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ByteDance says it will not transfer algorithm and technology to Oracle as part of TikTok deal

CNBC logo CNBC 9/21/2020 Arjun Kharpal
  • ByteDance will not transfer algorithms and technologies to Oracle as part of a deal announced over the weekend to keep social media app TikTok operating in the U.S.
  • Oracle will have the "authority to check the source code of TikTok" in the U.S.
  • President Donald Trump said he approved a deal on Saturday that will see the creation of a U.S.-headquartered firm called TikTok Global with Oracle and Walmart taking minority stakes.
a close up of a sign: The logos of the Chinese video portal TikTok and the US software and hardware manufacturer Oracle Corporation can be seen on a smartphone and screen on September 14, 2020 in Berlin, Germany. © Provided by CNBC The logos of the Chinese video portal TikTok and the US software and hardware manufacturer Oracle Corporation can be seen on a smartphone and screen on September 14, 2020 in Berlin, Germany.

GUANGZHOU, China — ByteDance will not transfer algorithms and technologies to Oracle as part of a deal announced over the weekend to keep social media app TikTok operating in the U.S.

President Donald Trump said he approved a deal on Saturday that will see the creation of a U.S.-headquartered firm called TikTok Global with Oracle and Walmart taking minority stakes. Oracle will become TikTok's secure cloud provider and host U.S. user data. 

But the deal does not entail any transfer of algorithms and technologies, according to a statement from ByteDance on Monday. The company said Oracle can instead check the source code. 

"The current plan does not involve the transfer of any algorithms and technologies. Oracle has the authority to check the source code of TikTok USA," ByteDance's statement said, according to a CNBC translation. 

Source code forms the basis for applications and software. Allowing inspections of source code is common practice to address local data security concerns. 


Video: TikTok will partner with Oracle in US, not Microsoft (TODAY)

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TikTok's recommendation algorithm has been a key driver behind its growth, helping to suggest other videos to users and keep them hooked within the app. 

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ByteDance also confirmed that it would do a small round of pre-IPO (initial public offering) financing. TikTok Global will become an 80% holding subsidiary of ByteDance as a result, giving it majority control. As part of the Oracle and Walmart deal, the companies said they would work toward a public listing in the U.S. within a year. 

Over the weekend, Trump said the new TikTok Global will "have nothing to do with any outside land, any outside country, it will have nothing to do with China. It'll be totally secure. That'll be part of the deal." 

Beijing-based ByteDance's majority ownership of TikTok appears to contradict that. But ByteDance is 40% owned by U.S. venture capital firms, so the Trump administration can technically claim TikTok Global is now majority owned by U.S. money.

Last month, as the TikTok deal appeared to be coming to a conclusion, China threw a spanner in the works by updating its list of technologies subject to export restrictions. One of the technologies on the list related to recommendation algorithms. After Beijing made this move, ByteDance said it would comply with the rules

Washington claimed that TikTok represents a national security threat because it collects American users' data which could be accessed by Beijing. TikTok has repeatedly denied this and says it stores the data of Americans in the U.S. with a backup in Singapore. 

In August, Trump issued an executive order that would have banned transactions with ByteDance and effectively shut down TikTok in the U.S. That was set to come into effect on September 20. But the Department of Commerce said in a statement that it has delayed that by a week. 

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