Caixin
Aug 07, 2020 07:27 AM
BUSINESS & TECH

TikTok Shifts Global Operations Base to Europe

TikTok will open a $500 million data center in Dublin in early 2022.
TikTok will open a $500 million data center in Dublin in early 2022.

TikTok, the popular short video app facing a looming ban or a possible takeover in the U.S., is shifting its global focus to Europe with a new $500 million data center in Ireland and a new headquarters in London.

In a blog post Thursday, TikTok’s Global Chief Security Officer Roland Cloutier announced plans to invest 420 million euros in building the new data center in Dublin. The center is slated to open in early 2022 and will house data from TikTok’s European users. Currently, the information is stored in the United States.

In addition, a person close to the senior management of the app’s parent company ByteDance told Caixin that TikTok picked London as its new global headquarters.

If TikTok can meet the regulatory requirements of European countries, which have the strictest regulations on data protection, it will be a direct demonstration that its data management is adequate and may defuse the risk of security challenge in the U.S., the person said.

ByteDance is in talks with Microsoft Corp. to sell a large portion of its overseas operations after U.S. President Donald Trump said he would block the app by Sept. 15 if it does not do so.

Meanwhile, U.S. Secretary of State Mike Pompeo declared an expansion of the Trump administration’s “Clean Network” program, which would require U.S. companies to remove “untrusted” Chinese apps like TikTok and WeChat from the country’s app stores.

The hostile environment in the U.S. makes it a reasonable move for TikTok to explore alternatives. TikTok currently has more than 1,000 employees in Europe, of which 800 are based in the U.K. and Ireland, according the company’s website. The company said June 29 that TikTok’s Irish and U.K. entities would take over management of European users’ personal data from the U.S. unit. With the new data center, the company will add hundreds of new jobs in Ireland.

Europe has been TikTok’s third-largest overseas market behind the U.S. and No. 1 India, which banned TikTok and scores of other Chinese apps earlier this summer. In 2019, TikTok ranked as the fourth-most downloaded nongaming app in Europe with 90 million downloads and $11 million of user spending, a 162.5% increase from the previous year, according to market research firm Sensor Tower.

As U.S. scrutiny increases, European politicians have been relatively conciliatory to TikTok. After Trump said he would ban TikTok, European governments including the U.K., France and Germany didn’t follow suit. Some European politicians even set up accounts on TikTok in an attempt to be accessible to young people.

Last month, French President Emmanuel Macron used TikTok for the first time. In a video filmed in the garden of the Elysee Palace, he congratulated French school graduates after their exam results. London Mayor Sadiq Khan and British Health Secretary Matt Hancock have posted videos on the app thanking health-care workers in the Covid-19 pandemic.

The U.K. and France have no plans to block TikTok in their countries, spokespeople for the governments said. A German government official said the country has seen no signs that the app poses a security risk and has no plans to ban it. A spokesman for British Prime Minister Boris Johnson said he hasn’t spoken to Trump about the issue.

A representative of France’s digital minister cited online hate speech and the protection of minors as the government’s main concerns about TikTok.

The British government called ByteDance’s decision to pick London as its global headquarters “a commercial decision” for the company. “The U.K. is fair and open for investment where it supports U.K. growth and jobs,” a U.K. government spokesperson said.

Ray Walsh, a digital privacy expert at British consulting firm ProPrivacy, said opening the door to TikTok seems likely to be move designed to allow the U.K. to regain some of the favor it lost with China due to its ban on Huawei gear in next-generation 5G wireless networks.

“With Brexit looming and a lack of trade deals in place, the U.K. appears to be scrambling to repair relations with the Chinese wherever possible,” Walsh told the Daily Telegraph.

But not all British politicians are so welcoming. Conservative lawmaker Bob Seely said even though the U.K. needs to reset its relationship with China and attract jobs, “we need to be careful that China does not start playing us off against the U.S. and other allies.”

As of June 15, TikTok had 5.4 million monthly active users in the U.K., 4.4 million in France and 5.5 million in Germany, as well as 3 million in Italy and 3.5 million in Spain, according to a survey by consulting firm Takesomerisk.

TikTok has also stepped up its lobbying efforts in Europe. The company hired policy experts in London, Dublin, Paris, Berlin and Brussels, to help it navigate the European legislative environment and get involved in policy debates, Politico reported last November.

“TikTok recognizes that Brussels is an exporter of regulation,” said Siada El Ramly, head of Edima, a Brussels-based tech lobby representing Facebook, Google and Twitter. “It’s a conversation they want to be a part of.”

But Europe is by no means an easy market. Despite the embrace by some politicians, the app has also come under scrutiny from the European Union’s data protection watchdogs, though no European countries have issued any formal warning or bans on the app.

The 27-nation EU has some of the strictest data-protection laws in the world. The General Data Protection Regulation gives EU authorities the power to fine companies as much as 4% of their global annual sales for violations. Global tech giants including Google and Facebook have been fined in the EU.

On June 20, the European Data Protection Board decided to establish a task force to investigate TikTok’s processing and practices across the EU. The move followed an investigation in May by the data-protection regulator in the Netherlands into the company’s policies to protect children’s data.

Elsewhere, TikTok is also facing uncertainty. Australian Prime Minister Scott Morrison appeared to rule out a ban on TikTok Tuesday, telling a U.S. security forum that there was “no evidence” the app was a threat to Australia’s security interests, though he warned that it “connects right back to China.”

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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