Storyboard18 | Simply Speaking: TikTok is surging. For Meta or Verse

This is significant for two reasons: Firstly, this stellar performance has punched the entrenched Silicon Valley social media giants in the nose and they are bleeding. Secondly, TikTok is seen as a danger to those who see the business as an extension of China’s new internet ambitions. It is an indication of the finesse with which China players can deal in such areas. The followership, brand appeal and gush of content has left everyone awestruck.

TikTok might be the easiest social act to be a part of but lurking under the simple interface is bleeding edge Artificial Intelligence which adapts and adopts content at a blinding pace. No wonder TikTok signed up its first 1 billion users double as fast as arch-rival Facebook.

In America, the average TikTok user, on a daily basis, spends 50 percent longer on the app than the typical user spends on Instagram. Powered by such reach and engagement, advertising revenues have surged. TikTok’s revenues are expected to reach $12 billion this year and $23 billion in 2024. Meta has been particularly hard-hit as tech stocks have taken a beating on flattish growth and privacy concerns and the firm is now seen as re-engineering its products to mimic TikTok.

But this success has raised a shrill alarm. There is continued scrutiny and concerns regarding the rise and rise of TikTok. What is the reason for such alarm?

The risk is privacy at minimum and national security at the other end of the danger spectrum. Simply put, China’s regime reserves the right to appropriate data from its companies. No one is exempt. Some have questioned these data concerns arguing that the average social user is unconcerned by privacy and most advertising models are based on companies reading data and usage. By this logic, the advantage of inside access is not new. Data is being analysed by all. How would it matter if it is one company or another?

They see TikTok as a publisher of harmless, even frivolous memes. Can world power be impacted by quirky dance moves?

But TikTok is not slapstick comedy and bad dancing alone. The bigger, material concern emerges with TikTok as an entertainment and news platform. TikTok is a news source for a quarter of all Americans and perhaps most of its youth. This deepens this sense of anxiety. The Chinese government actively meddles in domestic media; TikTok’s content creators are outside China, but the app’s algorithm is within Beijing’s sight. Given an adaptive, personalised feed, manipulation cannot be easily detected.

China knows that social platforms have clout, particularly in electoral systems. It recently classified content-recommendation algorithms as a key technology. The commercial implications for TikTok’s competitors are dire. Facebook's entire business is based on tracking users to feed its advertising machine and it is rolling in cash. Last year alone, the company made $40 billion in profit. But the key issue is a growth slowdown. Meta’s market cap dropped $230 billion in one day-the most ever for a publicly traded company — on account of privacy-linked constraints to its model. Apple took a lead in this matter and raised the privacy bar. So, the western tech bloc is hardly an indivisible monolith advancing its interests.

TikTok’s success is not a fluke. The social media app cuts through with relevant trends, unique algorithms and a diverse set of communities for every niche subject matter. Recent updates include interactive add-ons for in-feed ads and its own AR development platform — Effect House. This has made Meta and other smaller players doubt their technical skills as pertinent to where consumers see value.

Despite being banned in India, which has one of the largest markets for app installs in the world, TikTok was ranked third overall in Asia. It was number one on the App Store. Looking at US overall downloads, TikTok has been the top app each quarter since Q1 2021. The last app to beat TikTok was Zoom in Q4 2020. Also, since Q1 2021, TikTok and YouTube have been the top two apps on the US App Store each quarter. TikTok was also the number one app on Google Play for the third quarter in a row, with installs up 19 percent year-over-year.

Starting with the Trump administration, the United States is keen to box Chinese tech expansion. Be it TikTok or Huawei, they have moved proactively. Brendan Carr, one of the FCC's commissioners, shared — via Twitter — a formal letter written to Apple CEO Tim Cook and Alphabet CEO Sundar Pichai in late June. The letter pointed to reports and other developments that made TikTok non-compliant with the two companies' app store policies.

"TikTok is not what it appears to be on the surface. It is not just an app for sharing funny videos or memes. That's the sheep's clothing," he said in the letter. "At its core, TikTok functions as a sophisticated surveillance tool that harvests extensive amounts of personal and sensitive data."

Carr's letter, written on FCC letterhead, said if the Apple and Alphabet do not remove TikTok from their app stores, they should provide statements to explain "the basis for your company's conclusion that the surreptitious access of private and sensitive US user data by persons located in Beijing, coupled with TikTok's pattern of misleading representations and conduct, does not run afoul of any of your app store policies".

On July 16, it was announced that TikTok’s global chief security officer Roland Cloutier, who oversees cybersecurity, is stepping down from his role. TikTok has been reshuffling its global security team and moving China-specific security issues, including ring fencing it from ByteDance, to more localised teams. It recently announced a dedicated US data security team known as “USDS'' as a gatekeeper for US user information, minimising China’s access to data. The company is discussing a structure under which the team would operate autonomously and not be under TikTok’s control or supervision. TikTok, whose leadership is based in the United States and Singapore, is considering rolling out similar data security teams in other regions.

It is estimated that 44 percent of TikTok’s American users are under 25 (compared with 16 percent of Facebook’s). That makes the video app a hugely desirable and influential platform. It is moving beyond User Generated Entertainment Content to shopping and news.

Still, TikTok is but one small corner of a large Chinese strategic canvas. The Chinese are building their own internet, in a potential fragmentation that has been called the “splinternet”, an alternative cyberspace. The Chinese version of cyberspace would be a completely different digital architecture, complete with its own ideological governance and values incompatible with our own. It would herald the beginning of a new cold war-style split, between an ‘open and free’ and ‘controlled and compromised’ internet.

Digital China, like all the country’s national-level strategies in general, is built on Communist Party decisions, objectives, missions, projects, and priority areas of action. ‘New Type Infrastructure’ is one of Digital China’s major missions, one of three focused specifically on developing core technologies. The New Type Infrastructure has three main directions — information infrastructure, integration infrastructure and innovation infrastructure. This is a major mission designed to support national informatisation. It overlaps with two key focus areas, mastering core technologies and collecting cyber talent, from one of Digital China’s cornerstone strategies: to be a ‘Cyber Great Power’.

While the technical missions of Digital China are grand, the socioeconomic and geopolitical ambitions of Digital China are imperial in scope. This digital transformation encompasses digital economy, e-government, digital culture, smart society, and digital ecology.

The governance and control of data is a key focal point of Digital China. A new age Marxist economic system that had elevated data as the key factor of production joining labour, land, capital, and technology.

TikTok delights consumers and advertisers worldwide, but China’s regime cannot let surveillance and propaganda be beyond its limits of authority. How this will play out is a big deal for everyone.

In effect, TikTok is a test case for global business, global internet and global capitalism.