According to sources familiar with Microsoft’s timeline to carve out TikTok’s U.S. operations from the rest will be a technically complex endeavor which could test the patience of the U.S. administration.
While Microsoft has until September 15 to piece together a blueprint for an acquisition that safeguards the personal data of Americans stored on TikTok’s micro video sharing app, U.S. President Donald Trump has issued an order banning the app in the event of a no-deal.
Microsoft is negotiating a transition period that will allow it to ringfence TikTok technologically from its parent ByteDance once an agreement is reached.
According to sources, the clean break that Trump and other lawmakers are hoping could take a year or more to come.
Incidentally the video sharing app is technically and functionally similar to ByteDance’s Douyin, a similar product that caters to the Chinese market and shares technical resources with as well as other ByteDance-owned properties, said sources familiar with the matter at hand.
ByteDance had started working on their technological separation several months following scrutiny from the U.S. government, said a source familiar with the process. While the client side of the code has been separated, the server code, shared by ByteDance’s other products still partially shared, said the source. The server code provides basic functionality to the apps including algorithms for moderating and recommending content , data storage, and user profiles management.
According to cyber security expert Ryan Speers from River Loop Security, a company which provides services such as cybersecurity due diligence for deals, in order to ensure uninterrupted service of TikTok, Microsoft will need to rely on ByteDance’s code while reviewing, rivising and move it to a new back-end infrastructure for users.
“Any continuing technical or operational reliance of the U.S. business on the Chinese company after the sale generally would have been unacceptable to the Committee on Foreign Investment in the United States (CFIUS),” said Aimen Mir, former Deputy Assistant Secretary of the Treasury responsible for CFIUS, who is now a partner at the law firm Freshfields Bruckhaus Deringer.
Another challenge facing Microsoft is, how it will transfer TikTok’s recommendation engine that keeps users glued to their screens. This algorithm, powers TikTok’s “For You” page, which recommends the next video to watch based on an analysis of user behavior.
The complication stems from the fact that TikTiok’s recommendation engine is ties intricately to Douyin’s, said two sources familiar with the matter at hand. What makes it tick is the content and user information fed into the algorithm.
“Algorithms are not worth anything without the data,” said Jim DuBois, a former Chief Information Officer at Microsoft. “Segmenting the data for those countries is a significant task.”
Microsoft’s negotiations for the acquisition of the U.S., Canada, New Zealand and Australia operations of TikTok complicates a separation. Not only would TikTok have to be separated from ByteDance, it would have to be broken up from TikTok’s other regions. This adds to the technical challenges because of the amount of data involved.
“The biggest part is separating the user data – both content and data about users,” said DuBois, noting hard disks of data would likely need to be transferred between ByteDance and Microsoft.
The September 15 timeline adds to the pressure and makes the task even more challenging, said Karen C. Hermann, a deal lawyer at Venable LLP:
“It can sometimes take months and months just to identify the business needs of the divested business, what IP and other assets it uses exclusively, and what assets and IP it shares with other businesses in the company group,” said Hermann.