TikTok's dilemma is the last layer of window paper for Chinese companies to internationalize

Titanium Media APP

2024-04-25 20:02Published on the official account of Shaanxi Titanium Media APP

Text | Narrowcast, by | Li Wei

"Again, I'm Singaporean. At the hearing a year ago (March 2023), TikTok CEO Zhou Shouzi graciously repeated this answer in the face of repeated cross-examination of personal nationality by US Republican Senator Tom Cotton.

This moment has also become the most figurative presentation of TikTok's twists and turns:

An Asian face with a helpless smile and a pure English speaker tried to identify his true nationality in the U.S. legislature, but was repeatedly interrupted and questioned. A short video product with Chinese roots, 60% of which is in the hands of global institutional investors, serves 170 million American users, but has been forced into a corner step by step by American politicians.

In this era, the debate around "us and them" is becoming an extremely dangerous game, and TikTok is caught in the middle, reduced to a bargaining chip in this game, and is carried away from the original course by the torrent of the times, trying to prevent the straw that is holding it down.

TikTok's predicament is also the last layer of window paper that Chinese companies need to pierce when they internationalize.

01 TikTok faces the strongest killer feature

On the evening of April 23, 2024 (Beijing time, April 24), the U.S. Senate quickly passed a foreign aid budget amendment by a vote of 79-18. The bill, which was voted overwhelmingly in the U.S. House of Representatives on April 20, includes provisions that force ByteDance to divest TikTok or face an indefinite ban.

The bill would give ByteDance more time to divest TikTok (from six months in the March version of the bill to a maximum of one year). U.S. President Joe Biden said in a statement after the bill was passed that he would sign it tomorrow when it was delivered to his desk. In just one week, the bill that allowed the U.S. Senate and House of Representatives to quickly reach an agreement has become the strongest killer feature offered by U.S. politicians to TikTok.

TikTok has been pushed to the brink. First of all, this action against TikTok was initiated by the US legislature and received support from within the White House to impose restrictions directly on the legal framework. Secondly, the wave of operations initiated by the U.S. House of Representatives is the accumulation of experience in trying to ban TikTok in the past four years, and it is more strategic and targeted, so as to avoid factors that affect the effectiveness of the bill as much as possible.

At the moment, TikTok is not giving up on its efforts. Before and after the March version of the bill was passed, TikTok made efforts to push splash screens to users, lobby in Washington, and the CEO released a response video. On April 20, after the latest amendment was passed, TikTok went on to emphasize that the U.S. House of Representatives' move would trample on the free speech rights of 170 million Americans, destroy 7 million businesses, and shut down a platform that contributes $24 billion a year to the U.S. economy.

However, TikTok has been mixed up in the complex game of US politics around aid to Ukraine and Israel, and it is difficult to use its weak influence in US politics to win opportunities for itself, even if TikTok has been trying to localize its products, business, organization, image, etc.

As the U.S. election approaches, the attitude of Republican presidential candidate Donald Trump is also an important factor influencing the direction of events. Opposition to the ban on TikTok has become a tool for Trump to hit Biden and curry favor with young voters. If elected, Trump's need to counterbalance Facebook could be a breakthrough for TikTok.

No matter what the fate of TikTok will usher in in the future, in the current complex environment, how a global company with Chinese roots should properly integrate into the local rules of the game has become an urgent issue to be solved.

Only by piercing this layer of window paper can the internationalization of Chinese enterprises truly enter the mature stage.

02 TikTok's globalization dilemma

The next few months will be a critical window of time for the game between the two sides. But there's not much room left for TikTok to maneuver. Putting a more effective shackle on TikTok has become a consensus in American political circles. If there are no disruptive changes, TikTok can only strive for as many benefits as possible for itself under this consensus.

As with the TikTok executive order issued against Trump four years ago, TikTok can still file a lawsuit to prohibit the bill from taking effect while the lawsuit is in progress, get a respite, and then seek new changes.

One option for TikTok is to abandon the U.S. market altogether and instead consolidate markets in Europe, Latin America, Southeast Asia, the Middle East, and more. Unlike consumer electronics, new energy vehicles, FMCG and other consumer products, TikTok, as an entertainment product, has almost no opportunity to counterattack the highland market from the lowland market, and if it misses the commanding heights of the US market, TikTok may lose its global influence in the entertainment field.

The more serious consequence is that once the United States succeeds in banning TikTok in the form of legislation, it is difficult to say that Canada, the European Union, the United Kingdom and other countries will not follow in the footsteps of the United States. Without these highland markets and no global influence in terms of content, TikTok can only favor Latin America, Southeast Asia and the unstable Middle East market, and it is no longer a global company. This is not what Zhang Yiming and the Byte team want.

Another option for TikTok is to pay more and maintain its presence in the U.S. market. The cost is bound to be much greater than the "Texas Plan" four years ago.

What TikTok needs to get out of the predicament, and what Chinese international companies need to understand with the help of TikTok, is actually how much room for bargaining can there be. The breaking point it chooses will also determine the bargaining ceiling for all Chinese international enterprises to a large extent.

Although the aforementioned bill is currently only aimed at TikTok, once it takes effect on TikTok, it means that the bill will theoretically cover all companies with Chinese origin doing business in the United States, including Temu and Shein. The U.S. market will become a bomb that can explode at any time for these companies, and once the interests of U.S. companies are touched, they may be targeted accordingly, making competition no longer fair.

03 TikTok's American cornerstone

In any case, TikTok's ability to be in this near-no-man's land predicament is already a success.

TikTok has been engaged in multiple rounds of battles with the U.S. government over the past few years. In 2019, the Committee on Foreign Investment in the United States launched an investigation into ByteDance's acquisition of musical.ly, in 2020, then-US President Trump issued a presidential order to remove the TikTok app and split TikTok from ByteDance, in 2022, the US Congress passed a budget bill to ban the use of TikTok by government devices, and in 2023, the US House of Representatives Foreign Affairs Committee introduced the Data Act, which intends to empower the president to prohibit, The power to sanction foreign apps such as TikTok, and in the same year, the US state of Montana announced a ban on TikTok.

But most of these U.S. government attempts to impose more restrictions on TikTok have failed. Even two weeks before the March bill was thrown, executives in charge of TikTok's U.S. operations were optimistic that TikTok was temporarily free from the threat of being banned in the U.S.

The multi-dimensional practice around the localization of the United States is the reason why TikTok was able to fight the US ban and give the US team optimistic expectations.

Since encountering the threat from the U.S. government head-on in 2020, TikTok has comprehensively promoted the localization of TikTok in the U.S. market and the globalization of the entire company from the aspects of product, business, organization, and image.

At the organizational level, TikTok moved its headquarters to Los Angeles and Singapore, and relocated a large number of Chinese employees abroad. The localized operation team recruited in the United States has been given a greater voice. The two large-scale opening page push campaigns launched by TikTok before the vote in the U.S. House of Representatives were made by TikTok's U.S. local operations team after comprehensive consideration, hoping to directly state its position. This is also considered a very American response.

At the product level, TikTok began to host TikTok's U.S. user data on Oracle Cloud in accordance with the Texas Plan, and allowed Oracle to review TikTok's source code. By June 2022, TikTok's U.S. users' data has been fully stored on Oracle Cloud, and TikTok U.S. Data Security (USDS), which is responsible for operation and maintenance, has been established, and the company's board of directors needs to be approved by the Committee on Foreign Investment in the United States.

In terms of business, TikTok has adopted a relatively conservative operation strategy in the U.S. market. Of the 170 million U.S. users, only 5% of TikTok users can see e-commerce content. When launching e-commerce business in the United States, TikTok's merchant access is more stringent, and various policy subsidies will also favor brand merchants and live broadcast rooms that open stores in the United States.

In terms of image, TikTok finally chose Chow Shouzi, a Singaporean with an Asian face and a Western education background, as the CEO or spokesperson, in order to balance the acceptance of TikTok management by users in China and the United States, and also show that the company itself is a global company with a diverse and integrated culture - this choice is suitable for every Chinese company committed to globalization, they should find their own international spokesperson.

04 The Three Dimensions of Localization

If the localization of the enterprise is divided into three levels: operation, organization and game rules, as mentioned above, TikTok has reached a proficient or even proficient level of localization in operation and organization.

But at the level of localization of the rules of the game, TikTok is still feeling the stones to cross the river. Before TikTok, Chinese Internet companies entered the U.S. market, and it was difficult for them to pose a threat to local giants, and their user scale and influence were not enough to attract the attention of the U.S. government. TikTok not only has 170 million users in the United States, but has also become a popular information app among young Americans, with users spending more time on average than YouTube and Instagram, which are embedded in short-form video apps.

TikTok has been forced to become more deeply involved in the rules of the game that merge politics and business in the United States. In 2022, in the face of the rapid growth of TikTok, Mata paid a hefty fee to a consulting firm called Targeted Victory, hiring it to plan a nationwide campaign against TikTok with the theme of "TikTok is a threat to American children", and hindered TikTok's development by publicly influencing the direction of policy.

Under this rule, the government and the business community are highly interconnected. Businesses need to exert influence on politicians through lobbying, public opinion, etc., and politicians need to rely on corporate support to win elections, which is a process in which both sides continue to reach or break the balance of interests of each other. In the general direction of cautiously avoiding getting involved with politics, TikTok, which has a huge influence among young people, has become a piece of cake that has made both the American political and business circles red.

TikTok has increased its lobbying funding year by year since 2020, exceeding $8 million by 2023, and has hired former top Trump aide Kellyanne Conway, former Senate Majority Leader Trett Lott, and former House Democratic Caucus Chairman Joe Crowley to lobby for it. The Conservative Group Growth Club and the Democratic Party consulting firm SKDK have also become TikTok partners.

Although these lobbying investments have achieved certain results, it can be seen from the statements made by members of the US Senate and House of Representatives around the "bill" that lobbying has not been able to find more allies for TikTok and help it fundamentally reverse the unfavorable political situation.

There are media reports that TikTok is preparing to remove Anderson, a key executive in charge of lobbying the U.S. government. As general counsel for ByteDance and TikTok in the United States, Anderson has spent the past few years working to negotiate with the U.S. government to address concerns about TikTok's "Chinese origins." Clearly, Anderson's work was not seen as a success to the outside world. A TikTok spokesperson's response was: "100% wrong. 」

Clearly, compared to emphasizing the importance to users, TikTok has not yet found a way to balance the interests of the political community, nor has it gained the proper identity to integrate into the rules of the game in American politics and business. This is also the essence of TikTok's bargaining with American politicians - to exchange certain benefits for a proper identity in the rules of the game, and to pierce the last layer of window paper for the internationalization of Chinese companies.

Regardless of TikTok's success or not, TikTok's exploration of the rules of the localization game will be an extremely valuable experience for other Chinese companies committed to globalization.

View original image 262K

• 

•