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The mounting pressures on TikTok

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For the past 10 years, any regulation of social media companies in the United States has moved at a g
 
November 4 · Issue #411 · View online
The Interface
For the past 10 years, any regulation of social media companies in the United States has moved at a glacial pace. But when it comes to TikTok, the government is moving with unusual speed.
It has been less than two weeks since two senators first asked the director of national intelligence to look into whether TikTok, the looping short-form video app owned by Chinese company ByteDance, poses a security risk to the United States. On Friday, the investigation entered phase two: an inquiry into whether ByteDance might be forced divest Musical.ly, an American app that ByteDance acquired in 2017 for $1 billion and helped form the basis for TikTok.
Greg Roumeliotis, Yingzhi Yang, Echo Wang, and Alexandra Alper had the exclusive at Reuters:
The Committee on Foreign Investment in the United States (CFIUS), which reviews deals by foreign acquirers for potential national security risks, has started to review the Musical.ly deal, the sources said. TikTok did not seek clearance from CFIUS when it acquired Musical.ly, they added, which gives the U.S. security panel scope to investigate it now.
CFIUS is in talks with TikTok about measures it could take to avoid divesting the Musical.ly assets it acquired, the sources said. Details of those talks, referred to by CFIUS as mitigation, could not be learned. The specific concerns that CFIUS has could also not be learned.
(I’m told that a formal inquiry has not been opened, but that CFIUS has begun asking questions.)
Meanwhile, on Tuesday, Congress will hold a hearing on privacy, security, and censorship concerns created by Chinese apps. Sen. Josh Hawley (R-MO) invited TikTok, but the company elected not to participate, Drew Harwell and Tony Romm report at the Washington Post. (Apple declined to participate as well, for what it’s worth.) “We appreciate Sen. Hawley’s invitation. Unfortunately, on short notice we were unable to provide a witness who would be able to contribute to a substantive discussion,” the company told my colleague Makena Kelly.
How serious is this CFIUS investigation? The Grindr case from earlier this year may offer a useful precedent. The popular gay hookup app had been acquired in 2016 by Beijing Kunlun Tech Co Ltd. Because of its nature, the app obtained some of the most sensitive user data imaginable, from real-time location to nude photos and videos. Some of those users worked in the US government and the military, creating the possibility that the app could reveal troop movements or offer useful material for blackmail. CFIUS ordered Kunlun to sell the app — a sale that appears to still be pending.
At first blush, data shared in TikTok would appear to be far less sensitive than data shared in Grindr. But as Chinese censorship demands roil more American companies — and given Congressional Republicans’ hair trigger for anything resembling the stifling of conservative speech — it’s easy to imagine the case for divestment that CFIUS could build here.
And as regulatory pressure on TikTok grows, so too does competitive pressure. Jack Nicas rounded up some of the threats over the weekend in the New York Times, including some comments from Mark Zuckerberg’s leaked audio that we broke last month. Those threats include: Facebook’s clone, Lasso; a forthcoming Instagram feature called Clips; and an app called Firework that Google considered buying. I’d also add an app called Triller, which raised $28 million last month and says it already has 13 million users; and the Chinese app VMate, which Alibaba sunk $100 million into earlier this year.
The competitive threat is especially interesting when you consider that TikTok’s user retention — the percentage of users who return to the app every week — still falls short of Facebook or Instagram. The number of new users has declined since ByteDance ratcheted down the amount of money it spent advertising to new users on other social platforms. And the basic idea of an entertainment app powered by machine learning that shows users a bunch of fun videos punctuated by ads may ultimately be easy to clone — which is why you see so much venture capital flooding into rivals at the moment.
A final growing threat to TikTok is what you might call narrative risk — or, the likelihood that the company won’t be able to overcome shifting public opinion about Chinese-owned apps in America. ByteDance CEO Zhang Yiming rarely gives interviews, and to my knowledge has never spoken on the record to an American journalist about TikTok. Nor has Vanessa Pappas, the company’s well respected US general manager, who joined the company in February after a long career at YouTube. To date, TikTok has been loath to speak up for itself — and it’s hard to win a public-relations battle from the sidelines.
ByteDance has begun to deploy a phalanx of spokespeople to push back on allegations of censorship and promote a more positive view of the company. Last month, it also announced it had hired an independent American law firm to review its content moderation practices. It also hired an American firm to audit its security practices, which found that TikTok would have been unable to transmit user data to China during the period it surveyed. And the company is reportedly making plans to join the industrywide Global Industry Forum to Counter Terrorism,
Still, it’s not too early to ask whether TikTok can survive outside the arms of its wealthy benefactor. The app grew to prominence in no small part because ByteDance spent more than $1 billion advertising it. TikTok has now been installed more than 1.2 billion times around the world, and it’s likely that only a giant would be able to afford it, if CFIUS makes ByteDance sell it. But such an acquisition would put TikTok on a collision course with Congress over its other pet issue of the moment: antitrust.
No matter what happens to TikTok, ByteDance will likely be fine. The company is valued at $78 billion, and just put out its first smartphone in China. (It comes preloaded with TikTok’s Chinese-language sibling, Douyin.) Maybe ByteDance will go to war to protect its American investment — the most successful American consumer internet product ever created by a Chinese company.
But as pressure escalates on TikTok, the company may find that it has few levers of support to pull on. Putting its executives forward outside the friendly confines of a press release would be a start. But so long as the Chinese government is looming behind the company’s business practices, TikTok faces a credibility gap — and it’s not clear what, if anything, can close it.

The Ratio
Today in news that could affect public perception of the big tech platforms.
🔼 Trending up: Apple pledged $2.5 billion to address California’s affordable housing crisis. The move follows similar pledges from Facebook, Google and Microsoft, earlier this year. If you like these moves, you might also like … taxes.
🔽 Trending down: A Chinese propaganda video about the Hong Kong protests was widely viewed, seemingly due to promotion from YouTube’s algorithms. The video has half a million views, and argues that US agents are stirring up protests in Hong Kong.
🔽 Trending down: GitHub has been trying to quell employee anger over its renewed contract with the US Immigration and Customs Enforcement Agency. Employees aren’t buying the company’s rationale, and some are beginning to quit.
Governing
Democratic strategists have set up a $75 million digital campaign to counter Trump. Former Obama campaign manager David Plouffe is advising the effort, with the goal of competing with the president on his own terms. Shane Goldmacher at The New York Times explains how the campaign will work:
The effort will feature advertisements across multiple digital platforms, including Google, YouTube, Facebook, Instagram, Hulu and Pandora. There will be original content, such as videos and animations, as well as boosting local news coverage that portrays Mr. Trump, his administration and his agenda in a harsh light.
Ms. McGowan said that for months her group had been raising the alarm about Mr. Trump’s early online spending advantage.
“It started to feel as though we were really screaming into the abyss,” she said. So they decided to take matters into their own hands.
Trump has reshaped the presidency on Twitter, according to this New York Times analysis. Over the course of 11,000 tweets, the president has conducted foreign policy, attacked his enemies, and helped spread conspiracy theories. (Michael D. Shear, Maggie Haberman, Nichlas Confessore, Karen Yourish, Larry Buchanan and Keith Collins / The New York Times)
Twitter’s ban on political ads also encompasses “issue” ads — raising the question of what will be considered an “issue.” The company hasn’t said whether tweets promoting articles about climate change or books about race fall into this category, for example. (Adi Robertson / The Verge)
California Attorney General Xavier Becerra won’t say whether or not he’s investigating Facebook and Google. The silence is notable given that the companies are in his home state, and his office has more resources than most of the other state attorneys general involved in the antitrust probe. (David McCabe / The New York Times)
Yaël Eisenstat, former global head of elections integrity operations at Facebook, argues that the company’s business model, which is precedented on targeted advertising, makes it hard for them to not harm democracy. This one had to sting in Menlo Park. (Yaël Eisenstat / The Washington Post)
Facebook’s defense of its political ad policy is rooted in American values, which can blind it to the consequences of its policies in other countries, this sharp piece argues. Key fact: despite all the discussion about political ads on Facebook in America, less than 10 percent of Facebook users actually live here. (Julia Carrie Wong / The Guardian)
Rather than banning political ads, Facebook should stop letting politicians microtarget voters, says Ellen L. Weintraub, chairwoman of the Federal Election Commission. It’s a sentiment shared by some Facebook employees and the company’s former security chief, Alex Stamos. (Ellen L. Weintraub / The Washington Post)
Facebook confirmed that its political ad policy will extend to the UK. The company will not fact-check ads run by British political parties or the thousands of candidates running for election to the House of Commons. (Hadas Gold and Donie O’Sullivan / CNN)
Facebook says it won’t tolerate bullying and harassment, but a CNN investigation shows otherwise. The company sometimes allows users to stay on the platform even after they repeatedly violate community standards and verbally abuse other people. (Elizabeth Cohen / CNN)
The Defense Innovation Board, a White House advisory group with executives from Google, Microsoft, and Facebook, proposed ethical guidelines to prevent military AI from going overboard in conflict zones. (Tom Simonite / Wired)
Senate lawmakers proposed bipartisan legislation to require Google to disclose its search ranking algorithm and give consumers an option for “unfiltered” searches. Which would arguably defeat the entire point of a search engine, but hey — this stuff is really hard for Congress. (John D. McKinnon / The Wall Street Journal)
The antitrust probe into Google has already landed in court. The company is citing confidentiality concerns in filings, arguing that two experts retained by the states may have a conflict of interest given their past work with rivals like News Corp. (Tony Romm / The Washington Post)
China is rolling out emotional recognition technology as part of its ongoing efforts to surveil citizens. The idea is to identify criminals by analyzing their mental state, but experts say the technology doesn’t work that well yet. Amazon, Microsoft and Google are all developing emotion recognition systems too. (Sue-Lin Wong and Qianer Liu / The Financial Times)
Industry
Facebook created a new logo to distinguish Facebook the corporation from Facebook the social media platform. The new logo — which is the word Facebook spelled out in all caps versus the white or blue “f” that Facebook has used for years — will appear on the login screen and the settings page of Instagram and WhatsApp. Kurt Wagner talks to the company’s chief marketing officer at Bloomberg:
The point is to ensure that people who use those products know they’re owned by Facebook, said Chief Marketing Officer Antonio Lucio.
“All the research that we’ve had from Generation Z and millennials was all very emphatic as to they need to know where their brands come from,” Lucio said in an interview. “We needed to be more transparent with our users in showcasing that everything is coming from the same company.”
Lucio said most people don’t know that Instagram and WhatsApp are Facebook-owned — he cited a Pew research study that found only 29% of Americans knew Facebook owned both apps. When people find out, Lucio said it improves that person’s perception of Facebook as a company.
Google acquired Fitbit for $2.1 billion. The move comes after Google spent years trying (and largely failing) to break into the wearables market. Will it raise any antitrust objections? (Chaim Gartenberg / The Verge)
Before the deal went through, Facebook also looked into buying Fitbit. The social network was reportedly willing to pay only about half of what Google spent on the money-losing company. (Alex Heath / The Information)
Since the start of the year, Snap’s stock has risen more than 150 percent, to about $15 a share. CEO Evan Spiegel says it’s proof that the company’s controversial redesign is paying off. (Georgia Wells and Matt Murray / The Wall Street Journal)
Waterfront Toronto is moving forward with a proposal from Google-affiliated Sidewalk Labs to build a high-tech community on the city’s waterfront. The project has gotten a lot of attention due to privacy and surveillance concerns. (Josh O’Kane / The Globe and Mail)
Anyone can submit a proposal for a new emoji — but not everyone does. Here’s the incredibly charming story of how a Verge reporter created the “yawning” and “waffle” emojis. (Jay Peters / The Verge)
The chat platform Discord, hailed as “Slack for gamers,” is home to a bunch of user-generated dating services. Many of them specifically target people under the age of 18, and are attracting potential predators. (Luke Winkie / OneZero)
And finally ...
Sen. Josh Hawley is among the Senate’s most diligent self-promoters. But nothing could have prepared us for this hype reel that his press office has prepared for Tuesday’s hearing about China and tech, which marries the civic spirit of C-SPAN to the emotional appeal of a commercial for WWE SummerSlam.
Senator Hawley Press Office
TOMORROW /// @senjudiciary Crime & Terrorism Subcommittee Chair, Sen. Hawley, will explore security concerns raised by big tech platforms like Apple and TikTok collecting vast amounts of user data, and the threats American face from nations like China getting ahold of their data. https://t.co/RnLHH8DTyC
7:53 AM - 4 Nov 2019
It promises to be quite a smackdown.
Talk to us
Send us tips, comments, questions, and your bull case for TikTok: casey@theverge.com and zoe@theverge.com.
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