It’s undeniable that TikTok has been facing a whirlwind of challenges in the United States over recent months. After a series of rapid developments, the U.S. government has provided the platform with a 75-day period to comply with regulatory requirements. This comes amid ongoing discussions about the potential sale of TikTok’s U.S. operations, yet the valuation of the company remains a complex issue.
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Valuing TikTok: A Complex Puzzle Without Clear Data
Determining the value of TikTok is challenging, especially as partial divestiture is under consideration. The platform does not disclose detailed financial data, such as revenue or profits. Under these circumstances, Mark Zgutowicz, an analyst at Benchmark, estimates that TikTok’s U.S. arm could be valued between $40 and $50 billion.
However, this figure does not include TikTok’s key algorithm, which is central to the app’s success. According to Dan Ives from Wedbush, if the algorithm were included in the sale, the value of TikTok’s U.S. operations could soar to as much as $300 billion. In November 2023, ByteDance, TikTok’s parent company, offered to buy back shares from its U.S. employees at $160 each, thereby valuing TikTok in the U.S. at approximately $268 billion, reports Reuters. Yet, it seems unlikely that ByteDance would agree to sell its core technology, which has been integral to its rapid success.
Additionally, TikTok remains highly popular in the U.S., with 170 million users, making it the second most used social network in the country, just behind Facebook. Moreover, TikTok is expected to generate substantial advertising revenue, projected at $15.5 billion by 2025 according to eMarketer.
Could an Auction Be the Solution?
Following the pause on the ban, several prominent figures have expressed interest in purchasing TikTok. Among them are Larry Ellison (co-founder of Oracle), Elon Musk, influencer MrBeast, and Franck McCourt (owner of Olympique de Marseille), who proposed $20 billion for TikTok, a figure significantly lower than the $1 trillion valuation previously suggested by President Donald Trump.
However, Trump’s estimate is widely regarded as unrealistic. For context, Meta, the parent company of Facebook, Instagram, and WhatsApp, is valued at approximately $1.5 trillion globally. Moreover, the ban only affects TikTok’s U.S. operations, limiting its potential market value.
The Final Hurdle: The Decision to Sell
A significant barrier to the sale remains: ByteDance has not yet indicated a willingness to part with TikTok’s U.S. branch, casting uncertainty on the app’s future in the United States.
Beyond the financial valuation of TikTok, there is a significant geopolitical tug-of-war unfolding. Tensions between China and the U.S. over data security and the power of Chinese tech firms like ByteDance continue to be unresolved. In this context, the valuation of TikTok and decisions regarding its potential sale remain hotly contested topics.