According to people familiar with the matter, Microsoft’s attempt to exclude parts of TikTok from its Chinese owner, ByteDance, will be a technically complex attempt that may test the patience of President Donald Trump’s administration.
Trump has provided Microsoft with a blueprint until September 15 to protect the personal data of Americans stored in the short video application, and he has issued an order to prohibit it if no agreement is reached at that time The transaction.
According to a report on August 2, Microsoft is negotiating a transition period that will give them time to technically signal TikTok from ByteDance after agreeing to the transaction.
Some sources said that the complete breakdown envisaged by Trump and lawmakers may take a year or more.
People familiar with the matter said that TikTok is similar in function and technology to Douyin owned by ByteDance, which is only sold in China and shares technical resources with it and other properties owned by ByteDance.
A person familiar with the matter told Reuters that ByteDance began to implement technological separation a few months ago under the review of the US government. According to Reuters, it began planning a spin-off as part of a strategy to transfer power from China.
The source said that although the application code that determines the appearance of TikTok has been separated from Douyin, the server code is still partially shared among other ByteDance products. The server code provides the basic functions of the application, such as data storage, algorithms for reviewing and recommending content, and management of user profiles.
Ryan Speers, a network security expert at River Loop Security, said that in order to ensure uninterrupted TikTok services, Microsoft may need to rely on ByteDance code when reviewing and modifying the code and migrating to a new back-end infrastructure to provide services to users. Services include cyber security due diligence of transactions.
Aimen Mir, the former Deputy Secretary of the Treasury of the US Treasury in charge of CFIUS, stated that any continued technical or operational reliance on Chinese companies by US companies after the sale will be accepted by the Committee on Foreign Investment in the United States (CFIUS). He is now a partner of Freshfields Bruckhaus Deringer law firm.
He said that in the past, CFIUS required more protective measures before selling, including separating the US business from foreign sellers as much as possible.
Another challenge that Microsoft faces is how it will transfer what is regarded as TikTok’s secret secret, a recommendation engine that keeps users on the screen. TikTok’s “For You” page powers the engine or algorithm. This page recommends the next video to watch based on the analysis of user behavior.
According to two people familiar with the matter, the recommendation algorithm used by TikTok is independent of Douyin. But what makes it tick is the content and user information entered into the algorithm.
Former Microsoft Chief Information Officer Jim DuBois (Jim DuBois) said: “Without this data, the algorithm is worthless.” DuBois is a risk consultant for Ignition Partners. “The breakdown of data for these countries is a major task.”
Microsoft’s negotiations to acquire TikTok’s operations in the United States, Canada, New Zealand and Australia have complicated the separation. Not only must TikTok be separated from ByteDance, but it must also be separated from other areas of TikTok. Due to the amount of data involved, this adds to the technical challenges.
DuBois said: “The biggest part is the separation of user data-content and user-related data.” He pointed out that data hard drives are likely to be transferred between ByteDance and Microsoft.
Karen C Hermann, a transaction attorney for Venable LLP, said that the proposed timetable makes it very challenging to complete the transaction: “It can sometimes take months or even months to determine the business needs of the divested business. IP and other assets, as well as assets and IP shared with other businesses in the company group.”
© Thomson Reuters 2020