Introduction
In recent years, the US operations of the video app TikTok have attracted worldwide attention. During the Trump administration, there was a major news story that TikTok would be shutting down its services in the US, but it seems that a resolution is nearing.
However, this series of events has meaning beyond mere "acquisition." Why do Chinese companies leave the US market, and why do transactions that initially appear to be "losses" actually end up being profitable for the Chinese parent companies?
This article will provide a detailed explanation of the truth behind the TikTok controversy and the business strategies behind it.
TikTok acquisition deal finalized: The biggest winner is China's ByteDance!
At first glance, this deal regarding TikTok's US operations might seem like a victory for the US side. However, the reality is a bit more complex. The key question is, "Who benefits the most?"
Details of the transaction
- A consortium of U.S. companies and investors has acquired shares (80%) in TikTok's U.S. subsidiary.
- The acquisition price was $14 billion (approximately 2.1 trillion yen).
- TikTok's algorithm usage rights have been transferred to the US side.
- ByteDance, the Chinese parent company, will continue to hold shares 20%.
Why this deal?
On the surface, it appears that President Trump has made concessions. However, there is actually a strategic reason behind this:
- Avoiding geopolitical risksOperating in the United States has always been unstable due to the political situation. By withdrawing from the United States, the Chinese parent company will be freed from this risk.
- Focus on world dominationThere is room to expand the business in other markets, such as TikTok Shop (retail), Douyin (the Chinese version), and even AI development.
- The actual source of revenue is not the United States.: Of ByteDance's valuation of $330 billion, the contribution of its U.S. operations is relatively small.
One investor even said that "the company's value would increase even more if it were completely separated from its U.S. operations." In other words, a transaction that appears to be a "loss" at first glance is actually strategically sound.
TikTok is more than just a video app! A challenge to expand into multiple industries.
ByteDance (Chinese name: 字節跳動) is not just known for TikTok. The company engages in diversified business activities, including:
ByteDance's three faces
① Social media (social interaction)
TikTok and Douyin are social apps, but they are slightly different from Facebook and Instagram.
The algorithm has a strong "recommendation" function.
We focus on "building social connections."
② E-commerce (retail)
ByteDance is aiming for global success in e-commerce.
TikTok Shop has entered the market in Brazil, France, Germany, and other countries.
In Indonesia, TikTok acquired Tokopedia, gaining control of more than a quarter of the ASEAN e-commerce market.
③ Search + AI
TikTok and Douyin also function as search services.
It provides hints and information that you would have previously searched for on Google.
In the AI field, it ranks first in the industry for Large-Scale Models (LLMs).
Purchased more than 200,000 times the amount of NVIDIA semiconductors.
As part of the group "BATXM"
The three major digital oligopols in China are known as "BAT." Currently, B is shifting from Baidu Group to ByteDance.
(The remaining two are Alibaba and Tencent)
Each company is competing head-on in all fields, including e-commerce, artificial intelligence, and entertainment.
Why was it difficult to expand into the United States?
A strategy to avoid geopolitical instability:
TikTok Shop launched in the US in 2023, three years after Douyin was launched in China. However, US regulations made it difficult to implement the algorithm, so TikTok shifted its strategy to concentrate resources on markets with less friction.
Supplemental information: Global influence and future developments
User scale
- In the US alone, over 117 million people watch TikTok monthly.
- Over 1 billion monthly active users worldwide
- Even though it's banned in India, it's attracting attention due to its vast market.
Source of revenue
- ByteDance's 2024 Global Revenue: $155 billion
- The majority of the profits come from the Chinese domestic version of Douyin.
- Advertising revenue accounts for less than one-third of total sales ($49 billion).
Predictions for future developments
Following the sale of TikTok's US operations, ByteDance has made the following moves:
- Accelerating the deployment of new features in ASEAN and other regions.
- Development of the Chinese AI app "Doubao" is underway.
- Focused investment to conquer the world in the e-commerce sector
Summary
What can we learn from this series of events? It's that it goes beyond the simple framework of "corporate acquisition" and highlights the essence of business strategy.
TikTok's sale of its US operations might appear at first glance to be a "defeat for a Chinese company," but in reality, it was preparation for the next stage.
In the business world, what might seem like a "loss" or a "withdrawal" often becomes a stepping stone for new growth. The key is to decipher the intentions and strategies behind it.
Furthermore, this isn't just about TikTok. Modern businesses need to pursue diversified business strategies rather than relying on a single product or market. Combining multiple value propositions, such as e-commerce, AI, and search capabilities, is what truly enhances competitiveness.
A choice that might seem like a "failure" at first glance could actually be a stepping stone to the next big challenge. The important thing is to understand the strategic intention behind it and have the courage to move on to the next step.
