Is TikTok Using Kids?
Bloomberg Businessweek|April 22,2019

The next big thing in social media, TikTok, is fun, irreverent, and Made in China. It’s also got some unusual ideas about censorship and free speech

David Ramli and Shelly Banjo

Most nights, from around 7 till midnight, Sydney Jade is on TikTok, the smartphone app of the moment. The platinum blond teenager films herself singing show tunes, doing jumping jacks, and joking around with store clerks at a Walmart not far from her home in Oklahoma. Her short music videos and live streams are popular— Jade has 284,000 followers, some of whom periodically send her virtual gifts, like 99¢ Rainbow Puke stickers.

Jade’s parents resisted TikTok at first. They hadn’t heard of the app and, Jade says, “didn’t like the idea of strangers watching me sing alone in front of the pink curtains in my bedroom.” But she convinced them that TikTok was “friendlier for kids than other apps like Facebook.” They let her join last year, just as, it seems, every other teenager signed on as well. In January, TikTok was the most downloaded app in the Android and iPhone stores, according to research firm Sensor Tower Inc.

The story sounds a lot like the rise of other social media powers such as Instagram and Snapchat, both of which pitched themselves as alternatives to Facebook’s big blue app. But TikTok wasn’t created by Stanford students Mark Zuckerberg could buy off or spend into the ground. It’s a subsidiary of a Beijing startup, Bytedance Ltd., that’s built a collection of valuable apps in China powered by vast troves of data and sophisticated artificial intelligence. Last year, Bytedance’s investors valued the company at $75 billion, the most of any startup in the world.

Inevitably, especially in the age of Donald Trump, TikTok’s fast growth and Chinese ownership have made it the subject of scrutiny. Last month, the Committee on Foreign Investment in the U.S. (CFIUS), ordered Beijing Kunlun Tech Co., a little-known Chinese gaming company that bought the very well-known gay- dating app Grindr, to sell the business over apparent concerns that Chinese intelligence agencies could potentially use data from the app to blackmail users. In an April 1 filing, the company said it’s in talks with CFIUS. U.S. authorities haven’t said they’re investigating Bytedance in connection with its ownership, but the company’s large user base could conceivably make it a target. “Social media platforms are increasingly considered sensitive by CFIUS,” says Farhad Jalinous, chair of the national security and CFIUS practice at law firm White & Case LLP. Bytedance says it now stores all TikTok data outside of China and that the Chinese government has no access. (The company’s privacy policy had previously warned users it could share their information with its Chinese businesses, as well as law enforcement agencies and public authorities, if legally required to do so.)

Separately, TikTok has faced concerns over privacy and child safety. In February, Bytedance was fined $5.7 million by the Federal Trade Commission to settle allegations that Musical.ly, which Bytedance bought and renamed TikTok, illegally collected information from minors. It was the largest FTC penalty in a children’s privacy case.

The settlement didn’t scare off Bytedance’s investors or the company itself, which is spending hundreds of millions of dollars to advertise on Facebook in the hope of luring away more users. Over the past three months, for instance, 13 percent of all the ads seen by users of Facebook’s Android app were for TikTok, says app- analytics firm Apptopia.

The result is that Bytedance has had more success outside of China than any previous Chinese internet company, including Baidu and Tencent. The TikTok app and its Chinese version have been installed more than a billion times. (It has no relation to TicToc, Bloomberg LP’s breaking news network.) Late last year, executives told investors that they expect $18 billion in revenue this year and $29 billion in 2020, according to people familiar with its finances who aren’t authorized to discuss the company publicly. Bytedance will “become a global player,” says Hans Tung, managing partner of GGV Capital, one of the company’s backers. “It’s just a matter of when.”

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