expressing concerns that TikTok posed a threat to US citizens.

In December 2019, the US Army banned personnel from using TikTok. The Navy also told personnel not to install the app on government devices.

The US started signaling in early July that it might ban the TikTok app outright.

When asked by Fox News about a potential ban on July 6, Secretary of State Mike Pompeo said: "We are taking this very seriously and we are certainly looking at it."

He added that US TikTok users should be wary of the app, saying their data could end up "in the hands of the Chinese Communist Party."

In an interview broadcast the following day, Trump said he was considering banning the app.

President Donald Trump. AP Photo/ Evan Vucci

When asked about Pompeo's comments in an interview broadcast Tuesday, July 7, Trump said: "It's something we're looking at."

Trump's reasoning for potentially banning TikTok differed from Pompeo's. Rather than citing national security concerns, Trump suggesting a TikTok ban could be deployed to punish China for the outbreak of the coronavirus.

"Look, what happened with China with this virus, what they've done to this country and to the entire world is disgraceful," Trump said, adding that banning TikTok was "one of many" options he was considering as a way to punish China.

Amid these political rumblings, news emerged Friday that Microsoft might buy parts of TikTok.

The New York Times first reported TikTok was in talks to sell its US business to Microsoft and other US companies because Trump was considering taking action against the company.

According to the Times' sources, the governmental Committee on Foreign Investment in the United States (CFIUS) ordered TikTok's parent company ByteDance to divest the company on national security grounds.

The same day, President Trump told reporters on Air Force One he would ban TikTok in the US within 24 hours.

President Donald Trump boards Air Force One as he departs Washington for travel to Florida at Joint Base Andrews, Maryland, US, July 31, 2020. REUTERS/Tom Brenner

"As far as TikTok is concerned we're banning them from the United States," Trump said, adding that he planned to take action "as soon as Saturday."

It is not clear whether Trump has the authority to ban the app, although he asserted he could do so "with an executive order or that."

TikTok's US office said on Saturday saying it wasn't going anywhere.

In a video by TikTok's US general manager Vanessa Pappas addressed to its US users, she said "we're not planning on going anywhere" and "we're here for the long run."

She said that TikTok is planning on creating 10,000 jobs in the US over the next three years.

On Sunday, Mike Pompeo said the administration would be taking action against TikTok within days.

Peter Summers - WPA Pool/Getty Images

Talking to Fox News, Pompeo said Chinese software companies including TikTok "are feeding data directly to the Chinese Communist Party, their national security apparatus."

"President Trump has said 'enough' and we're going fix it, and so he will take action in the coming days with respect to a broad array of national security risks," said Pompeo.

The Wall Street Journal reported Sunday that Microsoft had put its acquisition talks on hold due to these confusing signals from the government.

Citing people familiar with the matter, the Journal said the talks between Microsoft and ByteDance hit a speed bump following Trump's comments on Air Force One. One source said the comments caught both TikTok and Microsoft completely by surprise, while another said the Trump administration had been intimately involved in discussions between the two companies for weeks.

Microsoft publicly announced on Sunday it was resuming talks to buy parts of TikTok after its CEO spoke personally with Donald Trump.

Microsoft CEO Satya Nadella. REUTERS/Fabrizio Bensch

"Following a conversation between Microsoft CEO Satya Nadella and President Donald J. Trump, Microsoft is prepared to continue discussions to explore a purchase of TikTok in the United States," the company said in a blog post.

Microsoft's blog also said the company is looking to buy up not only TikTok's US business but also in Canada, Australia, and New Zealand.

"Microsoft will move quickly to pursue discussions with TikTok's parent company, ByteDance, in a matter of weeks, and in any event completing these discussions no later than September 15, 2020. During this process, Microsoft looks forward to continuing dialogue with the United States Government, including with the President," it said.

Any potential acquisition will be overseen by the Committee on Foreign Investment in the United States (CFIUS).

It isn't clear what a new Microsoft-owned TikTok would look like, but early indications suggest it's about who owns the data

Microsoft's announcement doesn't explicitly state what a new, Microsoft-owned TikTok across the US, Canada, Australia, and New Zealand might look like. The idea of another hived-off TikTok app that operates only in these markets under Microsoft seems drastic.

One part of the announcement suggests a deal would focus on who owns the data of TikTok users in these markets and where it's stored. As Microsoft wrote: "This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections. The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries."

But it isn't clear how this might impact TikTok in other major markets such as, for example, Europe.

It emerged that Microsoft and TikTok now have 45 days to conclude their talks.

President Donald Trump speaks to reporters as he departs for a trip to Florida from the South Lawn of the White House in Washington, DC, July 31, 2020. Carlos Barria/Reuters

Three sources familiar with the matter told Reuters Trump only gave Microsoft the go-ahead for its acquisition talks with TikTok on condition that it closes the deal in 45 days.

According to Reuters' sources, Trump softened his stance on TikTok following pressure from his advisers and other Republican party members, who said banning TikTok would trigger a wave of legal challenge as well as alienating young voters ahead of November's presidential election.

According to Bloomberg, Microsoft isn't the only company in the running to buy TikTok.

US officials have had talks with at least one other large company apart from Microsoft about potentially acquiring TikTok, a source familiar with the talks told Bloomberg. The source did not say which large company this was.

It's also still possible that rather than sell TikTok, ByteDance might spin the company off entirely.

ByteDance founder Zhang Yiming. VCG/VCG via Getty Images

The South China Morning Post reported Sunday that ByteDance's founder Zhang Yiming as well as its investors are reluctant to sell TikTok, citing a source familiar with the matter.

His preference is instead for a spinoff that would enable TikTok to operate independently, and in the US.

Analysts told Business Insider the potential acquisition was unexpected from Microsoft, but it could be a smart move for the company to break into the social media market.

Microsoft's interest in TikTok was seen by analysts as a departure from its typically enterprise-based business model.

"It's a little bit out of left field, but for Microsoft, the one area where they missed the boat was social media," Wedbush Securities analyst Dan Ives told Business Insider.

Futurum Research analyst Daniel Newman said an acquisition could position Microsoft as a savior for TikTok's predominantly young user base. "The rising generations are very attached to this platform [...] Microsoft has the opportunity to be the hero here," Newman said.