TikTok deal could hurt transfer of app’s core algorithms

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Deal negotiations for TikTok’s U.S. operations have hit a snag over the key question of whether the app’s core algorithms can be included as part of a deal, people familiar with the matter say .
The algorithms, which determine which videos are served to users and are considered TikTok’s secret sauce, were seen as part of the deal negotiations until Friday, when the Chinese government issued new export restrictions. of artificial intelligence technology, according to people familiar with the matter.

Now, the two sides are trying to determine whether the order means the algorithms need approval from the Chinese government for the transfer, and if so, whether Beijing will sign. The complexity involved reduced the chances that a deal could be reached anytime soon.
TikTok’s parent company ByteDance Ltd. has said it will comply with the Chinese government’s order and is trying to get clarification from Beijing on how to proceed with a sale if the new restrictions apply to its algorithms, some people said.

For bidders, the idea of ​​buying TikTok without the algorithms completely changes the outlook on companies’ bids, other people familiar with the situation said. They believe a big part of TikTok’s value is in the suggestion algorithms that keep users glued to the app.
An expanded version of this report appears on WSJ.com.
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