The owner of TikTok has selected software giant Oracle to be its technology partner in the US, according to reports, marking the end of a unique deal forced upon by the US government.
Oracle has pipped the most high-profile bidder Microsoft, which released a statement on its blog Sunday (September 13) confirming that its bid to acquire TikTok's US operations from parent ByteDance was rejected.
"ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft," Microsoft said in a statement.
"We are confident our proposal would have been good for TikTok’s users, while protecting national security interests. To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement. We look forward to seeing how the service evolves in these important areas."
Retail conglomerate Walmart had joined Microsoft's bid in August. Oracle's bid is supported by two of ByteDance’s largest backers, Sequoia Capital and General Atlantic.
Details of the Oracle deal are yet to emerge, but it is not expected to be structured as an outright sale of TikTok's US operations, as was first being discussed.
A TikTok spokesperson confirmed to Campaign Asia-Pacific that it has submitted a proposal to the US Treasury Department which it said it believes "would resolve the Administration's security concerns".
"This proposal would enable us to continue supporting our community of 100 million people in the US who love TikTok for connection and entertainment, as well as the hundreds of thousands of small business owners and creators who rely upon TikTok to grow their livelihoods and build meaningful careers," the spokesperson said.
New regulations introduced by the Chinese government may have altered the terms of the deal. In late August, Beijing rolled out new restrictions on the export of artificial intelligence technologies such as voice and text recognition, and those that analyse data to make personalised content recommendations, among other technologies. Businesses that operate technologies covered by the list —such as TikTok—are now required to seek permission from the Ministry of Commerce before transferring overseas. The ministry then has 30 days to decide whether to greenlight the export.
A report over the weekend suggested ByteDance will not sell or transfer the algorithm that powers TikTok in any sale or divestment deal, in order to comply with the new Chinese restrictions. Instead, the technology partner in the US will be required to develop a new algorithm for the short-video app, the report said.
Taking control of TikTok's source code formed a key element of Microsoft's proposal to put in place user-privacy protections for the US operation.
The Oracle deal marks the culmination of a nearly six-week race to salvage TikTok's operations in US, after President Trump signed two executive orders threatening to ban the popular app unless its American operations are sold. In the orders, he cited "national security" concerns related to TikTok's Chinese ownership and its affiliations with the Chinese government. TikTok and parent ByteDance have repeatedly denied sharing data with Beijing.
Given the rapid escalation of events, the date of Trump's deadline is unclear. The Trump administration first set September 15 as the 'D-Day' for TikTok. Then the first executive order set a September 20 date for banning "transactions" with TikTok, and a second executive order a week later seemingly extending a deadline for a TikTok deal to November 12.
TikTok sued the US government in late August, accusing the Trump administration of a "lack of due process" and paying "no attention to facts".
Separately, it emerged over the weekend that ByteDance is planning to rapidly grow its operations in Singapore, which looks set to benefit from a reduced operation in China.
The technology firm is reportedly slated to spend several billion dollars and add hundreds of jobs over the next three years in Singapore, according to a Bloomberg report.
TikTok currently has more than 150 job openings in Singapore covering a range of positions, according to its careers site. It is also reportedly planning to begin moving existing China-based engineers to Singapore this year.
It is said to be growing its data storage operations in Singapore by purchasing a greater volume of cloud-computing servers. TikTok has said it stores user data in the US and Singapore, rather than China.
ByteDance has also reportedly applied for a licence to operate a digital bank in Singapore.
The company would not comment on the Singapore reports.