In the ongoing battle for control of TikTok’s algorithm, Oracle and ByteDance find themselves at odds with each other. As a potential partner and government proctor, Oracle’s relationship with ByteDance has soured, leading to distrust and adversarial behavior on both sides.

One major point of contention has been the placement of cameras in TikTok’s dedicated transparency center, with Oracle pushing back against ByteDance’s plan to position cameras above each Oracle employee’s workspace. This disagreement highlights the extent to which ByteDance’s algorithm and proprietary information are at stake. The draft agreement between the two companies, known as Project Telesis, not only outlines Oracle’s monitoring responsibilities but also grants them the power to suspend TikTok’s functionality in the United States if ByteDance fails to comply with the agreement. Overall, the relationship is strained, and the Battle for Control of TikTok’s Algorithm continues to unfold.

Table of Contents

Background

Introduction to TikTok’s algorithm

TikTok is a popular social media platform known for its addictive, short-form videos. The success of TikTok can be largely attributed to its algorithm, which uses artificial intelligence to curate a personalized feed of content for each user. This algorithm analyzes user behavior, such as liked videos and time spent on certain content, to determine the type of videos that will be shown to the user. It has been praised for its ability to optimize user engagement and keep users hooked on the platform.

Oracle’s involvement with TikTok

In 2020, when TikTok faced potential bans due to national security concerns, Oracle emerged as a potential partner to acquire TikTok’s operations. Under a draft agreement with the Committee on Foreign Investment in the United States (CFIUS), Oracle would become TikTok’s primary service provider and also act as a government proctor. This would give Oracle a significant role in monitoring TikTok’s operations and ensuring compliance with national security regulations.

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CFIUS agreement

The CFIUS agreement between ByteDance, TikTok’s parent company, and Oracle was intended to address concerns about the security of TikTok’s operations and user data. The agreement outlined the responsibilities and obligations of both parties in ensuring the protection of national security interests. However, the implementation of this agreement has faced controversies and tensions between ByteDance and Oracle.

Controversies and Tensions

Cameras in TikTok’s transparency center

One source of controversy between ByteDance and Oracle has been the presence of cameras in TikTok’s dedicated transparency center. This center is used by Oracle employees to review TikTok’s source code for influence operations and covert changes. The Chinese government reportedly required the installation of cameras in this center, which has sparked concerns about privacy and proprietary information. Oracle pushed back against ByteDance’s plan to place cameras above each Oracle employee, citing potential risks to their passwords and other sensitive information.

Untrusting and adversarial relationship between ByteDance and Oracle

According to multiple sources, the relationship between ByteDance and Oracle has become deeply untrusting and adversarial. Oracle’s stance towards ByteDance has been described as a “counterintelligence operation,” indicating a heightened level of suspicion and caution. This strained relationship has raised questions about the effectiveness of their collaboration and the extent of Oracle’s control over TikTok.

Oracle’s counterintelligence operation

Oracle’s approach to its partnership with ByteDance has raised eyebrows and fueled speculations about their intentions. Some within ByteDance suspect that Oracle’s actions are driven by financial motivations and an attempt to maximize their profits from the TikTok contract. These speculations have contributed to the distrust and tensions between the two companies.

Speculations about Oracle’s intentions

The nature of Oracle’s involvement and its potential influence over TikTok have led to speculations and concerns about Oracle’s intentions. Some speculate that Oracle may have ulterior motives beyond national security and could use its position of power to manipulate or control TikTok’s operations for its own benefit. These speculations highlight the need for transparency and accountability in the partnership between ByteDance and Oracle.

The Draft Agreement

Details of the Summer 2022 draft agreement

A Summer 2022 draft agreement between ByteDance and the Biden Administration, reviewed by Forbes, provided insights into the proposed arrangement between the parties. The agreement showcased the significant role that Oracle would play in monitoring TikTok’s operations and ensuring compliance with national security requirements. It detailed the responsibilities and obligations of both TikTok and ByteDance under the agreement.

Oracle’s power to determine source code compliance

One notable aspect of the draft agreement was Oracle’s power to determine whether TikTok’s source code matched ByteDance’s representations to the U.S. government. If Oracle found any discrepancies, it would have the authority to suspend TikTok’s functionality in the United States, potentially impacting its 150 million U.S. users. This power granted to Oracle raised concerns about the level of control it would have over TikTok’s operations.

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Government’s right to temporary suspension

The draft agreement outlined the government’s right to require ByteDance to temporarily halt TikTok’s functioning in the U.S. in specific circumstances. This right would be exercised if Oracle claimed that TikTok and ByteDance had not provided the necessary funds for Oracle to carry out its responsibilities. This provision emphasized the government’s role in overseeing the partnership and enforcing compliance.

Responsibilities of TikTok and ByteDance

The draft agreement assigned several responsibilities to TikTok and ByteDance. They were tasked with ensuring that Oracle fulfilled its duties, which included monitoring communication between TikTok and ByteDance. If necessary, TikTok and ByteDance were obligated to notify the government if Oracle failed to comply with the national security agreement. This shared responsibility highlighted the need for close collaboration and accountability among the involved parties.

Oracle’s Attempt to Acquire TikTok

Oracle’s bid to buy TikTok

Before Oracle agreed to partner with TikTok, it made an attempt to acquire the platform outright in 2020. President Donald Trump’s threat to ban TikTok in the U.S. unless it was sold to a U.S. company sparked a bidding war between Oracle, Microsoft, and Wal-Mart. Despite Trump’s endorsement, the Chinese government introduced export rule changes that required ByteDance to obtain a government license for the sale. Oracle’s bid ultimately fell through, resulting in a hosting contract instead.

Chinese government’s rule change

The Chinese government’s change in export rules played a significant role in derailing Oracle’s bid to acquire TikTok. ByteDance was now obligated to obtain a government license to sell TikTok’s recommendations algorithm, a pivotal component of the platform’s success. This rule change added complexity and uncertainty to the acquisition process and ultimately led to the hosting contract with Oracle.

Hosting contract as a consolation prize

With the acquisition plans thwarted, Oracle settled for a consolation prize in the form of a hosting contract for TikTok’s U.S. business. This hosting contract had the potential to generate significant revenue for Oracle, estimated at around $1 billion annually. It marked a shift in the partnership between Oracle and TikTok, with Oracle taking on a broader role beyond just hosting data.

Limitations of Oracle’s Control

Inability to change TikTok algorithm’s source code

Despite the significant responsibilities and authority granted to Oracle, the draft agreement explicitly stated that Oracle could not change the source code of TikTok’s algorithm. This right was reserved for ByteDance, which would continue to own and develop certain parts of the source code. This limitation aimed to protect ByteDance’s proprietary technology and ensure its continued involvement in the development of the algorithm.

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ByteDance’s ownership and development rights

ByteDance’s ownership and development rights over the TikTok algorithm served as a critical safeguard against Oracle’s potential control. By retaining ownership and development rights, ByteDance maintained a level of independence and influence over TikTok’s operations. This balance of power aimed to prevent Oracle from dominating or manipulating the algorithm for its own benefit.

Foreign legal and regulatory authorizations

The draft agreement emphasized the importance of obtaining all necessary foreign legal and regulatory authorizations for ByteDance and TikTok. This included compliance with licensing rules in China, where TikTok has a significant user base. The dynamic regulatory environment in China posed challenges for ByteDance, as licensing requirements could change unexpectedly. Navigating the licensing landscape in China required proactive efforts from ByteDance to ensure compliance.

Difficulties posed by licensing in China

ByteDance faced difficulties and potential risks in obtaining licenses in China due to unpredictable changes in regulation and the broader geopolitical context. The Chinese government’s control over licensing requirements and its influence over tech companies like ByteDance complicated the partnership with Oracle. ByteDance’s commitment to meeting licensing obligations in China added an additional layer of complexity to their collaboration.

Ongoing Negotiations

CFIUS ultimatum to ByteDance

In March, TikTok announced that CFIUS had issued an ultimatum to ByteDance: sell the app or face a ban in the U.S. This ultimatum highlighted the high stakes involved in the negotiations between ByteDance, Oracle, and the U.S. government. The ability to strike a favorable deal that satisfied both national security concerns and business interests remained a critical challenge for all parties involved.

Current status of negotiations with CFIUS

The current status of negotiations between ByteDance and CFIUS remains unclear. Conversations are ongoing, but the details and progress of these negotiations have not been publicly disclosed. As ByteDance and Oracle navigate the complexities of their partnership and address national security concerns, the future of TikTok’s operations in the U.S. hangs in the balance.

Additional comment from TikTok

TikTok spokesperson Alex Haurek provided additional statements regarding the relationship between TikTok and Oracle. Haurek clarified that the presence of cameras in TikTok’s transparency center was part of standard physical security protocols to protect intellectual property. He also stated that Oracle would have complete freedom to conduct its code review confidentially and that the video feed from the cameras would not leave the Dedicated Transparency Center. Oracle and the U.S. government declined to comment on the matter, leaving many questions unanswered.

In conclusion, the partnership between ByteDance and Oracle to address national security concerns surrounding TikTok has been characterized by controversies, tensions, and speculations. The draft agreement between the parties shed light on the significant role assigned to Oracle and the limitations imposed to protect ByteDance’s proprietary technology. As negotiations continue, the future of TikTok’s operations in the U.S. remains uncertain, highlighting the complex and ever-evolving landscape of technology, national security, and international business partnerships.