Why Trump wants to ban TikTok and Microsoft wants to buy it

The Trump administration is raising security concerns about the popular, China-owned video app. But Microsoft sees a market opportunity. 

First Look

President Donald Trump plans to take action on a what he sees as a broad array of national security risks presented by software connected to the Chinese Communist Party, Secretary of State Mike Pompeo said Sunday.

Mr. Pompeo’s remarks followed reports that Microsoft is in advanced talks to buy the U.S. operations of TikTok, which has been a source of national security and censorship concerns for the Trump administration. The potential deal would be a victory for both companies, making Microsoft Corp. a major player in the social media arena and providing relief to TikTok and its parent company, Bytedance Ltd., a target of President Trump's.

“These Chinese software companies doing business in the United States, whether it’s TikTok or WeChat – there are countless more ... are feeding data directly to the Chinese Communist Party, their national security apparatus,” Mr. Pompeo said on Fox News Channel’s “Sunday Morning Futures.”

“Could be their facial recognition patterns. It could be information about their residence, their phone numbers, their friends, who they’re connected to. Those – those are the issues that President Trump has made clear we’re going to take care of," he said.

TikTok’s U.S. user data is stored in the United States, with strict controls on employee access, and its biggest investors come from the U.S., the company said Sunday. “We are committed to protecting our users’ privacy and safety as we continue working to bring joy to families and meaningful careers to those who create on our platform,” a TikTok spokesperson said.

Mr. Trump had said on Friday that he would soon ban TikTok in the U.S. A federal committee is reviewing whether that's possible, and its members agree that TikTok cannot remain in the U.S. in its current form, because it "risks sending back information on 100 million Americans,” said Treasury Secretary Steven Mnuchin.

“We all agree there has to be a change ... everybody agrees it can’t exist as it does," Mr. Mnuchin said Sunday on ABC's “This Week.”

As speculation grew over a ban or sale of the social media's U.S. business, TikTok posted a video on Saturday saying: “We’re not planning on going anywhere.”

TikTok's catchy videos and ease of use has made it popular, and it says it has tens of millions of users in the U.S. and hundreds of millions globally. Its parent company, Bytedance Ltd., launched TikTok in 2017. It bought Musical.ly, a video service popular with teens in the U.S. and Europe, and combined the two. It has a similar service, Douyin, for users in China.

But TikTok's Chinese ownership has raised concern about the potential for sharing user data with Chinese officials as well as censorship of videos critical of the Chinese government. TikTok says it does not censor videos and it would not give the Chinese government access to U.S. user data.

“The president, when he makes his decision, will make sure that everything we have done drives us as close to zero risk for the American people,” Mr. Pompeo said. “That’s the mission set that he laid out for all of us when we get – we began to evaluate this now several months back. We’re closing in on a solution. And I think you will see the president’s announcement shortly.”

The debate over TikTok parallels a broader U.S. security crackdown on Chinese companies, including telecom providers Huawei and ZTE.

Reports by Bloomberg News and the Wall Street Journal citing anonymous sources said the administration could soon announce a decision ordering ByteDance to divest its ownership in TikTok.

There have been reports of U.S. tech giants and financial firms being interested in buying or investing in TikTok as the Trump administration sets its sights on the app. The New York Times and Fox Business, citing an unidentified source, first reported Friday that Microsoft is in talks to buy TikTok.

U.S. national-security officials have been reviewing the Musical.ly acquisition in recent months, while U.S. armed forces have banned their employees from installing TikTok on government-issued phones. Mr. Pompeo said this month that the U.S. was considering banning TikTok.

These national-security worries parallel a broader U.S. security crackdown on Chinese companies, including telecom providers Huawei and ZTE. The Trump administration has ordered that the U.S. stop funding equipment from those providers in U.S. networks. It has also tried to steer allies away from Huawei because of worries about the Chinese government's access to data, which the company has denied it has.

The Trump administration has stepped in before to block or dissolve deals on national-security concerns, including stopping Singapore's Broadcom from its $117 billion bid for U.S. chipmaker Qualcomm in 2018 in an effort to help retain U.S. leadership in the telecom space. It also told China's Beijing Kunlun Tech Co. to sell off its 2016 purchase of gay dating app Grindr.

Other countries are also taking action against TikTok. India this month banned dozens of Chinese apps, including TikTok, citing privacy concerns, amid tensions between the countries.

The U.S. government’s poor track record in bolstering Americans' data privacy more broadly lessens its credibility in taking on Chinese-owned companies, according to Susan Ariel Aaronson, a professor at George Washington University and a data governance and national-security expert. The federal government has not passed broad privacy or data-security legislation despite efforts to do so last year, and the Justice Department has tried to undermine encryption – which makes sure only a sender and receiver can see content they exchange – for law-enforcement reasons. Tech companies have pushed back against that.

“I continue to be wary of forcing a sale of TikTok without data protection laws they could try to follow,” Alex Stamos, the former chief security officer at Facebook who now studies internet security at Stanford University, tweeted on Friday. He added that Microsoft “has one of the best child safety teams, which is a larger risk on TikTok right now.”

Microsoft, which owns LinkedIn, is the No. 4 digital ad company in the U.S., after Google, Facebook, and Amazon. Still, buying TikTok would be a significant change of direction from Microsoft CEO Satya Nadella’s focus on workplace software that makes people more productive, said technology industry analyst Patrick Moorhead of Moor Insights & Strategy.

Unlike Google or Facebook, which dominate the digital advertising industry, Microsoft hasn’t been under the intense scrutiny of U.S. politicians and antitrust regulators lately over its market power. Mr. Moorhead said that might make it easier to swoop in and acquire TikTok, which poses a competitive threat to social networks like Facebook, Instagram, Google’s YouTube, and Snapchat. It’s an interesting irony that it was Microsoft at the center of the landmark antitrust case 20 years ago.

If the deal goes through, “it would definitely make Microsoft a much more competitive advertising system in years to come,” said eMarketer analyst Ross Benes.

This story was reported by The Associated Press. Tali Arbel, Anne D'Innocenzio, and Zeke Miller in Washington contributed to this story.

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