The TikTok IPO dance

 

The TikTok social networking app is in many ways a trailblazer. For starters, it stands as one of the fastest growing apps in history, having expanded exponentially in the past couple of years to reach 2+ billion downloads and 1+ billion monthly active users; we’ve heard (way) worse from older apps. Second, its business model is interestingly intertwined with the music industry as it emerged (in no small part thanks to its merger with fellow app Musical.ly back in 2018) as a viral machine for dances and memes based on popular songs; that includes Master KG‘s “Jerusalema“, which became a global phenomenon last year after the South African DJ had his music used for a dancing challenge on the app. Third, TikTok is Chinese…

The fact that a global tech player is Chinese shouldn’t theoretically be all that surprising: after all, China has been a tech giant for years, manufacturing many/most of the smartphones we use anywhere in the world. Also, it has long boasted massively successful websites and apps. Just think of Alibaba, whose reach has now extended to large parts of the world. Or Tencent’s WeChat app, the biggest of the lot — in China. The thing is, the limit to China’s software-related expansion is significantly more political than it is technical: while the nation’s authorities are perfectly happy with having Western countries buy their manufactured products, apps are another situation altogether as ownership — and therefore control — over them can become socially strategic.

Alibaba had troubles trying to get out of the Chinese rule of law, eventually launching a massively successful IPO in New York back in 2014. Its founder, Jack Ma, had plans for another IPO regarding his Ant Group neutralized by Chinese authorities last year. Didi, the “Chinese Uber”, went ahead with its, only to be met with official cybersecurity investigations afterwards. And now TikTok: although it was long documented that the company was preparing for an IPO, preferably in the US, plans have for now been indefinitely stalled. The formal reason is the same “data-security risk” argument mentioned in Didi’s case. The likely real reason is more political: one of the world’s new tech juggernauts would move one step further from China — and closer to the US.

For the key difference between TikTok and any other Chinese-born tech company is this: the majority of its current users are not Chinese. Which is both incredibly interesting in terms of global trends — you can foresee a future with Chinese unicorns challenging US reigning champs — and very sensitive for the Chinese government: they want to make sure that their hold on said unicorns remains strong in an ever tightening geopolitical face-off with the US. As we speak/write, it is rather hard to tell how things will unfold, and at which pace. What we can reasonably posit, however, is that things will indeed evolve, given how dynamic tech as an industry is. Let the (virtual) chips fall where they may…