TikTok Looking at Ways to Shake Off Its Ties to China

TikTok this year made history as China’s first social-media company to make it big in the U.S. Now, TikTok wants to shed its label as a Chinese brand.

As TikTok faces mounting scrutiny from U.S. lawmakers and regulators, some employees and advisers in recent weeks have approached senior executives to suggest ways the company could rebrand, according to people familiar with the discussions.

Ideas discussed include expanding operations in Southeast Asia, possibly Singapore-which would allow executives to distance the video-sharing app from China-and rebranding it in the U.S., the people said.

Meanwhile, TikTok has reduced the amount of content from China that appears on the app, hoping to minimize reminders of its Chinese roots to American users, according to people familiar with the company’s practices.

Some investors in TikTok’s parent company, Beijing-based ByteDance Ltd., acknowledge that an attempt to set the app apart from China could be difficult to execute and that some of the ideas are long shots at best. But the discussions reflect how TikTok’s meteoric rise is under threat and how some close to the company increasingly view the company’s Chinese ownership as a liability.

One reason behind the concern: ByteDance’s investors, including Sequoia Capital and SoftBank Group Corp. , view growth in the U.S. as key to achieving their goal of an initial public offering late next year, people familiar with the matter said.

ByteDance was most recently valued at $75 billion, making it one of the most valuable startups in the world.

A ByteDance spokesman said an IPO isn’t the company’s focus, and moving TikTok’s headquarters to Singapore isn’t under consideration. He said there is no discussion to change TikTok’s brand name. He also said the company doesn’t determine how much Chinese content is on the app because users, not TikTok, upload videos.

“It is well-known that ByteDance was founded in China,” he said. “But the reality is that the TikTok app does not operate in China, and we have been further building out and empowering teams in the markets where it does operate.”

ByteDance operates a version of TikTok in China under a different name, Douyin, and the head of TikTok is based there, although the company’s website doesn’t list any offices in China.

For TikTok, the challenge is that many lawmakers and regulators-and some parents-are wary of the potential for the Chinese government to demand information about the app’s users any time. Increasing the tension between the two countries is the trade war.

“We are stuck in between,” one ByteDance employee said. “We are a Chinese company, and we do business overseas.”

ByteDance isn’t the only company in this position. Since a 2018 law expanded the power of U.S. regulators to limit foreign access to technology deals, other Chinese companies have tried to find ways to manage or work around these new restrictions.

When ByteDance in 2017 bought Musical.ly, the small social-network in the U.S. that morphed into TikTok, most Americans hadn’t heard of it. ByteDance poured money into promoting TikTok on popular apps in the U.S., and as of earlier this year, more than 100 million Americans had downloaded the app.

That popularity sparked a backlash. After several senators expressed concerns that TikTok was censoring content to appease Beijing and collecting data about American users, the U.S. launched a national security review.

“TikTok claims they don’t store American user data in China. That’s nice. But all it takes is one knock on the door of their parent company, based in China, from a Communist Party official for that data to be transferred to the Chinese government’s hands, whenever they need it,” Sen. Josh Hawley (R., Mo.) said during a hearing on data security in early November.

TikTok has said it stores data on American users in the U.S. and Singapore, although its website says the app may share user information with ByteDance.

“The Chinese government has never asked us to provide access to any TikTok U.S. user data, and we would not do so if asked,” a ByteDance spokesman said.

TikTok’s perception as a home for goofy and harmless content also took a blow when The Wall Street Journal reported last month that Islamic State was posting propaganda videos on the app.

In China, Uighur Muslims have used Douyin to post videos that call attention to Beijing’s mass-internment campaign. Chinese laws require Douyin to delete any content that expresses political dissent; however, the videos appeared to slip past the company’s censors. Many have since been deleted.

The U.S. represents a small portion of the company’s business: About 4% of users of TikTok and its Chinese version, Douyin, are in the U.S., according to a former employee. The U.S. business is operating at a massive loss, the former employee said.

Yet ByteDance’s investors are eager to pitch it as the parent of the first social-media company to get big in China and the West, according to a former executive. “Without the U.S., it’s not global,” this person said.

Investors also fear that if the U.S. forced ByteDance to divest itself of TikTok or cease U.S. operations, other countries that have expressed concerns about TikTok, such as Japan and India, also could decide to take action, according to people familiar with the matter. They say TikTok could weather losing access to the U.S. market, but the loss of multiple countries would be devastating.

TikTok has continued to spend heavily to grow in the U.S., both to the delight and consternation of its U.S. rivals. It has spent hundreds of millions of dollars on ads on Snapchat and Instagram, bringing both companies significant revenue but also raising concerns around Silicon Valley about heightened competition.

“They operate out of China under a completely different set of rules,” longtime Facebook Inc. executive and head of Instagram Adam Mosseri told sports podcaster Bill Simmons in October. Mr. Mosseri also criticized the company for cloning Musical.ly, then buying it and renaming it TikTok.

The ByteDance spokesman pointed out that Mr. Mosseri’s Instagram was itself bought by Facebook. “There is some real lack of self-awareness here,” he said.

Instagram last week unveiled a TikTok-like product called Reels, which follows Facebook’s attempt to launch a TikTok clone late last year with an app called Lasso. That app has yet to gain traction. TikTok allows users to share and view short videos that are typically less than 15 seconds long.

Meanwhile, rivals of the Chinese version of TikTok are preparing to pounce. Tencent Holdings Ltd. recently told employees its new priority is to aggressively take on Douyin, according to a person familiar with the discussions. Tencent also has allocated an unlimited budget to its own short-video app Weishi, the person said.

On a recent call with analysts, Tencent President Martin Lau said the company plans to back Weishi with “a lot of marketing and content dollars,” and described it as the tech giant’s flagship short-video app.

One complicating factor for ByteDance is that it doesn’t want to upset the Chinese government, according to people familiar with the company’s thinking. Like other Chinese technology companies, ByteDance relies on the government to issue licenses to run its business. When government ministries ask, it runs ads on its apps in China at no cost to promote government events, one of these people said.

ByteDance also hands over certain user data, such as telephone numbers and national ID numbers, to Chinese police, but only when presented with a document-a request of evidence-showing the user is suspected of having violated local law, the person said.

A spokesman for ByteDance said the company follows local laws and regulations in the markets in which it operates. Regarding the ads, he said some of ByteDance’s Chinese apps do provide free public service announcements in certain cases, but that it is consistent with other civic engagement across other apps including TikTok.

ByteDance appears to be asserting some independence. When protests broke out in Hong Kong in June, ByteDance initially had a policy of restricting content about the protests across all of its apps, including TikTok, a person familiar with the matter said. That changed over the summer, when the company’s policy team decided to more closely tailor TikTok’s practices to individual countries’ laws and regulations, the person said. The move left some people in ByteDance concerned that it would irk the Chinese government, according to the person.

A former employee in TikTok’s Los Angeles office said it would be hard for the company to shake off its roots. “We’re a Chinese company,” this person said. “We answer to China.”

By Georgia Wells, Yoko Kubota and Kate O’Keeffe