Quicktake: What is TikTok and why is it being pressured to sell its US operations

The US President Donald Trump is reportedly close to a decision to approve Oracle's possible alliance with the short-form video streaming app TikTok. On Wednesday, the Financial Times said that the Chinese video app will place its global business into a new company that has its headquarters in the US and Oracle will be a minority shareholder, although this has yet to be officially confirmed

Before Mr Trump reveals his decision, The National explains what the Chinese app that became a global sensation is and why it is being pressured to sell its US operations.

What is TikTok?

Launched in China in September 2016, TikTok is owned by Beijing-based technology firm ByteDance. It was rolled out in the US in 2018 after ByteDance’s $1 billion (Dh3.67bn) purchase of lip-synching app Musical.ly. It allows users to create and share 15-second videos while providing musical soundtracks.

Why is it popular?

The platform, which is known as Douyin in China, is popular with young audiences around the world as it allows them to create short-form videos that tend to have an extensive reach. TikTok is available in more than 140 countries and boasts of over one billion users worldwide. In the first quarter of this year, it amassed more than 315 million installs across Apple’s App Store and Google Play, according to app intelligence agency Sensor Tower. This was the highest amount of downloads an app has ever registered in a quarter.

Where are most of its users?

India, which banned TikTok in June, has been its biggest market in terms of user growth. India generated 611 million downloads till March 31 - 30.3 per cent of the total, data compiled by Sensor Tower showed.

TikTok’s home market China only ranked second, accumulating 196.6 million or 9.7 per cent of all downloads. The US accounted for nearly 165 million installations, or 8.2 per cent of the total.

Why is it selling its US operations?

TikTok started to actively look for a buyer for its US operations after Mr Trump issued an executive order last month banning businesses and US residents from using the app. In another executive order passed on August 14, the Trump administration directed ByteDance to sell its US assets within 90 days. Amidst all these developments, the company’s chief executive Kevin Mayer resigned on August 26.

Why could it be a prized possession?

TiKTok's market value could be about $50bn – 50 times its projected 2020 revenue of about $1bn, according to Reuters. The company said it had hired about 1,000 people in the US this year and plans to hire another 10,000.

In comparison, competitor Snap, which owns photo and video sharing platform Snapchat, is currently valued at $36bn or about 20 times its annualised revenue.

Who is leading the race?

California-based enterprise software giant Oracle is reportedly nearing a deal with TikTok. According to the latest report by The Financial Times, Oracle will now be a stakeholder in TikTok's global business and not just in the US. However, details of the agreement are not public yet.

"Oracle confirms that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider … Oracle has a 40-year track record providing secure, highly performant technology solutions," Oracle said in a statement to The National.

The company’s billionaire co-founder, Larry Ellison, is one of the leading Silicon Valley entrepreneurs who openly supports Mr Trump. In February, he held a fundraiser for Mr Trump at his property in Coachella Valley, California.

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Pakistan: Sarfraz (c), Hafeez, Imam, Azhar, Sohail, Shafiq, Azam, Saad, Yasir, Asif, Abbas, Hassan, Afridi, Ashraf, Hamza

New Zealand: Williamson (c), Blundell, Boult, De Grandhomme, Henry, Latham, Nicholls, Ajaz, Raval, Sodhi, Somerville, Southee, Taylor, Wagner

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The burning issue

The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.

Read part three: the age of the electric vehicle begins

Read part two: how climate change drove the race for an alternative

Read part one: how cars came to the UAE

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Kathryn Hawkes of House of Hawkes on being a good guest (because we’ve all had bad ones)

Arrive with a thank you gift, or make sure you have one for your host by the time you leave.
Offer to buy groceries, cook them a meal or take your hosts out for dinner.
Help out around the house.
Entertain yourself so that your hosts don’t feel that they constantly need to.
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Offer to strip the bed before you go.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”