TikTok Had a Tumultuous Year. What’s Ahead in 2025?

Summary

WSJ Tech News Briefing: TikTok Had a Tumultuous Year. What’s Ahead in 2025?

Podcast Information:

• Title: WSJ Tech News Briefing
• Host/Author: The Wall Street Journal
• Episode: TikTok Had a Tumultuous Year. What’s Ahead in 2025?
• Release Date: December 31, 2024

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1. Introduction and Overview

In the December 31, 2024 episode of WSJ Tech News Briefing, host Julie Chang delves into the precarious situation surrounding TikTok in the United States. The discussion centers on TikTok's potential ban, the legal battles it faces, its strategies to navigate geopolitical tensions, and its broader business challenges as the company looks toward 2025.

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2. Legal and Political Battles Over TikTok in the US

Julie Chang opens the discussion by outlining the imminent Supreme Court decision on a law that threatens to ban TikTok over national security concerns, specifically its Chinese ownership. The proposed ban mandates that TikTok shed its Chinese parent company, ByteDance, failing which the app would be prohibited from operating in the US.

Georgia Wells, WSJ's tech reporter, engages with her colleague Bell Lin to unpack the intricacies of this scenario.

Key Points:

• Historical Scrutiny: TikTok has been under scrutiny since 2020 when then-President Donald Trump attempted to ban the app via an executive order, which was later overturned in court. This set a precedent for ongoing investigations into TikTok’s operations in the US.

• Current Legal Proceedings: The Supreme Court is scheduled to hear oral arguments just days before the proposed ban's enforcement on January 19th. The core legal question revolves around whether the ban violates the First Amendment.

Notable Quote:

"Trump recently asked the Supreme Court to pause this whole TikTok shutdown process, and he said that keeping TikTok operating would preserve the First Amendment rights for the tens of millions of Americans who are using TikTok."
— Bell Lin [02:50]

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3. TikTok's Strategies and Alliances

In a strategic move, TikTok's CEO has sought counsel from billionaire entrepreneur Elon Musk regarding navigating the incoming Trump administration's policies. Bell Lin elaborates on the significance of this alliance.

Key Points:

• Elon Musk’s Influence: Musk, known for his strong business ties with China through Tesla, presents a potential ally for TikTok. His involvement could influence the administration's stance given his unique position bridging American and Chinese business interests.

• Geopolitical Crosshairs: TikTok is navigating a complex geopolitical landscape, balancing American regulatory pressures and Chinese government interests, placing the company in a challenging position.

Notable Quote:

"If TikTok sees an ally in Elon Musk, clearly that's like a way to get to Trump. One of TikTok's challenges is not only do they have to satisfy kind of American concerns about their ownership, but any action TikTok takes also will have to ultimately get approved by the Chinese government."
— Bell Lin [03:26]

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4. Impact on Users and Operation

The potential ban’s implications for TikTok users in the US are significant. Bell Lin discusses how the ban might be implemented and its effects on the app’s functionality.

Key Points:

• Implementation of the Ban: If enforced, TikTok could remain on existing devices but would be delisted from app stores like Google and Apple. This would prevent new downloads and updates, leading to an outdated and potentially insecure app over time.

• User Base Reaction: Despite these looming threats, TikTok's predominantly younger user base appears largely indifferent to the national security debates, focusing more on the app’s content and community.

Notable Quote:

"Initially it would remain on devices where it's currently downloaded, but the app stores, so Google and Apple would have to delist it so they wouldn't have new people coming on."
— Bell Lin [04:32]

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5. Business Challenges and Growth

Beyond legal battles, TikTok faces internal business challenges that could impact its future trajectory.

Key Points:

• Slowing User Growth: For the first time, TikTok is experiencing stagnating user growth in the US, a stark contrast to its historically rapid expansion.

• Ad Sales Performance: Advertiser interest has plateaued, with ad sales meeting but not exceeding growth targets, indicating a potential saturation in the market.

Notable Quote:

"Slowing growth has been one of the issues for TikTok as a business... it's interesting to see that the company is also having to face some of the more cut and dry business challenges that other social media companies tend to face as they get bigger."
— Bell Lin [07:00]

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6. ByteDance's Valuation and Financial Implications

The financial health of TikTok’s parent company, ByteDance, is another focal point of concern.

Key Points:

• Valuation Drop: ByteDance’s valuation has declined to $300 billion, reflecting the heavy weight of geopolitical risks and regulatory uncertainties impacting investor confidence.

• Future Valuation Prospects: Should TikTok navigate the current challenges successfully and mitigate geopolitical tensions, there is potential for ByteDance’s valuation to rise. However, the path remains fraught with uncertainty.

Notable Quote:

"Valuation is how much this geopolitical risk has been weighing on some of its assets... if they found a way to remain in the U.S. that also seemed to satisfy other countries, we could expect to see their valuation grow even further."
— Bell Lin [07:52]

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7. TikTok's Status in Other Countries

TikTok’s challenges are not confined to the United States. The platform faces varying degrees of regulatory scrutiny globally.

Key Points:

• Canada's Approach: The Canadian government is attempting to shut down TikTok’s offices within the country while allowing the app to remain accessible to users, a nuanced strategy to mitigate geopolitical risks without outright banning the platform.

• India's Stance: India has previously banned TikTok, reflecting broader regional tensions and divergent regulatory environments.

• Global Implications: A US ban could trigger similar actions in other major markets like the EU, UK, and Japan, potentially crippling TikTok’s global operations.

Notable Quote:

"If the US market became like a bellwether, like a domino effect among other countries and other markets like the EU or the UK or Japan, then TikTok would have a really serious problem on its hands."
— Bell Lin [08:30]

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8. Future Outlook and Supreme Court Decision

As the Supreme Court prepares to hear the case, the future of TikTok hangs in the balance. Georgia Wells and Bell Lin emphasize the significance of this decision not just for TikTok but for the broader landscape of foreign-owned digital platforms in the US.

Key Points:

• Judicial Precedent: The Supreme Court's ruling could set important legal precedents regarding the intersection of national security and First Amendment rights in the context of digital platforms.

• Emerging Challenges: Regardless of the outcome, the rise of other Chinese apps means that the issues TikTok faces will persist, necessitating ongoing legal and regulatory evaluations.

Notable Quote:

"I'm keeping my eyes squarely on the Supreme Court because they've said they're going to hear the case... it's really interesting moment for Americans to watch the Supreme Court kind of grapple with a lot of these novel issues."
— Bell Lin [09:21]

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Conclusion

The WSJ Tech News Briefing episode provides an in-depth analysis of TikTok's tumultuous year, highlighting the multifaceted challenges the platform faces—from legal battles and geopolitical tensions to slowing growth and shifting valuations. As 2025 approaches, the Supreme Court's impending decision will be pivotal in determining TikTok's fate in the US, with significant repercussions for the global digital landscape.

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Produced by: Julie Chang
Supervising Producer: Katherine Milsop

Transcript

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[Julie Chang]

Welcome to Tech News Briefing. It's Tuesday, Dec, December 31st. I'm Julie Chang for the Wall Street Journal. We're hearing from our reporters and columnists about some of the biggest companies, trends and people in tech and what could be store for 2025. TikTok faces an uncertain future in the US the Supreme Court is set to decide whether a law that would ban the app over national security concerns violates the First Amendment. Oral arguments are set to begin days before the ban is supposed to take effect on January 19th. The law would ban TikTok if it doesn't shed its Chinese ownership. TikTok's parent company, ByteDance, has said that it can't and won't sell its US business. Last week, President Elect Donald Trump asked the Supreme Court to stop the ban from taking effect, saying he wants to pursue a negotiated resolution to prevent a nationwide shutdown of the social media giant. Meanwhile, TikTok has continued to accrue cultural capital, attracting the likes of politicians, legacy media outlets, and of course, influencers. But what could happen to the app in the next year? Our tech reporter, Georgia Wells covers social media and she spoke with her colleague Bell Lin about this. Here's their conversation.

[Georgia Wells]

So give us a bit of an overview of how we got to this point where TikTok is again fighting a ban or a forced sale in the.

[Bell Lin]

US so TikTok is owned by a Chinese company called ByteDance. And so basically for years TikTok has faced this scrutiny about its ties to China. And so even way back in 2020, Trump tried to ban TikTok with an executive order, but that fell apart in court. But that kind of set the stage for the scrutiny TikTok was going to be under kind of throughout its existence in the US and so for years they were negotiating with this panel called CFIUS that looks at foreign investment in the US and they were hoping to come to some sort of agreement with them, but that didn't happen. And then late last year and continuing into earlier this year, policymakers in Congress quietly put together this legislation to require TikTok's parent company to sell them or to face getting banned in this country.

[Georgia Wells]

And what about President Elect Trump nowadays? Where do we think he stands on a TikTok ban in the US or a forced resale?

[Bell Lin]

So Trump recently asked the Supreme Court to pause this whole TikTok shutdown process, and he said that keeping TikTok operating would preserve the First Amendment rights for the tens of millions of Americans who are using TikTok. So this is clearly quite a reversal from his stance towards TikTok way back in 2020 when he sought to engineer a ban.

[Georgia Wells]

Yeah. Another interesting sort of tidbit is that the journals reported that TikTok's CEO has sought Elon Musk's counsel on the incoming Trump administration. What's the significance of this?

[Bell Lin]

Well, it's super interesting because Elon Musk has, at a time when it's been really hard for many American business owners to do business in China, Elon Musk has done business in China through Tesla. And so Elon Musk has some of the strongest American business ties to China. And so we don't know what's going to happen. But if TikTok sees an ally in Elon Musk, clearly that's like a way to get to Trump. One of TikTok's challenges is not only do they have to satisfy kind of American, American concerns about their ownership, but any action TikTok takes also will have to ultimately get approved by the Chinese government. And so they're caught in this political bind, in this, like, geopolitical crosshairs. And Trump, potentially, if he's going to be an ally for TikTok, that could be really super powerful because there aren't that many prominent business people who have been successful or managed to do business and also, like, create strong ties in both countries.

[Georgia Wells]

That's right. And for American users, if a ban does happen, would the app just disappear?

[Bell Lin]

The way we understand it would be implemented initially is it could remain on devices where it's currently downloaded, but the app stores, so Google and Apple would have to delist it so they wouldn't have new people coming on. So initially it would be a regular version of TikTok on your phone, but they wouldn't be able to update it, so it would increasingly become old, clunky. And also when apps can't get updated, sometimes, like security flaws are discovered. So that can just be a thorny mess. So we don't know how that would look in the long term, but it wouldn't disappear completely overnight.

[Georgia Wells]

Right. But to your point, mess is still frustrating for TikTok's huge user base in the US and so far it seems like its base of mostly younger people haven't seemed too fazed about larger issues surrounding it. So potential user privacy concerns, a ban or a forced sale. What can you tell us about how users have responded to these things?

[Bell Lin]

Yeah, many of the concerns that the US Government has laid out are more around national security. So ways that they believe the Chinese government could lean on ByteDance or TikTok for user data is like one type of concern. And that's a concern that for a lot of regular users just doesn't resonate as a top of mind fear in their life. And so it makes sense to me that a lot of users are just kind of like shrugging in the face of these national security concerns. This has also been going on for so long with TikTok, these concerns about its ownership that for users, I think many of them have become sort of desensitized because back in 2020 we thought TikTok could go away instantly if Trump wanted it to. That didn't happen.

[Georgia Wells]

Coming up, what else 2025 might hold for TikTok? We'll find out after the break.

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[Georgia Wells]

What about the other challenges that TikTok has faced this year?

[Bell Lin]

Slowing growth has been one of kind of the issues for TikTok as a business, and it's sort of an unexpected thing for TikTok to face. Just, you know, when companies are young and entering a new market, they tend to expand really quickly. And so for the first time in TikTok's history, its user growth has started to stagnate in the US market. And also ad sales have been hitting growth targets but not exceeding them. So it's just like in the context of all these geopolitical issues TikTok has had to battle, it's interesting to see that the company is also just having to face some of the more cut and dry business challenges that other social media companies tend to face as they get bigger and run up against competitors.

[Georgia Wells]

Right. Its parent company ByteDance's valuation reached $300 billion this year, too. Any idea what that means for TikTok? One of the big questions about ByteDance's.

[Bell Lin]

Valuation is how much this geopolitical risk has been weighing on some of its assets. And so TikTok, with all of these question marks surrounding it, a lot of investors, they don't know quite how much less it's valued at. But if all of these geopolitical issues went away for TikTok, if they found a way to remain in the U.S. that also seemed to, like, satisfy other countries that might have similar concerns, we could expect to see their valuation grow even further. But it's a complicated thing for them to sort out.

[Georgia Wells]

And what about elsewhere in the world? Is TikTok facing similar sort of regulations or bans outside of the U.S. the.

[Bell Lin]

Canadian government took a different tact. So they're working on shutting down TikTok's offices in Canada while allowing the app to remain for users in the country, which is sort of an interesting way of trying to address geopolitical risk. And then previously, years ago, India banned TikTok from operating there. And so our understanding with the US market, at least previously, was that TikTok could survive without the US market. But if the US market became like a bellwether, like a domino effect among other countries and other markets like the EU or the UK or Japan, then TikTok would have a really serious problem on its hands.

[Georgia Wells]

And, Georgia, what are you keeping your eye on the most as we head into 2025 around TikTok?

[Bell Lin]

I'm keeping my eyes squarely on the Supreme Court because they've said they're going to hear the case about Whether or not TikTok should be banned or have a forced divestiture. And so this is a really interesting moment for Americans to watch the Supreme Court kind of grapple with a lot of these kind of novel issues. And there are also issues that aren't going to be going away because there's more and more popular apps that are coming out of China. And so to hear what the Supreme Court thinks about this ban will be really, really interesting.

[Julie Chang]

That was WSJ reporter Georgia Wells speaking with Bellyn. And that's it for Tech News Briefing. Today's show was produced by me, Julie Chang, with supervising producer Katherine Milsop. Thanks for listening.