 Welcome back to the end of the week podcast and we are going to talk about one of the major headlines in Global news this week, and we're not going to talk about inflation. I said to Pierce He raised the topic of inflation because we had US inflation earlier this week Big event for markets and I slapped him down. Well, but now now you've now you've mentioned it We're gonna talk about it And we're not I'm sure people follow our social fees know all about the fairly boring inflation reading we had out of the US So we're gonna skip over that we're gonna talk just about tick tock and Not because either peers or I are Content influences on tick tock far from it But we definitely want to talk about this because it's interesting from lots of different things. It's interesting from a Technology company perspective. It's interesting from potential M&A perspective From a national security perspective from politics politics as well So there's a lot of angles to this story that I think warrants a thorough discussion on it So the headline is that the house of representatives Passed a bill on Wednesday this week that would require the tick tock owner bite dance to sell the social media platform Or face a total ban in the United States. So what I wanted to discuss with you Pierce is Firstly, why they being banned? How might that ban work in practice? What would it mean for actual users of tick tock is? tick tock a national security risk and can tick tock do anything to stop this ban and Any signals here from Trump about what might come down the pipe Towards the end of the year. So yeah, yeah, why are they being banned? Well because the US house of representatives Believe that tick tock which is owned by bite dance, which is a Chinese tech giant They're worried really about two things about security of data Does the Chinese government use and spy on American citizens? By having access to bite dance Data that's number one and number two Does it have an outsized influence on shaping people's opinions in America? With obviously an election year now here Obviously that then that that fear, you know bubbles right up to the surface. So those are the kind of two main Sort of incentives here as to why the American politicians are starting to try and take some action And using that app to Influence people's decision-making Did you know the stat of what the average user daily active user time on tick tock is what do you reckon? Well, I do know this it's actually I've got the global average and I've got the US average Okay, that's interesting. Which one of you got global Yeah, I'm not sure actually see you take the lead on this. Okay, so the global So the amount of minutes spent by a user on average, but this is kind of crazy stat but entirely believable It's 95 minutes per day. I mean That's that's insane. And so what next question then so what's the average length of a clip? So 15 seconds 30 seconds. So to watch 95 minutes Wow, I don't know what I don't know what you I don't know if you use tick tock that much But I use it. I mean, I'm not not a 95 minute a day, man. I'm maybe a 95 minute a week, man And the stuff I watch it's much longer than 15 second It might be a few minutes some of the stuff I watch but but anyway 95 minutes right globally. What do you think the US? Average is I think it's going to be a lot higher You're incorrect you're wrong. I'm just gonna stop you there. Oh, right. Okay, it's actually luck Well, according to the stats that the FT of no actually was the economist pulled out this stat So I don't know what if this is right, but look they're a decent source in terms of their credibility So they're saying 56 minutes a day for Americans versus 95 as the global average Hmm, sorry surprised by that. Yeah, but there's a hundred, but I guess there's a hundred and seventy Million Americans, it's basically half of the American population And given I mean, I don't know what percentage of the population don't own a smartphone, but obviously the kids I mean, wow kids get phones Pretty early on these days, right? But I don't know what the proportion of the population is let's say under 10 years old They're they're they're obviously not having a phone. So it's those that have phones It's we know well over 50% of the population that have tick tock are a tick tock user That is and so I guess yeah, that I mean we could tackle that You know an outsized influence on shaping public opinion What I found hilarious, I mean such a I mean couldn't have backfired Anymore so the House of Representatives So maybe we should take a step back for a second for these for anything to be Voted as a new law in America. There's kind of three pillars to their system Okay, it's the it's the House of Representatives. It's the Senate and then it's the president right the White House and any bill Needs to be voted through by all three parties Okay, now we know for sure Biden is all over this. This is Biden's bill So you've got that you've got the White House in the bag. They will sign this off Okay, the Joe Biden will sign this off the House of Representatives so they Announced that they were going to vote on this bill on the 13th of March. Okay on the 6th of March and remember One of the things that the Americans worried about is tick tock influencing public opinion So what did tick tock do to try and stop this happening on the 6th of March? They sent a notification to their users Encouraging all of them to call their own members of Congress to try and convince them not to vote so and there were loads of Congressmen that were on the fence here not quite sure what to do and then they saw that They absolutely do have an influence. This is the evidence of tick tock influencing a vote and so that's why actually turned out to be a landslide Vote through I mean it got voted through 352 to 65 so this was a big bipartisan, you know almost fully backed bill in the House of Representatives and tick tock a massive own goal in their attempt to try and influence it and So just to be clear here, I mean one of the things that the National Security Advisor Jake Sullivan in the state said is that the goal is ending Chinese ownership Yeah, actually banning tick tock because I think the headlines are all like we're gonna just ban tick tock Yeah, well, there's two So I guess there's two Solutions if this so well hang on before we talk about that I Talked about the three pillars, right? So Biden's gonna sign it the House of Representatives They've already signed that off, but there's still that third hurdle to get over this now goes to the Senate And it hasn't been voted through there yet only if it gets voted through the Senate will this actually will this bill pass? There's then still a legal a potential legal Challenge that tick tock can present. Oh, you know around, you know freedom of speech and this kind of stuff but but will the Senate vote it through is really the next question and Here it I mean obviously you look at that House of Representatives result and you think well surely it's just gonna sail through but There's a certain guy who's who's trying to put a spanner in the works on that with his own influence Right. Well, exactly. So basically and this is absolute classic Trump so I'm talking about Trump here because I mean I don't know you got you got to go back, but It was Trump himself that Basically in back in 2020 for national security reasons was forcing bike dance to Divest tick tock and so therefore this is one of the options right tick tock the US part of the business Bike dance sell it to a US buyer. Okay, and Trump was forcing this in 2020. So Trump himself Was doing this now here. We are in 2024. What's Trump saying the exact opposite? Trump has now come out in opposition to this idea. Why? because he's self-obsessed He has Billionaire backers who are bike dance shareholders. So self-obsessed right basically you'll remember the January 2021 riots on Capitol Hill in Washington and obviously Trump Has been accused of inciting those riots. Okay, and in response to that he got the platform He got cancelled and meta Banned him from all of their platforms. Okay. Now who would benefit? from tick tock basically closing in America who who is Ticktocks biggest rival. Well, it's meta right and it through Instagram And so who would benefit if tick tock suddenly vanishes while meta and Instagram would be the beneficiary But here's Trump saying and he actually he said it who would bet Trump himself has said who would benefit the most It'd be meta And so I don't think this should happen. But basically Trump say forget about national security now He just wants revenge Secondly there's a guy called Jeff Yass He's the owner billionaire owner of an investment firm called Susquehanna And he's a big donor to Trump Susquehanna happens to be one of the biggest stakeholders in bike dance So of course who else would would would get damaged here as shareholders of bike dance. So Yeah, it seems like Donald Trump is playing his self-obsessed sort of game here and coming out in opposition Despite he was on exactly the opposite side of the argument four years ago So so that so the timing here seems particularly interesting because we have got you know The clock is ticking now down to the US election and these things like you said There can be legal challenges and so forth. They can get dragged out for a prolonged period. So yeah It will be interesting if I were if I was advisor to Trump What I'd be saying is right. We need to be having some backdoor meetings with Republican Representees in the Senate and saying to them right we are clearly going to win this election And I want you beside me when that time comes So you're going to do this which is you're you're not going to ban it. You're going to vote against it And he will have his way. So yeah, I don't know this seems when you explain it like that particularly with the backing Factor You know choice or no choice. I mean if he serves his own Personal agenda. He just wants power to be president Come what may everything else is in consequential. I think that could be said of most politicians Yeah, in in that way. So yeah, I just wonder whether that actually is the secret here That's going to mean that this actually doesn't manifest into what a lot of the headlines are suggesting Yeah, indeed But look, let's just say it does right. Yeah, let's just say Trump fails to influence this and actually the senate voted through and let's just say I mean, well, actually, let's just make another point here The timing as you say is key given the elections in november, but Biden's obviously wanting to get this done like Before the election. I think biden sees this as a real positive thing you know possibly in terms of his election race, but Even if that yeah, go on. I just gonna say you said positive Well, I wonder like so the demographic you said that okay, let's let's strip out the bottom end So anyone younger than 10 Any old school people who are not so sophisticated with their phone? So there's a large proportion of people who who are tiktok users using it for an hour. You said in the u.s if you ban it I wonder, you know, if you I wonder how much of a deciding factor that is if you're Impartial neither this way or that But you have a reason then to vote because you're like, I want to use tiktok not thinking about the bigger picture I wonder if that could just be a catalyst to tip the balance Yeah, indeed. So there's definitely a risk here for biden But anyway, it seems like he wants to ram this through asap But look then there could be a legal challenge and you know how long that could take So chances of this getting done before november. I don't know it's probably unlikely, but um You never know but look, let's just say let's just say it happens, right? Then bite dance have got Well, they've got two choices One they spin it off and sell it and then obviously that would be their preferred choice because the second choice Is well if they can't sell it then well They'll have to close it down, right now from a you know, well, how much is this worth to bite dance? Well, it's hard to get data on this to be honest, but bite dance We know that they as a whole business generated 110 billion of revenue in 2023. Okay Now it's believed that about four fifths of that Was domestic revenue in china. It's not just tiktok That they own they also own an app called doyen and then another one called taotiao, which is a news aggregator So they're obviously that they're a massive player in mainland china. So 110 billion 80% of that in china. So you got 20 left. So that's like 22 billion dollars, right off international revenue generated Now what proportion of that is in the us? I don't know But you know, it's it's it's gonna be I don't know. Let's just say I know The advertising revenue fits for tiktok us is 9 billion. I think I was going to say let's guess 10 billion. All right. So nine billions about About there. So it's a nine billion dollar company, but There's no point in them going well. Look, let's just spin off the american part because if this gets voted through Almost inevitably you're gonna find other us allies, you know other western countries doing the same I don't know if you're aware, but it's already happened. I mean india have already banned tiktok. This was actually back in 2020 this was that in response to Yeah, military skirmishes on the border with china And so one of the they're kind of one of the indian retaliations was to go look We're gonna ban tiktok here for national security reasons So it has happened already in india. Who's to say, you know, the uk europe who whatever right australia You know, who's to say that they're likely gonna follow, right? You would assume So I think for bite dance. I think this is more like well not spinning off the us part. It's really spinning off potentially you know x Mainland china part in a way So it gets really complicated here and that might complicate who the buyers might be But look, let's see Let's see who the buyers might be because you've obviously got the big tech giants, right? Because the point I guess is Let's just say it's 22 million revenue. All right outside mainland china. This is a big company We're not messing about here. Well, yeah, I read the figure that they were previously valued at around 300 billion Right, well bite dance the whole company or is that's that's the us tiktok Oh, so there's that I at the comment I had is the company I bite dance a previously valued the app That around 268 billion Okay, well, I think you can safely say we're talking north of 100 billion here valuation, let's just say roughly so who can afford that Not many right. I mean look the the biggest capital raise In history that that would like I'm pretty sure that would double The biggest deal like ever done. I think the sandia ramco deal What was that like 25 billion when they IPO'd I think and that was like one of the so anyway That immediately eliminates The vast majority. So you've got the big tech giants the problem there, of course alphabet and meta particularly We'll forget forget that because the antitrust regulators would block that because of the They already own a large portion of the advertising market, right? So They wouldn't allow alphabet or meta to come in and buy tiktok So then you've got the other big tech giants Who are potentials, but again, there's possible antitrust roadblocks so you've got amazon You've got Like apple and netflix and actually both those last two apple and netflix They were both sniffing around in 2020 on this deal when trump Said right less ban tiktok and forced them to divest it So both apple and netflix were interested and it would make sense like for apple You know, obviously we're concerned about iphone Sales growth. So this would be a very nice way for them to enter that, you know, social media Market that they've kind of missed out on netflix as well, you know Streaming subscriptions, you know, we're worried about growth on that. Um, so that makes sense Yeah, I guess one thing is is that In 2020 tiktok was like the emerging app Super like potential growing at an incredible pace And I think yeah, their revenues might have gone from I think us one to nine billion in the last four years yeah, but One of the things here would be a are you now going to pay too much because it's that much bigger and in b You're you're buying what appears to be a little bit like an app You know with with apps. I think you do always run the risk of with social media and You know the evolution the change that happens so quickly Yeah technology that you can fall in and out of favor Yeah, you know, it was only 12 months ago and we were kind of you know podcast title the deathbed of facebook and here we are You know, they are phoenix from the flames sort of scenario Yeah, um, and you know flipping this on its head a couple of stats here Because instagram overtook tiktok in new app downloads Last year and the percentages I think are quite Quite meaningful. So instagram's total number of app downloads grew 20 percent Last year. Yeah, whereas tiktok was up four percent So it's it has flipped quite a lot I think one of the major things that I've read about given that you know, my job is to do a lot of content Is this idea about Being able to have an achieve overnight viral success But how do you monetize that and you monetize it by converting your audience over to the more matured platform In terms of getting paid And then there's a couple of other things, you know, one thing that zuckerberg is great at obviously he's shown throughout his career Is basically pinching other people's ideas And the real Thing which they implemented Definitely has been a big game changer. Also instagram has benefited from bite dance. I don't know if you ever see on instagram You'll you'll see that they are there are tiktok watermarked videos that people share So again, this is all part of that transferring of user base from one platform to the other where actually It's almost again bite dance Almost shooting themselves in the foot allowing their content to just be used thinking that actually they're going to steal the user's back Yeah, it just hasn't happened. No, and it just hasn't happened So I just wonder then is you know, what is the appetite of big tech to even touch this thing Right. So you really make a very very good point, you know, you can list off all these big tech firms and yes, you could make a A business case as to why it might be a good Acquisition for an apple, let's say, but you're right if they wanted to buy them in 2020 Well, that'd have been a great Great time to buy them and they've obviously had explosive growth But here we are in 2024 It's a much mature asset and as you say the trends aren't good and in fact their user numbers declined So in quarter four of 2023 um They were down 12 million like and so when you start getting You know, you saw what happened to um the meta share price A couple of years back when they started to they almost looked like they'd reached peak usage And the user numbers started to decline and their share price got hammered So the current trends user trends for tick tock are not good And looks like meta has really Come back with their reels and stolen back the market There's another good point you made there, which is the demographic of the users So tick tock is incredibly narrow and concentrated on the younger end of the spectrum Whereas as we know Facebook kind of captures quite a multi-generational demographic because they have the facebook Platform, which is the old the old geezers like you and I and then you've got Um younger people who are still using instagram But one of the things here is because the two are so almost integrated that you get a blended usage case across People like you and I using insta as well as using facebook. Whereas would we use tick tock? I mean, I can say I never use it. I'm definitely I think I clock about one minute a month So I've got some interesting stats here on right Take the user Take the tick tock user base and what other apps do they use, right? So for example, the highest crossover is as you'd expect instagram So 80 percent of tick tock users also use instagram, right? next 78 percent of tick tock users use youtube Then it drops off quite sharp at 53 percent of tick tock users use x and this one really surprised me Only 35 percent of tick tock users use snapchat Apparently which like like what from what I see with my kids. They use tick tock and snapchat. That's it Forget about even instagram Um, so I was quite surprised that there wasn't much of a crossover with snapchat So what you're saying is there's not a lot of pickup then for these big tech firms. Well, yeah That's that appears to be the case so And I think the other are quite I haven't mentioned Microsoft yet But obviously as we've been talking about if you were an interested buyer in 2020 doesn't mean you're going to be an interested buyer in 2024 but microsoft were in 2020 they submitted a bid not just for the american Tick tock also the australian the canadian and the new zealand tick tock So they were trying to buy all of those but actually bite dance backed off the deal because might want to microsoft's One of the things with their bid is they wanted to take control of the apps data and the source code And bite ants were going whoa, whoa, whoa, you know, you're not having the source code That's sort of the kind of deal sort of I'm not sure if that would be too much of a deviation for microsoft's current strategy of I know there's ai integration into a lot of these platforms like tick tock and so on to optimize in certain ways But I think they're where that they're heading Is much more an enterprise scale. Yep And so I don't really see that strategically as a fit So there's one and I'm talking about microsoft by extension the the the x owner of Activision blizzard the founder a guy called bobby coty. Oh, yeah he apparently is trying Trying to convince sam altman to team up with him To try and raise some finance to uh to to to do this deal. Uh, so that's like an outlier So outside of the big tech you might not be interested anymore. Anyway, probably would get blocked by antitrust You know who's left with such a massive price tag And this is bite dance's issue. Um, and it might be that there aren't any buyers in which case well um Happy days for mark zuckerberg because do you want to know what happened in in india? So went pre tick tock being banned Insta so tick tock was the number one app download in india. Okay Instagram was only sixth on the list Of the most downloaded apps Then they banned it in 2020. Okay by 2021 instagram was number one Top downloaded app in the country. So it went from sixth to first As a direct result of tick tock getting removed from the equation. So There's a lot to gain here from yeah, so so how we're talking then is the likelihood of Um, the goal of ending chinese ownership and this us buyer coming in is pretty small So what about then let's say there is a ban What what does the ban look like? Well, it gets removed the app gets removed right from From app stores right so apple google yeah from google play and Just just gets removed. I mean, yeah, I mean like I mean, I don't know I mean this obviously has never happened right, but I don't know in terms of I assume due to apple have control over Can they just switch the app off? I mean you've obviously already got it downloaded on your own phone, right? Can they I guess I guess they can just switch it off on their end and it's not downloadable anymore Yeah, and I'm sure you can still use VPNs and so forth to bypass restrictions if you really wanted to access it And look, there are a lot of people like thinking about from the other side now There's a huge amount of americans who Who don't want to see this happen because they're very reliant on tick tock as a platform To reach their audience, right? So You know, there are people that would get You know, they'd be collateral damage here if they just suddenly pulled the plug overnight Yeah, I wonder then thinking as now an advisor to biden about this whole thing going back to the political angle Is the is one of the main Kind of Things that trump really leverages is china in previous election cycles So you kind of take that weapon away from him By you're the one who's being the aggressor saying, you know, we want to safeguard the american economy For the best interests of the u.s people And therefore we're being anti appearing to be anti china And then you kind of take that away and force trump to act on the other side So actually for biden, it's not really a case of this goes through this doesn't go through This is all just positioning For the election essentially Yeah, it's just yeah, I guess these candidates want to be They want to put themselves up as having opposing views and differences of opinion so that ultimately voters There's there's a different choice, right? And you and you I guess you pick aside um, so I guess trump now has to pivot from china to just Anti-wokeness and double down on that as a key issue and the di and all the rest of it will probably become more polarized Probably imagine. There are other things. I'm just looking here like bite dance. They have been trying to allay concerns you know around around the kind of The security risk so they've actually they've actually enlisted oracle, which is obviously a u.s company importantly um, so oracle they've got oracle into fence off and like ring fence data From american users so so they they they are trying to segregate the businesses but but ultimately I don't know if the lawmakers will ever be satisfied that that gets you know 100 bulletproof Done and and there'll always be that lingering risk I would suspect that no matter how much ring fencing might be going on There's always a there's always a hole in the fence somewhere When money's involved pierce there's always a hole to find But okay, so look you've heard pierce and I discussed this but we want your opinion On whether you think This will go through or not and tick so it will be banned in the states or not so On Spotify if you're listening i'm going to drop a poll It's going to be banned no ban Or if you listen to this and you've accessed it via linkedin or the other social feeds So drop us a comment and let us know what you think and if there's anything we missed and you want to add into the argument For or against then we'd love to hear But yeah, thanks pierce No worries. See you later