News Information and Media Site: Byers Market: What's holding up the TikTok sale?

September 2, 2020

By DYLAN BYERS in Los Angeles &

AHIZA GARCÍA-HODGES in San Francisco

Good morning. 📅 Mike Bloomberg will host his annual New Economy Forum on November 16-19, bringing together many of the world's top political and business leaders for a virtual forum held just two weeks after the high-stakes 2020 U.S. election.

📚 What we're reading: David Rubenstein's "How to Lead: Wisdom from the World's Greatest CEOs, Founders, and Game Changers" landed on our doorstep last night. It features interviews with all the usual suspects, and then some.

Join the Market: 🗞️ Newsletter | 🎙️ Podcast

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⏲️ Moving the Market

What's holding up TikTok sale? The all-important algorithm

The TikTok acquisition talks have "hit a snag over the question of whether the app's core algorithms can be included as part of a deal," WSJ's Liza Lin, Aaron Tilley and Georgia Wells report, citing "people familiar with the matter."

• "The algorithms were considered part of the deal negotiations up until Friday, when the Chinese government issued new restrictions on the export of artificial-intelligence technology. ... Now both sides are trying to figure out ... whether Beijing would sign off."

The big picture: TikTok isn't TikTok without its algorithms, which give each user the unique (and addictive) experience that makes the app so desirable to its bidders and the envy of its competitors. So this isn't "a snag" so much as an existential threat to the negotiations.

• "For bidders, the idea of buying TikTok without the algorithms completely changes the outlook on what the companies are bidding for," the WSJ team reports. "A person close to the talks likened TikTok without its algorithms to a fancy car with a cheap engine."

• Eugene Wei, the tech investor, explained the algorithms' significance by channeling Nietzsche: "When you gaze into TikTok, TikTok gazes into you. To see it as merely a novelty meme video app for kids is to miss what is its much greater disruptive potential."

The big question is whether the Microsoft- or Oracle-led coalitions would buy TikTok without the algorithms. They would get TikTok's brand and its 100 million U.S. users, but they wouldn't get the "secret sauce" that makes TikTok successful.

• That could present a challenge for Microsoft or Oracle, because neither one has a social media business. Meanwhile, Facebook, YouTube and Snapchat have all launched new TikTok-like services or features.

What's next: It's possible that the standoff between the U.S. and China could delay the deadline for a TikTok sale past Sept. 15, and perhaps until after the 2020 election. If Joe Biden wins that election, it could reset the terms of the negotiations entirely.

• As Recode's Peter Kafka tweeted, it "seems like the real timetable for TikTok talks starts sometime after Nov. 3."

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🇨🇳 Big in Beijing

What's next for Zhang Yiming?

"The likely sale of TikTok's U.S. operations to a U.S. company will leave a gaping hole at ByteDance. ... But so far, the company has struggled to develop new products that could aspire to TikTok's global popularity," The Information's Yunan and Juro Osawa report.

• "Instead, a slate of apps ByteDance has launched recently, in areas including video games, corporate messaging and online education, have fallen short of the company's own expectations, employees and investors told The Information."

The big picture: "The disappointments underscore the difficulty a tech giant like ByteDance faces in trying to repeat the success of a runaway hit and satisfy the rising expectations of investors, especially as the company envisions an eventual public listing."

🇺🇸 Talk of the Trail 🇺🇸

J.P. Morgan's Marko Kolanovic is making waves on Wall Street after warning investors to "position for rising odds of Trump re-election" due in part to the impact that violent protests could have on voter sentiment. Nate Silver says it's all "nonsense."

• Back in California, Kamala Harris raised $1.25 million for her campaign at a Bay Area fundraiser yesterday, per Recode's Teddy Schleifer. She'll headline a Hollywood fundraiser organized by Ryan Murphy, J.J. Abrams and Lee Daniels tomorrow.

Kirill Kudryavstev/Getty

🌁 Big in the Bay

Facebook vs. Russia, con't.

Facebook says the Russian group that interfered in the 2016 presidential election is once again trying to sow discord by hiring U.S. journalists to contribute to a left-wing news site called Peace Data, the first sign that the Kremlin-backed Internet Research Agency is working to help re-elect President Donald Trump.

• Facebook learned about the effort "through a tip from the FBI" and has has taken down its known affiliated accounts, our colleagues Kevin Collier and Ken Dilanian report.

• Twitter also suspended five accounts related to the news site, calling them "Russian state actors."

The big picture: The FBI's finding "confirms [that] Russian actors are trying to target the 2020 elections and public debate in the U.S.," Nathaniel Gleicher, Facebook's head of cybersecurity policy, says. "The second thing that it confirms is, it's not really working."

• Bonus: The Guardian's Julia Carrie Wong spoke to four freelance journalists who wrote for PeaceData. "I'm a freelance writer," one of them told her. "I'm used to being taken advantage of."

Market Links

• Mark Zuckerberg invests $300m in elections (Axios)

• Jack Dorsey takes action on another Trump tweet (NBC)

• Sundar Pichai raises Google ad prices in UK, Turkey (FT)

• Tim Cook and Pichai unveil a new Covid-tracing tool (Vox)

• Whitney Wolfe Herd preps Bumble for IPO (Bloomberg)

Matt Winkelmeyer/Getty

🎮 Moving Manhattan

John Stankey to sell Xandr, hold video game unit

"AT&T is exploring the potential sale of its digital advertising operations, a sign the telecommunications company is curbing its ambitions to become a force on Madison Avenue," WSJ's Drew FitzGerald and Patience Haggin report.

• The big picture: "After bulking up with large acquisitions, [AT&T] is exploring alternatives for several of its assets to bolster its debt-laden balance sheet." Last week, WSJ reported that the telecom giant is also exploring a sale of "its shrinking DirecTV satellite business."

Meanwhile... AT&T "has removed its Warner Bros. video game business from the list of noncore assets up for sale, deciding it was too valuable to unload," per Bloomberg's Nabila Ahmed and Scott Moritz.

• "The gaming unit ... had attracted interest from several major companies and could have reaped $4 billion. ... But AT&T balked given the business's growth potential."

Saul Loeb/Getty

📰 Moving Midtown

Marc Lacey stock rises at NYT

The conventional wisdom about who might replace Dean Baquet as executive editor of The New York Times "has been upended" following James Bennet's ouster earlier this year and the larger reckoning over diversity (racial, ideological and otherwise) in media, Vanity Fair's Joe Pompeo reports.

• The big picture: Marc Lacey's name "is now being kicked around in a way that it definitely wasn't just a few months ago, when the whole thing still looked like a face-off primarily between [Joe] Kahn and Bennet, with [Cliff] Levy rising up in the wings."

• "There's been a real effort to elevate Marc Lacey," one insider told Pompeo. "Marc Lacey's stock has risen really high," said another. "He was never slotted in, and now all of a sudden he is."

What's next: Nothing soon. "Times executives traditionally step down by the end of their 65th year... Baquet is about to turn 64, and there's a growing sense in the newsroom that he will, and should, stay in charge for as long as possible," Pompeo writes.

• The word from A.G. Sulzberger, the Times' publisher: "All speculation is likely to be inaccurate, because I am in no hurry for the best editor in the business to leave anytime soon."

🍁 What's next: The September Issues. Ahiza reports that magazine stands "will have more Black faces and voices" this month as Vanity Fair, Vogue and others reckon with allegations of racism within their own industry.

See you tomorrow.