TikTok USDS officially announces the establishment of a new data security joint venture, ByteDance retains algorithm and business sovereignty

According to news from TikTok's official website, in response to long-standing regulatory challenges, TikTok announced a new operational plan for its U.S. business on January 23, aiming to balance compliance requirements with core business interests through structural reorganization.

The announcement shows that TikTok USDS has established the "TikTok U.S. Data Security Joint Venture LLC", which will be responsible for data protection, algorithm security, content review, and software assurance functions related to national security in the U.S.

The newly established security joint venture will adopt a "two-company joint operation" structure, but the business modules involving national security reviews will be independent to ensure TikTok meets U.S. regulatory expectations.

In terms of corporate governance structure, ByteDance has introduced Oracle, Silver Lake Capital, and UAE MGX as investment shareholders, with each holding 15%, while retaining 19.9% of the shares to maintain the largest single shareholder position.

At the same time, the joint venture will be managed by a seven-member board of directors, with current TikTok CEO Shouzi Zhou among them. This equity and governance design aims to satisfy U.S. regulatory requirements for transparency and independent oversight.

It is noteworthy that while making the above adjustments, ByteDance has also safeguarded its core business interests. Among them, the intellectual property rights of TikTok's algorithms still fully belong to ByteDance, and the joint venture is only granted a usage license;

The main profitable business in the U.S. market, namely advertising and e-commerce operations, will continue to be independently managed by an entity fully controlled by ByteDance and will not be included in the joint venture.

This arrangement not only ensures that TikTok avoids the risk of being banned in the U.S. but also provides a regulatory model for global technology companies in a complex geopolitical environment, separating "data security governance from business operations."

Some analysts believe that its approach is reminiscent of Apple's iCloud's "Cloud on Guizhou" model in China, reflecting a path to seek pragmatic solutions within established rules.

Overall, ByteDance has made concessions in equity and governance rights in exchange for absolute control over algorithm IP and business models, addressing regulatory concerns about data security while safeguarding its business lifeline.

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