How ByteDance became the first Chinese tech giant to break the West

Behind the headlines

Founded in 2012, Bytedance is a baby compared to domestic rivals such as Alibaba, part of China's second wave of tech start-ups which focused on mobile phones from the beginning. Its first app, the joke-sharing and live-streaming app Neihan Duanzi, was shut down last year after the government accused it of spreading "vulgar" and "improper" content.

Its next product, Toutiao, meaning "headlines", has become its flagship product, and is now the largest news aggregation app in China, with an impressive daily engagement time of 74 minutes per day.

Yet it is Bytedance's 2017 acquisition of Musical.ly, a Shanghai-based lip-syncing app with a strong toehold in the US , that unleashed its global growth. Musical.ly's users were all merged into TikTok, and the rest is singing, dancing, dangerous-acrobatic-stunt-performing history.

Today, TikTok, has around 300 million active users outside China, including 5 million in the UK and 120 million in India, where it is already bigger than Instagram (according to Mark Zuckerberg). Those are good numbers: Snapchat has 210 million daily users, while Twitter has only 145m "monetisable" daily users. TikTok's success in India is especially impressive, given the high-profile and expensive failure of its rival Tencent to export WeChat to that market (despite adverts starring Bollywood stars).

Bytedance's executives have previously set an ambitious target to get 50pc of its revenue from overseas by 2022, although it appears to have walked that back now. A person familiar with Bytedance's operations said that it sees itself as a future peer of the "BATs" – an acronym designating China's biggest tech giants, Baidu, Alibaba and Tencent. 

The happiest algorithm on Earth

Part of TikTok's success is a down to its users, who are endlessly inventive and mostly but by no means exclusively under 25. It has become a fruitful nursery of internet culture, like a more wholesome version of 4Chan and Reddit, which in their heydays generated a large proportion of the jokes and trends which then spread virally on other social networks.

Hidden in plain sight, though, is a startling technological innovation: the complete sidelining of user choice, which American tech companies traditionally extol as the highest possible virtue. Unlike on Facebook, Twitter or YouTube, TikTok users don't need to follow anyone, befriend anyone, search for anything or pick anything (although they can do these things if they insist). They can just open the app and immediately sink into an endless stream of auto-playing videos, selected by powerful algorithms which learn from their behaviour.

According to the technology critic Rob Horning, TikTok is "designed to eliminate the idea of browsing for content and instead showers content on you in a frictionless flow... there is no pretense that users have conscious, considered wants that the platform can hear and respond to; it instead presents itself as an assiduous butler who anticipates what one needs and presents it before they thought to ask."

It is these AI recommendation systems, not any one app, that Bytedance considers to be its true product. MacEwan describes them as an infinite "conveyor belt of entertainment" that powers both TikTok and Toutiao. Indeed, the company boats of how "any Bytedance content platform" creates a "personalised, extensive and high-quality content feed created specifically for you each time you open the apps". 

TikTok is also buoyed by its disconnection from the serious and contentious topics that bedevil rival networks. There is little political content, creating few opportunities for fake news or tribal rancour, and political advertising is banned entirely.

When the Guardian uncovered internal documents which instructed TikTok moderators to ban "highly controversial topics, such as separatism... Tibet and Taiwan", as well as "demonisation or distortion of history, such as... Tiananmen Square incidents", TikTok said that this was not evidence of Chinese censorship but simply a "blunt" and clumsy way of "minimising conflict on the platform". 

A secret weapon of the Communist Party?

Unfortunately for TikTok, similar accusations continue to dog the company, and are beginning to make it a target of Western politicians.

Recently, for example, US news reports claimed that TikTok moderators in California had been routinely overruled on controversial topics by their Chinese superiors until at least April 2019. That led US senators to call for an intelligence investigation into the company.

 TikTok says that it has "never been asked by the government to remove any content and... would not do so if asked", and an investigation by Buzzfeed found little evidence that content about the Hong Kong demonstrations was being suppressed. Given the opacity of its operations, however, there is little conclusive proof.

Worse, and as strange as it may sound, US legislators are now accusing TikTok of being a threat to national security. At a fiery hearing last week, which TikTok declined to attend, senators heard how the data collected on non-Chinese users – which includes data from third-party advertising networks about what websites they visit and what apps they have installed, as well as their locations and any video they take – may be fully accessible to the Chinese government due to sweeping national security laws. 

A TikTok spokesman told the Telegraph that non-Chinese users' data is never kept in China, saying: "The Chinese government has never asked us to provide access to any TikTok UK user data and we would not provide it if asked." But TikTok has admitted that US users' data "may have" been processed in China before February 2019.

And according to Kara Frederick, a former head of counter-terrorism analysis at Facebook and now a fellow at the Centre for a New American Security, a think tank in Washington DC, Chinese law actually requires Bytedance to assist intelligence services by any means possible, no matter where the data happens to be held. 

"When Beijing comes knocking, you're going to have to give them the information," she says. "If these companies work under Chinese jurisdiction, then you have got to assume that they're going to get access to that data if they want it." (A TikTok spokesman said that it did not share this interpretation of the law.)

Klon Kitchen, a senior technology fellow at the DC-based Heritage Foundation and a former member of the "intelligence community", says that foreign TikTok data could be used to train face recognition systems for automated weapons, or to identify and track US soldiers and spies.

How Donald Trump's trade war could destroy TikTok

These fears are already being acted on. US regulators have already fined TikTok for illegally collecting information from children under-13, while Britain's data watchdog is investigating how TikTok handles children's data and whether it is adequately protecting them from adult predators.

The US government's foreign investment committee is also probing Bytedance's acquisition of Musical.ly, which it theoretically has the power to reverse. That might mean that Bytedance has to sell off TikTok to another company, or spin it off as an independent firm, though Frederick said legally binding assurances would be a more likely outcome.

Nor has Bytedance had entirely smooth sailing in India, whose government has reportedly asked Google and Apple to pull TikTok from their app stores, and whose ruling BJP party has accused Helo, an Indian-language news app, of "interfering in the Indian election process".

All of this puts storm clouds on Bytedance's horizon. With Donald Trump's trade war in full swing, Frederick says it is likely to become more of a target, not less. Similar, MacEwan says the US government might force US companies cut all ties with Bytedance, just as it may soon force Google to revoke Huawei's access to its apps.

That would sever TikTok users' ability to log in using their Google and Facebook accounts, and break the sharing buttons that allow them to easily post TikTok content on other social networks. 

Moreover, Bytedance has a powerful commercial sector enemy in Facebook, whose chief executive Mark Zuckerberg has cited it as an example of the dangers of Chinese companies ruling the internet. The Californian giant has tried to repeat the strategy it used against Snapchat, releasing a copycat app of its own called Lasso and targeting Mexico, a lucrative markets where TikTok has little presence. 

In response, Bytedance appears to have gotten into a poaching war with Facebook, poaching many of its employees and moving into one of its old offices. Meanwhile Google, too, has reportedly considered trying to contain Bytedance by acquiring Firework, an American TikTok rival valued at around $100m in August.

For now TikTok's priority is to start milking its users for advertising revenue, which it has only just begun to do. If it can keep growing at its current pace, and convinced advertisers that it is a better gateway to Generation Z than Snapchat, MacEwan believes it can hold its ground.

But the question remains: in a time of increasing confrontation between East and West, can any company serve both and survive?