TikTok tug-of-war ensnares app’s affable billionaire founder

TikTok founder Zhang Yiming built his tech empire by fending off giants like Alibaba and Tencent at home and humbling Facebook abroad. Now all that could get torn apart at the hands of the brawling, nationalistic leaders of the world’s two most powerful countries.

Zhang Yiming, founder and global CEO of ByteDance, poses in Palo Alto, California, US, March 4, 2020. (REUTERS)

TikTok founder Zhang Yiming built his tech empire by fending off giants like Alibaba and Tencent at home and humbling Facebook abroad. Now all that could get torn apart at the hands of the brawling, nationalistic leaders of the world's two most powerful countries.

US President Donald Trump hit TikTok in its most lucrative market Thursday when he moved to ban it -- along with Tencent's super-app WeChat -- in 45 days. That followed efforts by Trump to get Zhang to sell off TikTok's US operations to Microsoft or another American suitor by September 15. 

When Chinese President Xi Jinping's military became embroiled in a deadly border clash with India in June, a surge of anti-China sentiment led to the banning of more than 60 Chinese apps -- including TikTok in the country where it has the most downloads.

TikTok's success has made it a high-profile target for Trump, whose tough stance on China -- sparring on everything from trade to Huawei Technologies to the South China Sea -- is a centerpiece of his re-election campaign. 

Besides TikTok and WeChat, his administration has considered banning more Chinese apps, an effort to prevent Beijing from accessing data from Americans using tactics once championed by China.

Zhang, whose ByteDance Ltd. owns TikTok, was on the verge of building the world's third truly global advertising and social-media force. Now, pressure from Beijing and Washington has put that dream in peril, forcing the 37-year-old billionaire founder to make a decision rooted in politics not business. 

As anger mounts in China about Trump's attacks on TikTok, Zhang could even decide not to sell. TikTok said in a strongly worded statement Friday that it's “shocked” by Trump's ban and will pursue all remedies available, including through the US courts.

ByteDance's international adventures “are nice little jaunts, but losing a few overseas markets isn't an existential threat to the company,” said Michael Norris, a research and strategy manager with the Shanghai consulting firm AgencyChina. “But losing China and falling foul of the authorities in Beijing is.”

Zhang has never been one to do the expected. For years, he managed to remain independent from Alibaba Group and Tencent -- the twin suns of China's internet. His Chinese tech peers can't say the same. Ride-hailing giant Didi Chuxing counts Tencent as a major investor. So does food-delivery platform Meituan Dianping.

Zhang has made it clear he doesn't want to go down the same path. Responding to rumors in 2016 that Tencent was willing to buy ByteDance, Zhang wrote on social media that he didn't found his company just to become a Tencent employee. In the post, he quoted lyrics from the band American Authors, “So if I'm gonna go at all, go big or go go go, go big or go home.”

Born in 1983 in the southern city of Longyan, Zhang is the only son of civil servants. He studied programming at Nankai University in Tianjin. There he built a following on the school's online forum by repairing classmates' computers and also met his future wife. After graduation, he joined Microsoft for a brief stint, but later said in an interview that the job was so boring he often “worked half of the day and read books in the other half.”

Zhang started ByteDance in 2012, luring China's top engineers with hefty paychecks. One of the startup's first apps, Neihan Duanzi -- it means “implied jokes” in English -- used artificial intelligence to tailor a selection of memes to individual tastes. After attracting tens of millions of users and refining its AI algorithms with massive data, ByteDance used the same approach to create the news-recommendation app Jinri Toutiao, or “today's headlines.” It became ByteDance's first blockbuster hit.

It wasn't long before Zhang ran afoul of Beijing. In 2018 he apologized to regulators for spreading content not in line with “socialist core values” and shut down the joke app. “We profoundly understand that our rapid development was an opportunity afforded us by this great era,” Zhang wrote in an open letter. 

“I thank this era. I thank the historic opportunity of economic reform and opening; and I thank the support the government has given for the development of the technology industry.”

The mea culpa is an early example of the hoops Zhang has had to jump through to keep ahead of regulators, first at home and later overseas. He initially tried to push a Toutiao-style news app in English-speaking countries, but only became a serious rival to Facebook Inc. and Alphabet Inc. with short videos. 

In 2017, ByteDance purchased the lip-syncing app Musical.ly that later morphed into TikTok, a deal that has been under the review by the Committee on Foreign Investment in the United States, or CFIUS, for allegedly posing national-security threats.

TikTok soon took off globally, with more than two billion downloads to date, along with its Chinese twin service Douyin. The U.S. is TikTok's most lucrative market in terms of in-app spending and is grabbing ad revenue that might otherwise go to Facebook's Instagram and other social-media apps. Today ByteDance is the world's most valuable startup, with a valuation of as much as $140 billion. Last year, Zhang's company generated more than $3 billion of net profit on more than $17 billion in revenue, Bloomberg reported in May.

But amid growing concerns about Chinese power, TikTok has become an object of suspicion in several countries. The last thing Zhang wants is an outright ban in the US, where he has built up TikTok's operations, hired an American chief and reassured regulators that user data won't be shared outside the country. He has also stepped up lobbying in Washington, pledged to create 10,000 American jobs and created a $200 million fund to support U.S. TikTok stars. But these measures have failed to satisfy the Trump administration.

“Zhang is facing the same dilemma that both Chinese and U.S. tech firms face entering each other's market space,” said Kendra Schaefer, head of digital research at consultancy Trivium in Beijing. “Chinese platforms, including those run by ByteDance, are walking the same fine line domestically as many foreign tech firms do in China: placating regulators while attempting to innovate and stay profitable.”

The reclusive founder has expressed his frustration with U.S. authorities to ByteDance employees. In an all-hands memo on Monday, Zhang said he disagrees with CFIUS's demand that he sell TikTok's US operations. 

“We've repeatedly stressed that we're a privately run business,” he wrote. One day later, in another letter to China staff, he called the forced sale “unreasonable.” “But this is not their goal, or even what they want,” he said. “Their real objective is to achieve a comprehensive ban.”

Zhang can't count on the kind of support his countrymen have lavished on Huawei founder Ren Zhengfei, who is locked in his own battle with the Trump administration. Huawei is a bona fide national champion that builds state-of-the-art smartphones and networking gear. ByteDance makes consumer apps, however popular. Zhang even had to hide his posts on the microblogging site Weibo after his account was flooded with comments slamming him as a “traitor” for even considering selling to an American company.

Still, Beijing seems to have his back -- if only for geopolitical leverage. In a daily press conference on Friday, the Foreign Ministry blasted the US for “using national security as an excuse and using state power to oppress non-American businesses.” State newspaper China Daily had earlier called on ByteDance to defend its rights legally against what it described as a “smash and grab” by Trump.

When asked about privacy concerns brought by Toutiao hoovering up user data in 2015, Zhang told a panel in Shanghai, “Machines and algorithms will grow smarter, but they are always innocent.” 

When challenged by the moderator that he's the real boss behind the machine, Zhang replied with a chuckle: “I'm also always innocent.”