Technology Feb 09

TikTok’s US push signals a bet on better ties with China

TikTok is pushing to expand in the US with e-commerce ads to compete with Facebook and a deal with UMG, the world's biggest music company; TikTok seems to calculate that US/China ties will settle into a ‘new normal’ where risks can be managed

TikTok’s US push signals a bet on better ties with China
TikTok's push to win US e-commerce ad market share indicates confidence in business conditions for Chinese firms. Image: Reuters

(ATF) TikTok is gearing up to compete with Facebook for e-commerce ad sales in the US and announced a deal with UMG, the world's biggest music company, on Monday February 7. The push to expand in the US signals a bet by TikTok that regulatory threats to Chinese companies will be manageable under the Biden administration.

TikTok confirmed to ATF that an advertising push is underway, while trying to place the move in the context of normal business expansion.

“We started previewing ad products that we will be focusing on more in 2021, and supporting our e-commerce ecosystem with more advertising solutions is a priority. These are just in the testing phases,” a spokeswoman said.

A report was earlier published in the Financial Times saying that TikTok is planning an aggressive push to win e-commerce business in the US from Facebook, which along with Google dominates online ads at the moment.

The report said that TikTok has briefed advertisers in the US about its plans to introduce new features to help it compete with Facebook, such as online shopping tools that would compensate its most popular users for links to products.

TikTok is also trying to win over providers of music by offering them potentially bigger earnings in the form of “equitable compensation” for use of their content online, in the deal announced on Monday with UMG, the biggest music company in the world.

In an indication of potential conflicts of interest in the future as Chinese technology firms expand abroad, a Tencent-led consortium is a 20% shareholder in UMG, having added to an existing 10% stock holding at the end of 2020. Vivendi of France remains the majority shareholder in UMG, which is based in Los Angeles.

A unit of TikTok’s owner ByteDance is currently suing Tencent in China over alleged monopolistic behaviour, and further tension between the two groups seems likely.

TikTok said on Monday that its new deal will help UMG’s recording artists and songwriters and develop a “collaborative roadmap for developing and launching innovative experiences uniquely centred on expression and enhancing connections between UMG’s artists and the music community from TikTok.”

Ole Obermann, TikTok’s global head of music, said: “Our platform has been a driver in creating chart hits and licensing the world's biggest catalogue of tracks will continue to inspire our community.”

TikTok’s aggressive expansion steps indicate that the firm is increasingly confident that it will be able to manage the political and regulatory risks from continuing tensions between the US and China.

TikTok effectively managed to sit out the threat from former US president Trump’s direct attacks on the company, such as labelling it a security threat to America and trying to force a sale of a major stake to Oracle and Walmart.

A ban on TikTok access via apps that was proposed by the Trump administration was rejected by a number of US judges in court hearings in late 2020, removing the most serious threat to its US business prospects.

TikTok still faces the threat of changes to its regulation from multiple sources, including the European Union and India, as well as the US.

And the new Biden administration has indicated that it will continue to take a tough line in its dealing with China, including in potential disputes over digital markets.

But direct attacks on TikTok and other Chinese firms appear to be less likely than they were under Trump, which will allow TikTok owner ByteDance and other companies to take calculated business risks in the US, in the hope that a ‘new normal’ of relations with China will emerge.

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