TikTok-Oracle partnership moves forward for consideration

The proposed partnership between TikTok and Oracle will – if approved by the US authorities – see the creation in the US of a brand new company and 20,000 jobs, it has emerged.

The joint proposal from TikTok’s China-based parent ByteDance and Oracle was made to the US government over the weekend and is designed to appease national security concerns around the data TikTok holds on millions of US citizens and devices.

Under executive orders signed in August by president Trump, the TikTok service, which rocketed to prominence during the Covid-19 pandemic, faces an imminent ban.

On Monday, US treasury secretary Stephen Mnuchin confirmed in an appearance on the CNBC network that the US government will conduct discussions with ByteDance and Oracle in the next few days about the proposals.

“We did get a proposal over the weekend that includes Oracle as the trusted technology partner, with Oracle making many representations for national security issues,” he said. “There’s also a commitment to create TikTok Global as a US-headquartered company with 20,000 new jobs.”

An Oracle spokesperson said: “Oracle confirms secretary Mnuchin’s statement that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider. Oracle has a 40-year track record providing secure, highly performant technology solutions.”

According to the Washington Post, which cited anonymous sources, the proposal will see ByteDance retain formal ownership of TikTok, but outsource its data management and operations in the US to Oracle.

If this is accurate, it means the US government will be required to compromise to some extent, as Trump had urged an outright sale to a US-based company. Microsoft had also been in the running, but withdrew at the weekend.

Oracle first expressed an interest in acquiring TikTok in August, which was met with some surprise as the enterprise software giant has no history in the consumer technology sphere.

Forrester vice-president and principal analyst Jeff Pollard suggested that Oracle was frustrated at being behind its key hyperscale competitors AWS, Microsoft Azure, Alibaba Cloud and Google Cloud in public cloud revenues, and wanted to prove its platform’s “scalability and hip factor”, as demonstrated by its partnership with the pandemic’s other breakout tech star, video-conferencing service Zoom.

Pollard wrote: “Nothing is more hip than TikTok at the moment, and TikTok has 100 million monthly active users in the US, putting a check mark by both of Oracle’s goals. This probably doesn’t buy Oracle much enterprise credibility, but it does buy the company visibility and exposure.”

He suggested it may also give Oracle access to a monetisation stream that its hyperscale competitors also possess in the shape of owned advertising inventory.

But the proposal was not welcomed in all quarters. US senator Josh Hawley, who represents the state of Missouri for the Republican party, urged Mnuchin and the other members of the Committee on Foreign Investment in the US (CFIUS) to reject the proposal, saying that it violated Trump’s executive orders.

“The available evidence compels only one conclusion: ByteDance has no intention whatsoever of relinquishing ultimate control of TikTok,” said Hawley in an open letter. “ByteDance, as TikTok’s parent company, will continue to be subject to Chinese laws that put Americans’ data at risk. That is precisely the problem that the president’s action sought to solve, and it is that same problem that the proposed Oracle partnership leaves fully intact. In short, the proposal violates the president’s executive order.

“CFIUS should promptly reject any Oracle-ByteDance collaboration and send the ball back to ByteDance’s court so that the company can come up with a more acceptable solution. ByteDance can still pursue a full sale of TikTok, its code and its algorithm to a US company, so that the app can be rebuilt from the ground up to remove any trace of CCP [Chinese Communist Party] influence.

“Or perhaps, given constraints imposed by Chinese law, the only feasible way to maintain Americans’ security is to effectively ban the TikTok app in the United States altogether. In any event, an ongoing ‘partnership’ that allows for anything other than the full emancipation of the TikTok software from potential CCP control is completely unacceptable.”

Neal Dennis, a threat intelligence specialist at Cyware, also urged caution. “Absent additional details, it’s difficult to tell just what Oracle’s and Bytedance’s plans really are,” he said. “Oracle as a technology partner might do little to secure the overall app itself.

“Without access to the source code, or at least some ability to include code audits, or the ability to fully moderate and manage actual content on the platform, China will still have a vehicle to push their own media agendas and potential malware.

“Yes, there will be more control on actual user data and how it is secured inside the US, but this seems to have little bite in the overall security of the app. Until more details are made clear, there’s not much more to be said.”