TikTok buyout could cost $100 billion even without its algorithm

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TikTok is facing a nationwide ban in the US, and potentially Europe. A buyout by an American company might be the only way for the popular video app to continue its operations stateside. However, a sale could severely impact the user experience. ByteDance reportedly won’t sell its core algorithm that makes the platform, currently estimated to be worth $100 billion, special.

TikTok buyout won’t include its powerful algorithm

After mulling over it for years, the US government is officially pursuing a nationwide ban on TikTok. President Joe Biden signed the law last month after the bill passed Congress with an overwhelming majority. The new law forces a ban on the app unless its Chinese parent company ByteDance sells it to an American firm or group of investors. It has until January 2025 to decide.

The Justice Department ideally wants ByteDance to sell TikTok’s US arm rather than enforcing a ban on the app. This would ensure continued access to the app for US users while addressing the security concerns. However, the Chinese firm doesn’t want to sell TikTok. It has challenged the law in court, calling it an “unconstitutional” law that violates citizens’ First Amendment rights.

A group of TikTok creators have also filed a similar lawsuit. They all want the court to block the law, allowing the platform to continue operations in the country. It has requested an expedited trial and a ruling by the first week of December. But if the ruling goes against it, ByteDance might have to sell TikTok and make some money off it rather than shutting it down for nothing.

If industry estimates are accurate, it would be no small amount. We might be looking at an outrageous buyout costing a whopping $100 billion. Even then, TikTok might not give away a key element that plays an important role in its success—its algorithm. The platform has a highly sophisticated algorithm that determines what kinds of videos you might want to watch.

A few names have already emerged as potential suitors

Like other video apps, TikTok allows users to follow their favorite creators and watch their videos. They can also search for a specific video or topic. However, the algorithm-powered feed of recommendations is its primary interface. The Chinese government has reportedly blocked ByteDance from including this powerful algorithm in any buyout deal for TikTok in the US.

However, prospective buyers are undeterred by it. Among the names that have emerged as potential suitors is real estate billionaire Frank McCourt. He is currently assembling a group of investors to buy TikTok and putting together their bid for the app. They have yet to formally contact ByteDance for a TikTok buyout. Former Activision CEO Bobby Kotick and former Treasury Secretary Steven Mnuchin are also interested in the app.

“Of course, TikTok isn’t worth as much without the algorithm. I get that. That’s pretty plain,” McCourt said. “But we’re talking about a different design, which requires people to move on from the mindset and the paradigm we’re in now.” McCourt likely believes that he can rebuild the technology and give TikTok users in the US the same experience as before. But the bigger question is whether ByteDance will sell the platform. We might not get answers anytime soon.

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