In the past few hours, a new chapter has been written in the TikTok “saga” in the USA. The Chinese social network has formalized an agreement that profoundly redesigns its presence in the United States, putting an end to a long phase of political and regulatory uncertainty. The company has decided to transfer its US activities to a new joint venture, i.e. a company created and controlled jointly by multiple entities, which will be mostly led by American investors. The goal is to respond to requests from US authorities regarding national security, avoiding a ban on the app and ensuring continuity of service for millions of users. ByteDance, the Chinese company that owns TikTok, does not completely exit the scene, but agrees to reduce its direct control over the US division of TikTok, leaving the governance and most sensitive functions to a US legal structure, with verification mechanisms designed to limit external interference.
TikTok USDS Joint Venture LLC was born: what it means
The agreement, communicated internally by TikTok CEO Shou Zi Chew, involves the creation of TikTok USDS Joint Venture LLC, a new entity that will house all of TikTok’s operations in the United States. A joint venture, in simple terms, is a collaboration agreement between two or more independent companies to achieve a common goal, combining resources, skills and sharing risks and profits. In this case, the majority will be in the hands of American investors: Oracle, Silver Lake and MGX (an Abu Dhabi-based fund), which will collectively hold around 45–50% of the new company. A share exceeding 30% will be owned by affiliates of investors already present in ByteDance, while just under 20% will remain directly with the Chinese parent company.
This shareholding structure is central because it responds to the demands of the US national security law, also confirmed by the Supreme Court, which required ByteDance to cede control of its US activities or face a ban on the app. The rule arises from the fear that sensitive data of American users could be accessed or influenced by foreign actors.
The new joint venture will have direct expertise in at least four critical areas:
- Data protection.
- Algorithm security.
- Content moderation.
- Software warranty.
The algorithm, i.e. the mathematical system that decides which videos to show in each user’s feed, will be «redeveloped» using exclusively US user data. In practice, the recommendation model will be trained and managed separately, to reduce the risk of external manipulation and make the process more transparent for US authorities.
A key role will be played by Oracle, which is not only an investor but also «trusted security partner”. This means that Oracle, at the end of the transaction, will have the task of verifying and certifying compliance with the so-called National Security Terms, a set of technical and organizational obligations agreed with the American government. US user data will be stored in Oracle data centers located in the United States.
TikTok USDS will operate as an independent entity
Operationally, TikTok USDS will operate as an independent entity, with a seven-member American-majority board of directors. TikTok’s global structures will continue to deal with product interoperability, i.e. the ability of different systems to work together, and some commercial activities such as e-commerce, advertising and marketing. This separation serves to maintain a coherent global ecosystem, without giving up local control over the most sensitive functions.
The deal, which is expected to formally close on Jan. 22, values TikTok’s U.S. assets at about $14 billion.
