Speaker 1: From the heart of where innovation, money and power collide
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Caroline Hyde and.
Speaker 2: Ed Louvelow live from New York.
Speaker 3: This is Bloomberg Technology. We are getting straight to our
Speaker 3: top story.
Speaker 2: Out of Washington.
Speaker 3: TikTok is at the US Supreme Court fighting for its future.
Speaker 2: Justices are hearing.
Speaker 3: Arguments only nine days before a federal law is set
Speaker 3: to ban TikTok in the United States if it isn't
Speaker 3: sold by its Chinese parent company. Bloemberg's Tyder Kendall standing
Speaker 3: by at the court and remind us Tyler, the key
Speaker 3: questions for the court is it national security versus free speech?
Speaker 2: Here?
Speaker 4: Yeah, hey, Caroline or all arguments here at the Supreme
Speaker 4: Court now just reaching about their one hour mark. Lawyers
Speaker 4: for TikTok started their opening arguments by saying that this
Speaker 4: is a First Amendment issue, arguing that if that band
Speaker 4: does go into place, it could potentially curtail the freedom
Speaker 4: of expression of it's more than one hundred and seventy
Speaker 4: million US based users. The lawyer for TikTok, arguing today,
Speaker 4: Noel Francisco, also added that the timeline for the ban
Speaker 4: is unrealistic and quote very difficult, asking the Court at
Speaker 4: the very least to delay the ban going into place.
Speaker 2: Now.
Speaker 4: On the other side of this is what you mentioned,
Speaker 4: the national security concerns. In a brief submitted to the
Speaker 4: Supreme Court today ahead of today's arguments, the US federal
Speaker 4: government says this is not about freedom of speech, since
Speaker 4: there is still a viable path on the table for
Speaker 4: TikTok to operate if they divest. Rather, they're not trying
Speaker 4: to restrict freedom of speech. They're trying to restrict what
Speaker 4: they call foreign adversary holding, considering bite Dance's connections to
Speaker 4: China and what that could mean to national security. Now,
Speaker 4: that appears to be the thread that we're seeing the
Speaker 4: support the Supreme Court justices pull on here, potentially expressing
Speaker 4: some skepticism when it comes to TikTok's arguments. For example, Caroline,
Speaker 4: the first question out of the gate from Justice Clarence
Speaker 4: Thomas was whether or not TikTok was trying to convert
Speaker 4: a potential restriction on byte Dance's ownership of TikTok into
Speaker 4: a restriction onto the freedom of speech of TikTok and
Speaker 4: its users.
Speaker 2: Tyler Kendall, We thank you so much.
Speaker 3: And look, just reading the tea leaves here shares of
Speaker 3: snap Meta on the higher side. It doesn't seem as
Speaker 3: though thus far the arguments are going in TikTok's favor,
Speaker 3: as has been on our tea live blog on the
Speaker 3: Bloomberg Frank McCord is with us to keep the conversation going.
Speaker 3: Executive chairman of the Court Global and founder of Project Liberty,
Speaker 3: which just made a formal offer to acquire TikTok. You
Speaker 3: call it the people's bid. Why is Project Liberty and
Speaker 3: your consortium the right owners if indeed bite Dance says
Speaker 3: it will divest.
Speaker 5: Yeah, Hi, Carolyn, how are you good?
Speaker 3: Good?
Speaker 6: It's I think we're the right buyers because we have
Speaker 6: put all the pieces together. We have the funding, we've
Speaker 6: worked through all the legal issues, We've put a formal offer,
Speaker 6: as you point out, right in front of Biteden, so
Speaker 6: they have something now to react to. And most importantly,
Speaker 6: we have the clean American tech stack to move the
Speaker 6: user base over to. And we don't need or want
Speaker 6: the Chinese algorithm. And so I think that the algorithm
Speaker 6: is something that China's very very beholden to and has
Speaker 6: it said clearly that they're not going to be selling it.
Speaker 6: We don't need it or want it, as I point out,
Speaker 6: So I think we're particularly unique bidder and well positioned,
Speaker 6: and I think as a matter of fact, we have
Speaker 6: the leading bidder right now.
Speaker 3: We were just seeing some of the share price reactions
Speaker 3: of rivals out there. From your reading into what's happening
Speaker 3: in Washington right now, does it look to be going
Speaker 3: in the favor you'd want to see, because would you
Speaker 3: actually like a delay to proceedings to be able to
Speaker 3: go forward with a.
Speaker 6: Bit, Well, we'd like to buy us TikTok, that's what
Speaker 6: we'd like to see as an end result, and move
Speaker 6: the user base over to this clean American stack. And
Speaker 6: I think that it's no surprise that the argument is
Speaker 6: going well for the government because this is a real
Speaker 6: national siksecurity issue, a strongly bipartisan piece of legislation that
Speaker 6: was passed by Congress upheld by the appellate court.
Speaker 5: So I think the.
Speaker 6: Conventional wisdom is that the government's position will be upheld,
Speaker 6: the legislation will will stay in effect, which means on
Speaker 6: January nineteenth, Byte Dance has to decide are they going
Speaker 6: to shut it down or sell, and in order to sell,
Speaker 6: they need to enter into an agreement, which is why
Speaker 6: we put a formal offer in front of them in
Speaker 6: the last twenty four hours.
Speaker 2: What is the price tag of that formal offer.
Speaker 6: So what we've said to byte Dance is we're not
Speaker 6: going to be talking about terms of the deal until
Speaker 6: we get into a formal conversation with them. And we
Speaker 6: want to be very very respectful of byte Dance because
Speaker 6: it's a very sensitive time here. We know they're arguing
Speaker 6: in front of the Supreme Court. We've given them space
Speaker 6: to do that, and at the point in time where
Speaker 6: we engage in an active negotiation, we'll be happy to
Speaker 6: share details once we sort things with them.
Speaker 3: Have you spoken to any of the current investors in
Speaker 3: byte Dance who are United States based, General Atlantic, Susquehanna.
Speaker 3: We also known that Sequoias involved KKR. There's a lot
Speaker 3: of them.
Speaker 6: Yeah, there are, and I believe we've spoken to all
Speaker 6: of them and they've indicated an interest in rolling over
Speaker 6: their investment. Why not, I mean, they don't want to
Speaker 6: lose their entire investment in us TikTok. We've put a
Speaker 6: real proposal forward which gives them value for us TikTok.
Speaker 5: Having said that, they too.
Speaker 6: Are waiting to see what byte Edance decides to do
Speaker 6: before committing.
Speaker 3: I'm really interested in the fact that investors are interested
Speaker 3: in rolling over. What value will you reccreate for the
Speaker 3: business going forward? Because you want as you've articulated a
Speaker 3: totally different tech stack, how will that change the use
Speaker 3: of TikTok? How will you monetize it as well? Because
Speaker 3: you want a different form of social media. You don't
Speaker 3: want us as content for the ultimate users and being
Speaker 3: advertised against.
Speaker 6: Yeah, well they'll be advertisement advertising on the new TikTok.
Speaker 5: Let's call it TikTok two point zero.
Speaker 6: But we see an Internet evolving where, rather than an
Speaker 6: attention economy, meaning algorithms designed to keep us addicted and
Speaker 6: online in a very unhealthy fashion, why not an intention
Speaker 6: economy where we just let people know we're interested in
Speaker 6: buying something or reading something, our information on something, and
Speaker 6: then we get that from the business or the advertiser.
Speaker 6: And inference is much less valuable than intention. So rather
Speaker 6: than have algorithms that surveil us, scrape our data, and
Speaker 6: then guess that we might want something, why not you
Speaker 6: and I just be very clear, you know, verify that
Speaker 6: we're a human being, and be very clear about what
Speaker 6: we want and then receive it On the Internet. We
Speaker 6: have technology available now that didn't exist twenty five years
Speaker 6: ago that enables you and I to actually control our identity,
Speaker 6: our data, and our relationships. So let's put people in
Speaker 6: charge of their data. Our data is very valuable, as
Speaker 6: it turns.
Speaker 3: Out, I mean, and that's why so much value has
Speaker 3: been accrued on a private market basis, at least to
Speaker 3: byte dance and to TikTok. But ultimately by not making
Speaker 3: these things quote unquote addictive, do you lose.
Speaker 2: Some of that value? And is that the right compromise here?
Speaker 6: Well, there are other factors here, right in the case
Speaker 6: of this Supreme Court hearing and the legislation that's being discussed.
Speaker 5: There are national security risks.
Speaker 6: There's also issues around safety to children. There are issues
Speaker 6: about a viability of our democratic system with such polarization.
Speaker 6: So the algorithms may be powerful, that doesn't mean that
Speaker 6: they're good or constructive. We just have an Internet technology
Speaker 6: that's evolved into one that's attention based, which means these
Speaker 6: platforms scrape our data. They aggregate it, and to do that,
Speaker 6: they're actually surveilling us, right, and then they profile us.
Speaker 6: And this is the problem with what's going on with TikTok,
Speaker 6: because it's not only the surveillance and the information on
Speaker 6: one hundred and seventy million people, it's that ByteDance can
Speaker 6: then provide what they want to feed to the one
Speaker 6: hundred and seventy million people.
Speaker 5: So it's an influence device as well.
Speaker 6: So I think we're all learning together that the current
Speaker 6: architecture which takes advantage of people is not the best architecture.
Speaker 6: It's leading to some very poor outcomes. This is just engineering.
Speaker 6: It's just it can be designed differently to work differently.
Speaker 6: We can get all the benefits we get from Internet
Speaker 6: technology without the harms.
Speaker 5: And it's interesting that this.
Speaker 6: TikTok problem could actually be the way forward to a
Speaker 6: much bigger solution to having an Internet that's much healthier
Speaker 6: for all of us.
Speaker 3: How has that got ramifications on meta on snow, which
Speaker 3: on the day are doing well because people feel okay.
Speaker 3: If TikTok loses this argument, it's out and then the viewers,
Speaker 3: the followers, the users just go to these other rival platforms.
Speaker 3: The money the advertising money goes to these rival platforms.
Speaker 3: Why are analysts like Morgan Stanley that have pointed this
Speaker 3: out not saying there's a legitimate bid here and we
Speaker 3: think this could be a whole new dawn future for
Speaker 3: social media.
Speaker 2: Why aren't people not taking that seriously?
Speaker 5: I think they'll begin to now.
Speaker 6: I think that BYT Dance has been playing out their
Speaker 6: legal strategy and it's coming to an end.
Speaker 3: Has been a good legal strategy from your perspective, Sorry,
Speaker 3: hasn't been a good legal strategy from your perspective.
Speaker 6: From the vantage point of looking at the legislation and
Speaker 6: how it was passed strong bipartisan legislation and the real
Speaker 6: national security risks. I think that the Byte Dance pursuit
Speaker 6: of a legal strategy was an uphill battle from the
Speaker 6: very beginning. And I think, as I say, it's coming
Speaker 6: to an end now that that's that path is closing
Speaker 6: down on them. Now they're confronted with January nineteenth, So
Speaker 6: we're talking about not nine days and something has to give,
Speaker 6: so either that it's going to be shut down or
Speaker 6: there'll be a transaction. That's why we put a formal
Speaker 6: offer in place so there's enough time for them to
Speaker 6: process that, and we hope they do because we want
Speaker 6: to see TikTok stay alive.
Speaker 5: We want to see it lit up. We don't want
Speaker 5: to see.
Speaker 6: It banned or shut down, just like President Electrump does not.
Speaker 3: We want to see about President Electrump and ultimately what
Speaker 3: January the twentieth means for all of this and the
Speaker 3: request he's made of the Supreme Court to just delay facts.
Speaker 6: Well, I think the legislation will operate. It will be
Speaker 6: the legislation and it's a hard and fast date of
Speaker 6: January nineteenth. So the timing here is very interesting, isn't it.
Speaker 6: President Biden will still be president. It doesn't get to
Speaker 6: President Electrump unless the ninety day of the three month
Speaker 6: extension kicks in. So it's a Biden administration decision to
Speaker 6: extend the timeframe for Bye Dance in TikTok, and then
Speaker 6: it gets coot.
Speaker 3: To allow some sort of delay, which many don't think
Speaker 3: will happen.
Speaker 6: Yeah, I'm assuming in answering your question that that won't happen.
Speaker 6: If it does, it's a different ballgame.
Speaker 5: I understand that.
Speaker 6: But you know, when you step back and think about this,
Speaker 6: why wouldn't Bye dance accept an offer. If it doesn't
Speaker 6: include the algorithm, they win. President Trump wins because it's
Speaker 6: not banned. The shareholders that you mentioned win they get
Speaker 6: value as opposed to getting nothing for us. TikTok Us
Speaker 6: citizens win because our clean stack will protect them.
Speaker 5: The national security risk has gone.
Speaker 6: And of course TikTok users win because the app stays
Speaker 6: in business.
Speaker 2: Why aren't there competing bids.
Speaker 6: The legislation requires that you have a clean stack. If
Speaker 6: this be independent of by dances technology, that's not an
Speaker 6: easy thing to do. If we hadn't been working on
Speaker 6: the technology and invested a half a billion dollars over
Speaker 6: the last five years, we wouldn't be in a position
Speaker 6: to bid. It's very serendipitous in a way that the
Speaker 6: work that Project Liberty has been doing to reimagine how
Speaker 6: the Internet works just so happens to be right place,
Speaker 6: right time to actually be the winning bidder for TikTok
Speaker 6: keep the app going, move the user base to a
Speaker 6: clean stack, and at the same time demonstrate to people
Speaker 6: that there's another version of the Internet where they're in
Speaker 6: charge of themselves. They own their data, they own their relationships,
Speaker 6: they can get value for it.
Speaker 5: They can parse out and permission.
Speaker 6: Its use as opposed to being surveilled and having the
Speaker 6: data be in the hands of someone else who's deciding
Speaker 6: what to feed them, what to tell them.
Speaker 2: Briefly, next steps for you.
Speaker 3: You've kind of given us your time today, But what
Speaker 3: happens after we start the arguments finish at the Supreme Court.
Speaker 6: I think we're all anxiously awaiting the Supreme Court to
Speaker 6: make their decision, and then we'll look forward to a
Speaker 6: conversation with ByteDance and see if we can.
Speaker 5: Get something.
Speaker 6: Completed prior to the nineteenth so that the Biden administration
Speaker 6: can get it this Roe month extension.
Speaker 3: Please come back if that conversation happens. Frank McCourt, executive
Speaker 3: chairman of McCourt Global, Founder of Project Liberty, and the
Speaker 3: beard on.
Speaker 2: The table for us TikTok.
Speaker 3: Coming up, we'll take a look at some of the
Speaker 3: tech themes dominating the deal sector in twenty twenty five.
Speaker 3: Maybe this is a deal we need to talk about,
Speaker 3: potentially a purchase of US TikTok with Barack ravin Is
Speaker 3: of Ey America's that's next.
Speaker 2: This is blue Meg technology.
Speaker 3: A quick check on the market, so look broader benchmarks
Speaker 3: are down today because the job's numbers were so hot.
Speaker 3: Once again, we question whether the rake cuts will come
Speaker 3: from the Federal Reserve or off by two percent on
Speaker 3: the NASDAP. But we want to shine a light on
Speaker 3: the key story in the Supreme Court today.
Speaker 2: TikTok fighting for its future.
Speaker 3: Meta platforms hire by five tens of percent, snap up
Speaker 3: seven point seven percent.
Speaker 2: This as investors tried to.
Speaker 3: Descend the Actually, some of the oral arguments thus far
Speaker 3: don't seem to be going in TikTok's favor.
Speaker 2: Let's just dwell on TikTok a little bit more, because
Speaker 2: couldn't it be a deal.
Speaker 3: To watch for twenty twenty five as we hear those
Speaker 3: oral arguments over in the Supreme Court, as we discern
Speaker 3: the future of TikTok and the United States tech deals
Speaker 3: continue to be really impressive as they were in twenty
Speaker 3: twenty four. Remember US volumes werep thirty two percent. Bak
Speaker 3: Revied is the man to ask ey America's strategy and
Speaker 3: Transactions technology sector leader joining us Now, Barak, I know
Speaker 3: you can't tell us about the intricacies of whether it
Speaker 3: or not we actually get a deal out of us TikTok,
Speaker 3: But have you been thinking through that particular deal. Is
Speaker 3: the deal outlook for tech a strong one?
Speaker 7: Yeah, Caroline, thank you for having me appreciate it. The
Speaker 7: outlook is actually very strong, and we feel generally pretty poor,
Speaker 7: I think on you know, you're obviously you're talking about
Speaker 7: TikTok today and it's a it's it's capturing a lot
Speaker 7: of the imagination. But you know, when we think about
Speaker 7: this deal, obviously we can't talk about it specifically, but
Speaker 7: if you think about any large transaction, obviously it gets
Speaker 7: very complex. And this is the kind of stuff that
Speaker 7: generally tends to move the market and tends to show
Speaker 7: that other M and A is possible and really can
Speaker 7: help ignite the market if it was to happen. But
Speaker 7: I do think that, you know, if we were to
Speaker 7: go through this, when we talk to our clients about
Speaker 7: complicated and complex carve outs, typically we talk about months
Speaker 7: and quarters in terms of timelines to getting it done,
Speaker 7: not you know, not generally not days or weeks, And
Speaker 7: so you know, to the extent that some of that
Speaker 7: work has been going on, that's that's fantastic. Depends on
Speaker 7: who the buyer is in terms of what the stack
Speaker 7: actually looks like, and how how capable they are to
Speaker 7: receive it. All of that, you know, will will drive
Speaker 7: the timeline here no matter what happens, and obviously you
Speaker 7: need willing buyers and sellers.
Speaker 3: Ultimately, this is a geopolitical discussion that drives the potential
Speaker 3: sale of TikTok. How much is geopolitics going to play
Speaker 3: into M and A into carve outs as perhaps relationships
Speaker 3: between the US and China become ever more tense.
Speaker 7: Yeah, that's a great question, Caroline. It's impossible to underestimate
Speaker 7: the impact that it already has had, in the chilling
Speaker 7: effect it has had, particularly when you think about big tech,
Speaker 7: particularly when you think about the semiconductor space, I think
Speaker 7: anti trust enforcement in the US, I think tariff wars
Speaker 7: or skirmishes or battles. However you define those between the
Speaker 7: US and China and potentially the EU and other countries,
Speaker 7: suddenly adds complexity to that. So when you think about
Speaker 7: big tech and semiconductors and social media getting caught in
Speaker 7: that crosshet, it really is a big has a big
Speaker 7: chilling effect on M and A More broadly, Now, if
Speaker 7: you think about the market more broadly than that ninety
Speaker 7: something percent of the market, it isn't really involved in
Speaker 7: that doesn't get caught up in that. So it's only
Speaker 7: the US anti trust enforcement which will matter to them.
Speaker 7: And if that kind of easies off under an incoming
Speaker 7: Trump administration, I think that's generally a nice tailwind for
Speaker 7: M and A going into twenty twenty five.
Speaker 3: And you said, of course there need to be willing
Speaker 3: sellers and willing buyers. What's interesting is we're talking with
Speaker 3: frant McCord is. He's got other in his combined concilidation
Speaker 3: of people coming forward to want to buy it, private equity,
Speaker 3: family offices. For you, who are the willing buyers? Is
Speaker 3: PE a big player here?
Speaker 5: Yeah?
Speaker 7: Pe, when you know, thinking more broadly about the market,
Speaker 7: PE definitely has a role to play, I think, whether
Speaker 7: it's in this deal and more broadly, you know, they're
Speaker 7: experts at getting deals done. They've seen all the most
Speaker 7: difficult deals, they've seen the easy deals, they've seen it all.
Speaker 7: They add balance sheet, they add availability of capital. So
Speaker 7: they are fantastic owners to be part of any kind
Speaker 7: of bid, particularly as a It's very complex, and I
Speaker 7: think the industry has a lot of experience in you know,
Speaker 7: looking at carve outs come you know, this would be
Speaker 7: effectively a carve out, and so looking at big carve
Speaker 7: outs coming out of you know, large enterprises. I think
Speaker 7: private equity has a very large role to play in that,
Speaker 7: whether it's this still specifically or more broadly, I think
Speaker 7: in general, PE is very interested in items that get
Speaker 7: carved out of larger take enterprises. Generally, their viewers that
Speaker 7: these are you know, these have been unloved a little bit,
Speaker 7: they're potentially undermanaged. This isn't obviously the TikTok example we're
Speaker 7: talking about here, but this is more broadly, and they
Speaker 7: do see it as an opportunity to create value and
Speaker 7: and and drive shareholder it time.
Speaker 2: You can have a busy year. Thanks for fitting us in.
Speaker 2: Eric Ravid of Ey America.
Speaker 3: I just want to check in on in video Stock
Speaker 3: right now because the company has been criticizing what we
Speaker 3: expect to be new export restrictions coming from the Biden
Speaker 3: White House ahead of any announcement that we expect later today,
Speaker 3: and video is saying it's trying to undercut the incoming
Speaker 3: Trump administration by imposing last minute rules. Bloomberg's Mike Shppard
Speaker 3: joins us a more in video setting off three percent.
Speaker 3: More to do with the macro jobs data, I'm sure,
Speaker 3: but tell us a little bit about what also could
Speaker 3: be a key headwind in terms of selling their devices worldwide.
Speaker 8: Well, this really would be a headwind, and it would
Speaker 8: come on top of other restrictions on AI chip sales
Speaker 8: in China and Video is already facing from the US.
Speaker 8: Those were imposed about a year and a half ago
Speaker 8: by the Biden administration. In this new set of proposed
Speaker 8: restrictions that could come in the next few days, this
Speaker 8: would add a velvet rope to the world where the
Speaker 8: US would be controlling access to these chips. It would
Speaker 8: be capped. Your access would be capped on a company
Speaker 8: and country basis, and the closest US allies, say Europe,
Speaker 8: the UK, Pan Australia, they would have the most and
Speaker 8: easiest access. Most of the rest of the world would
Speaker 8: face tougher restrictions. They would have to meet security requirements
Speaker 8: and also human rights requirements as well. And then there
Speaker 8: are a handful of US adversaries, namely China and Russia
Speaker 8: that would face the most restrictions in the least likelihood
Speaker 8: of having access to this sophisticated AI technology. That is
Speaker 8: coming from the US and principally from Nvidia.
Speaker 3: Mike, what is so fascinating is it hasn't even been
Speaker 3: announced yet and we've heard this strong response. I'm not
Speaker 3: aware of how often we tend to hear these strong
Speaker 3: rebuttals coming from companies, and video usually keeps relatively quiet
Speaker 3: about these political changes.
Speaker 8: You know, Carolyn, I'm glad you framed it that way,
Speaker 8: because this was a really unusual comment from Nvidia, and
Speaker 8: we also heard objections more broadly from the group here
Speaker 8: in Washington that represents the chip maker's industry, and they
Speaker 8: together were curative criticizing very harshly the Biden administration move
Speaker 8: ahead of its release. Seeing would be unnecessarily restrictive on
Speaker 8: whatever Trump may want to do is foreign policy, but
Speaker 8: it would also inflict wide pain on other parts of
Speaker 8: the economy. Think the gaming industry, think computing, and just think.
Speaker 8: Back in September, when he was asked by our own colleague,
Speaker 8: Tyler Kendall, Jensen, Wang said, look, we will abide by
Speaker 8: any restrictions and government policies, and now he is saying
Speaker 8: earlier this week he told our friend Ed Ludlow he
Speaker 8: is interested in meeting with Donald Trump, and so this
Speaker 8: would give them something very much to talk about as
Speaker 8: a new administration takes office.
Speaker 3: It would then Meg's Mike Shepherd across what we anticipate
Speaker 3: to be the latest amount of the announcement out of
Speaker 3: the White House. Thank you, Welcome back to Blue Meg Technology.
Speaker 3: I'm Karen Hyde in New York. A quick check on
Speaker 3: these markets. Look, I want to focus in on what
Speaker 3: has been a macro story of the day as well.
Speaker 3: Job's numbers really strong, two hundred and fifty six thousand added.
Speaker 3: What does that mean in terms of the Fed policy
Speaker 3: rate cuts on pause?
Speaker 2: Of course, growth stocks pull back.
Speaker 3: We're down one point nine percent on the NASDAK biggest
Speaker 3: drags to the downside, also Apple in Vidia. Of course
Speaker 3: we've got key nines on what is going to be
Speaker 3: announced from the White House in terms of further limitations
Speaker 3: on exports from Nvidia to the rest of the world.
Speaker 3: That's playing on the stock but on the upside. Key
Speaker 3: point driver on the green side is Meta and of
Speaker 3: course that is feeling into where our key story is today.
Speaker 3: TikTok what to expect today around what's happening over in Washington.
Speaker 3: Of course, the Supreme Court hearing arguments about the future
Speaker 3: of TikTok. That of course plays into Meta's hand if
Speaker 3: indeed TikTok is indeed banned. Let's get to Bloomberg's Kurt
Speaker 3: Wagner because it's interesting Snap and Meta trading higher. It
Speaker 3: feels as though in the court it doesn't seem to
Speaker 3: be going their direction for TikTok.
Speaker 2: Kert.
Speaker 9: Yeah, I mean, we're only halfway through right now. The
Speaker 9: lawyer for the creator aspect of the lawsuit is making
Speaker 9: his arguments before the court. But the first hour was
Speaker 9: TikTok's lawyer, and I listened to the whole thing. I
Speaker 9: don't listen to a ton of Supreme Court oral arguments,
Speaker 9: but I walked away feeling that TikTok's in real trouble.
Speaker 9: A lot of the justices did not seem convinced with
Speaker 9: TikTok's argument that this is a free speech issue. A
Speaker 9: lot of them push back on the idea that you know,
Speaker 9: it's not just speech, this is also a data in
Speaker 9: a security issue, and so they did not seem convinced
Speaker 9: from my opinion, as to what the TikTok lawyer was
Speaker 9: presenting this morning, and.
Speaker 3: Certain analysts Morgan Stanley, for example, have theorized what would
Speaker 3: happen if indeed TikTok is banned, money goes to Snap potentially,
Speaker 3: but the key winner is Meta YouTube. Can you spell
Speaker 3: out who the winners and losers are and what it
Speaker 3: means in terms of advertising revenue here?
Speaker 9: Yeah, I mean you hit the top three. I think
Speaker 9: Meta and Google and YouTube in particular are probably one
Speaker 9: A and one B there because they both have products
Speaker 9: in YouTube shorts and in reels at Meta that are
Speaker 9: you know, essentially TikTok clones, right, So if you are
Speaker 9: a TikTok creator, if you're a TikTok user, very easy
Speaker 9: to migrate to one of these other services, And they
Speaker 9: both have massive advertising businesses already, so I think they don't,
Speaker 9: you know, they don't have to do a lot different
Speaker 9: to really capitalize on the fact that all of the
Speaker 9: money that's currently going and TikTok will need to go
Speaker 9: somewhere else. So I think there's a very you know,
Speaker 9: obvious reason why MetaStock is up right now today. It's
Speaker 9: that people see there's a real potential for this mass
Speaker 9: migration of users from TikTok over to reels if indeed
Speaker 9: TikTok gets banned.
Speaker 3: Kut Wagner the the latest from the court and what
Speaker 3: it means for the rivals. We thank you more on
Speaker 3: TikTok's impact on the social media landscape. But please to
Speaker 3: welcome Spreta Coajuria, Will Research Global Internet Managing director who
Speaker 3: has thought long and hard about who the.
Speaker 2: Winners and the losers are.
Speaker 3: Schwetter just take us to what you're reading of the
Speaker 3: tea leaves of the arguments right now.
Speaker 2: It doesn't seem to look good for TikTok.
Speaker 10: I agree, first fall, thanks for having me. I actually
Speaker 10: listen to part of the argument this morning, and I
Speaker 10: know it's far from over. But my understanding from and
Speaker 10: I don't do a lot of these Supreme Court argument hearings,
Speaker 10: but I guess my understanding is that the TikTok lawyer
Speaker 10: did not come off convincing enough for the justices, and
Speaker 10: not only around free speech, but also around the privacy
Speaker 10: and security natural security of US citizens. So with that,
Speaker 10: why is we are already seeing stock reactions as it
Speaker 10: relates to the internet name Snap is up, as is Meta,
Speaker 10: and as is Google. Based on our research, we think
Speaker 10: that there is an eight to ten percent upside to
Speaker 10: metas earnings per share. That's quite meaningful because we think
Speaker 10: that over fifty percent of the time spent can actually
Speaker 10: be going to meta reels as the number one beneficiary
Speaker 10: for YouTube shorts, we think that about thirty to forty
Speaker 10: percent of the time spent on TikTok today could go
Speaker 10: to YouTube short and we think that there is about
Speaker 10: five to eight percent upside to YouTube's revenue. And then
Speaker 10: for Snap, part of the reason why it's trading up
Speaker 10: so much is because of the volatility around how much
Speaker 10: benefit Snap could have on a smaller base, and we
Speaker 10: think that it could be about five to ten percent
Speaker 10: of its revenue even if only ten to fifteen percent
Speaker 10: of the time spent today on TikTok goes to Snapchat Wow.
Speaker 3: And of course eyeballs and focus of a consumer means
Speaker 3: more advertising revenue. Ultimately, is that also how it's a
Speaker 3: portioned meta gets the bulk of the advertising revenue that
Speaker 3: currently is sent towards TikTok's direction, and then it's apportioned
Speaker 3: to YouTube and then Snap as well.
Speaker 10: That's exactly right, and what we're actually hearing from advertisers
Speaker 10: right now is that the budgets have actually not yet migrated,
Speaker 10: even with the upcoming risk of TikTok being banned. I
Speaker 10: think the advertisers want to see the ban being implemented
Speaker 10: and then transition the ad dollars in part with snap
Speaker 10: There will be integrations required for those advertisers who have
Speaker 10: not integrated with Snapchat just yet. But what we're also
Speaker 10: hearing is that that work has already begun Shutta.
Speaker 3: That's so interesting because if advertised, if marketers aren't changing yet,
Speaker 3: the reason is because there is one hundred and seventy
Speaker 3: million US users of TikTok who really like the product.
Speaker 3: And from that perspective, do you think that actually it
Speaker 3: does just overnight go away. Have you thought through the
Speaker 3: action of if indeed it is banned, what technically happens
Speaker 3: and if we see users migrade, how long that takes.
Speaker 11: Oh?
Speaker 10: I believe that it will be a moderately fast leak.
Speaker 10: I don't think it will be overnight that the advertising
Speaker 10: budgets will be shut down, in part because there will
Speaker 10: be still some TikTok users in the United States. I mean,
Speaker 10: you won't be users won't be able to download them,
Speaker 10: and service providers will say that we are not going
Speaker 10: to be supporting TikTok, but there will still be millions
Speaker 10: of users and eyeballs on TikTok platform, and the technological
Speaker 10: integrations of ad dollars going away from TikTok into meta
Speaker 10: may not all happen overnight, as advertisers still try and
Speaker 10: figure out how they want to shift their budgets and
Speaker 10: what kind of targeting they want to do, so it
Speaker 10: will be a slow lead. My guess is that it
Speaker 10: will probably take about a quarter or two before most
Speaker 10: of the budgets will move.
Speaker 3: At the start of the show, we had Franklin Court,
Speaker 3: junior joint of Project Liberty.
Speaker 2: He, as far as he's.
Speaker 3: Aware, has made the only bid for us TikTok, asking
Speaker 3: Byte Dance ultimately to sell, which they promised us far
Speaker 3: not to do. But have you thought through the likelihood
Speaker 3: of Bite Dance selling TikTok based.
Speaker 10: On the arguments of this morning, It did not sound
Speaker 10: like that would be a very high likelihood outcome, whether
Speaker 10: that was even a possibility in a ninety day window
Speaker 10: or even in a one hundred and eighty day window,
Speaker 10: So I would be very surprised. I would put it
Speaker 10: in a low probability scenario where that actually happens. I'm
Speaker 10: not sure if they actually want that to happen. If
Speaker 10: we're speculating, so to speak, on who the buyer could be.
Speaker 10: I mean, I wouldn't be surprised if Elon Musk makes
Speaker 10: a bid. He already has Twitter and he has the
Speaker 10: resources to do so too. But I just don't think
Speaker 10: that that will be a high likelihood scenario that they
Speaker 10: actually sell the asset.
Speaker 3: Amazon has been another name that and thrown out that
Speaker 3: would benefit by purchasing TikTok, for example.
Speaker 2: So the next steps from your perspective, how do you start.
Speaker 3: To judge the day reactions of these companies? Followed by
Speaker 3: the as you say potential? What did you mention for
Speaker 3: Meta up to like eight to ten percent upside in
Speaker 3: terms of revenue? How long apath for this share price
Speaker 3: reaction to last?
Speaker 10: You think, I think it'll be sustained. Today's hearing will
Speaker 10: be whether the Supreme Court tells us their decision today
Speaker 10: or not. The way it goes will be very telling
Speaker 10: in terms of the likelihood of the outcome, because it
Speaker 10: seems like it will be binary whether TikTok is banned
Speaker 10: or Supreme Court is going to bring it as a
Speaker 10: hearing to see what happens if TikTok is expected to ban,
Speaker 10: then the rally actually stays and there will be a
Speaker 10: lot more interest from investors on Meta and in fact
Speaker 10: the potential overhand on these stocks on Meta and Snap
Speaker 10: on the uncertainty of where TikTok, whether TikTok will be
Speaker 10: banned or not, will be lifted, so that in part
Speaker 10: will also be a relief.
Speaker 3: Treider Conjuria of all for research. Great to get your
Speaker 3: take on the implications of social media.
Speaker 2: Thank you.
Speaker 3: Coming up, look, we're going to delve into LTK President
Speaker 3: Ama Ven's Boxes perspective. She's got the take on the
Speaker 3: frade of TikTok as it impacts the creator economy.
Speaker 2: This is blome meg Technology.
Speaker 3: Now, as the Supreme Court is hearing arguments on the
Speaker 3: future of TikTok and the United States, let's take a
Speaker 3: look at the apps impact on the creator economy. Here's
Speaker 3: what TikTok CEO had to say about that.
Speaker 11: A couple of months ago, creators from all around the
Speaker 11: world come to TikTok to be discovered, to find an
Speaker 11: audience that live their dreams of fame and fortune. Now,
Speaker 11: in addition to launching countless global stars. The discovery and
Speaker 11: authenticity that defined the TikTok experience have also made the
Speaker 11: platform home the serious issues that are vital to the
Speaker 11: global good.
Speaker 3: Let's bring an LTK co founder president Ammaven's Box, who
Speaker 3: knows a thing or two about these content creators worldwide.
Speaker 3: How are they reacting at the moment.
Speaker 12: Well, Kiln, I have to start out by acknowledging what's
Speaker 12: happening with the wildfires in La are the arts and
Speaker 12: prayers are with the huge portion of the LTK community.
Speaker 13: That's impacted today.
Speaker 12: We have ten thousand creators that are operating their businesses
Speaker 12: out of La County, and so I'd be remiss not
Speaker 12: to acknowledge that they really have had a struggle in
Speaker 12: the start of this year, both with how they will
Speaker 12: operate out of their homes and with what products that
Speaker 12: they show to their audience, and then now also thinking
Speaker 12: about rehoming their community.
Speaker 13: So I did want to start there.
Speaker 3: Well said thank you, Ama, do you want to then,
Speaker 3: having discussed, of course the heart that goes out to
Speaker 3: a lot of your user base, a lot of your
Speaker 3: user base are therefore also having to analogize what's happening
Speaker 3: in Washington.
Speaker 2: At the same time.
Speaker 13: Exactly.
Speaker 12: Well, you know, on the TikTok side, we've had nine
Speaker 12: months to prepare, and so we have been educating our
Speaker 12: creators about what they can do to get their arms
Speaker 12: around their audience. We call it meat and keep, and
Speaker 12: so over that period of time, they've been educating their
Speaker 12: communities of where.
Speaker 13: They can be found.
Speaker 12: What we've seen in the numbers is that with our
Speaker 12: TikTok creators specifically they've launched their LTK pages, they've actually
Speaker 12: produced twice the number of video in twenty twenty four
Speaker 12: versus the year prior, and I would describe that as
Speaker 12: really making a house a home. They want to make
Speaker 12: sure that when that community transitions to the LTK that
Speaker 12: they have a place that they love and they're getting
Speaker 12: tons of content there.
Speaker 13: That has returned in material growth in their earnings.
Speaker 12: Our TikTok creators earned twice as much last year as
Speaker 12: the year prior, so they've got a way to.
Speaker 13: Really transition that community.
Speaker 12: And then on the brand side, we've actually seen that
Speaker 12: brands intend to spend more on creator marketing in twenty
Speaker 12: twenty five. That was a finding from our Northwestern study
Speaker 12: where we pull the cmos both inside of LTK, all
Speaker 12: eight thousand of them, plus those outside of our universe.
Speaker 12: They all expect to continue to grow their investment, and
Speaker 12: I know Goldman still says that by twenty twenty seven
Speaker 12: they expect this industry to be worth five hundred billion.
Speaker 12: So these brands are not slowing down their investment creators.
Speaker 12: They're really seeing it as a channel play and not
Speaker 12: a platform play.
Speaker 3: As you mentioned, money marketers looking at LTK. But where
Speaker 3: else do you think we'll ultimately benefit if, for example,
Speaker 3: it is indeed banned, is it immediately Meta that benefits
Speaker 3: the most? Is CMO is going to be putting most
Speaker 3: of the advertising dollars that they would have spent on
Speaker 3: TikTok to Instagram?
Speaker 13: Right?
Speaker 12: I think on the biggest losers certainly would be TikTok themselves.
Speaker 12: You know, they're losing eight billion dollars it's expected of revenue,
Speaker 12: and of course they are based in Asia and so
Speaker 12: that revenue is going to their kind of homeland. On
Speaker 12: kind of the biggest winners, I do think that Meta
Speaker 12: will be the biggest winner out of this. I echo
Speaker 12: your other guests that we saw here today. Really from
Speaker 12: the creator industry side, though cmos are putting their dollars
Speaker 12: with the creators themselves. Those creators are on average four
Speaker 12: different platforms today, and so it will ultimately drive content
Speaker 12: into the other existing social platforms.
Speaker 13: I think Meta will be the biggest winner.
Speaker 12: There, followed by YouTube and then on down the line.
Speaker 3: What's interesting is ultimately how creators themselves not only using
Speaker 3: TikTok and other platforms to tell people how to circumvent
Speaker 3: any future ban, maybe trying to advocate the use of VPNs,
Speaker 3: but have they been migrating their user based to other platforms.
Speaker 3: They said, they've come to you a lot more with LTK,
Speaker 3: But have they managed to convert their YouTube audience and
Speaker 3: not their YouTube audience TikTok audience over to YouTube, over
Speaker 3: to Instagram ahead of this.
Speaker 12: Yes, and actually so for LTK, the way they're thinking
Speaker 12: about us is like the home base for across all
Speaker 12: of their platforms, Like where can they gain ownership of
Speaker 12: that community? Because you have to think, what's happening with
Speaker 12: TikTok is a revolution. This is a moment in time
Speaker 12: where it might go away entirely. But what we've seen
Speaker 12: over twenty twenty four is an evolution of every other platform.
Speaker 12: You're looking at YouTube shorts, or you're looking at what's
Speaker 12: happened across Instagram. It's no longer a place to follow
Speaker 12: people or be part of a community. It's an interest
Speaker 12: based entertainment platform. So creators across the entire creator economy
Speaker 12: have been looking for where they are going to house
Speaker 12: and have ownership of their audience. We've seen that, you know,
Speaker 12: in Q four, specifically those last three months of the year,
Speaker 12: we saw a tremendous uptick in TikTokers applying to LTK
Speaker 12: to get their shops launched so that they can have
Speaker 12: their home base there. But it's a trend across the
Speaker 12: entire creator universe where they know they've got to get
Speaker 12: their arms around that community because the most important thing
Speaker 12: about their ability to continue their business is their reachable,
Speaker 12: engaged audience. And the problem is not just here on
Speaker 12: TikTok it's across all platforms today.
Speaker 3: What's interesting is there is a smaller probability that bite
Speaker 3: dance does decide to sell. If it does and we
Speaker 3: have a change of ownership and a change of the
Speaker 3: underlying algorithm, how sticky do you think the one hundred
Speaker 3: and seventy million used reso of TikTok, or indeed the
Speaker 3: content courage is on that actually are.
Speaker 12: You know, I actually believe it's an algorithm preference. There
Speaker 12: are some unique things about TikTok when they first started,
Speaker 12: specifically around music. I think those things have become a
Speaker 12: little bit more ubiquitous. But I think we learn a
Speaker 12: lot by looking to Europe. You know, TikTok does exist
Speaker 12: in Europe, except that they have much more restrictive privacy
Speaker 12: over there versus what we have here in the United States,
Speaker 12: and TikTok has not really been able to grab hold
Speaker 12: of the European customer the way it has the United
Speaker 12: States customer. If you have a TikTok, that's not I
Speaker 12: mean it, excuse me. If you few an algorithm that's
Speaker 12: informed by less data, it's just inherently lesser, and so
Speaker 12: ultimately this becomes an algorithm choice for our US consumers.
Speaker 12: I do expect that you know the patterns that we've
Speaker 12: created as individuals of how much time and how frequently
Speaker 12: we are picking up our phone. I think I just
Speaker 12: read that the average American user picks up their phone
Speaker 12: over twenty two hundred times a day. What are they opening?
Speaker 12: They're looking for entertainment. I don't think that they're going
Speaker 12: to stop that behavior. I do believe that there's going
Speaker 12: to be a lift and shift to other platforms, and
Speaker 12: creators are hoping that that lift comes directly then over
Speaker 12: to them as creators so they can continue their businesses.
Speaker 12: Because remember, the platforms are not the ones that pay creators.
Speaker 13: Creators are responsible.
Speaker 12: For building their own business in their own revenue streams,
Speaker 12: but except for a YouTube and long format, they are
Speaker 12: really not being paid at scale or really any meaningful
Speaker 12: way by the platforms directly. So it's very critical that
Speaker 12: they own that customer relationship so that they can create
Speaker 12: those businesses around their reach.
Speaker 2: I'm a ven's box.
Speaker 3: I let you go back and tap for one of
Speaker 3: the twenty two hundred times you're going to be picking
Speaker 3: up your phone today. LTK co founder president, It's always
Speaker 3: great to have you.
Speaker 2: Thank you. TikTok fighting for its future in the Supreme Court.
Speaker 3: Let's bring back Bloomberg's Tyler Kendall, who is outside that
Speaker 3: court and the latest in terms of the arguments, I
Speaker 3: understand US Solicitor General Elizabeth Prologar is now testify.
Speaker 4: Yes, she's representing the federal government in this case, who
Speaker 4: is arguing that this is an issue of national security.
Speaker 4: Before that happened that we just heard the lawyer representing
Speaker 4: TikTok creators wrap up his statements to the Supreme Court,
Speaker 4: and Jeffrey Fisher made similar arguments to what we heard
Speaker 4: from TikTok's lawyer earlier today, that this is an issue
Speaker 4: of freedom of speech and potentially curtailing the freedom of
Speaker 4: expression of the nearly one hundred and seventy million US
Speaker 4: based users who use the app. Now, it does appear
Speaker 4: that the Supreme Court justices are signaling they are skeptical
Speaker 4: to that argument. I've been struck just how many times
Speaker 4: they had brought up the specifics of the text of
Speaker 4: the bill that Congress passed, saying that this is not
Speaker 4: an outright ban, that the lag could knew that the
Speaker 4: app could still continue to operate. Rather, it is a choice,
Speaker 4: and that the app has to divest in order to
Speaker 4: maintain its platform. You overcall, of course, that this text
Speaker 4: was originally introduced by the China Select Committee on a
Speaker 4: partisan basis over those national securities cancers. We even heard
Speaker 4: Chief Justice John Roberts hit on that saying that Congress
Speaker 4: is not concerned about what is on the platform. They
Speaker 4: are concerned about what the federal government calls a foreign adversary,
Speaker 4: holding who.
Speaker 2: Owns the platform.
Speaker 3: Tyler, what's also some intriguing about all of this is
Speaker 3: President elect Trump and where he feels the delay should
Speaker 3: come in.
Speaker 4: Right exactly so, a lawyer for Trump actually filed a
Speaker 4: Friend of the Court brief last month of requesting that
Speaker 4: there be a delay and citing Trump's own negotiation skill,
Speaker 4: saying that he could ultimately help reach some sort of
Speaker 4: agreement between the parties to get this done and as
Speaker 4: well as address those national security concerns. Now, if this
Speaker 4: span is put into place, we actually heard this come
Speaker 4: up in the questioning whether or not Trump could delay it. Further,
Speaker 4: we know that the law was written to include a
Speaker 4: ninety day pause if there is a potential deal on
Speaker 4: the table, but of course that would have to materialize.
Speaker 4: He also could potentially instruct his Department of Justice to
Speaker 4: not enforce it, however, that would open him up to
Speaker 4: legal scrutiny. And then lastly, you could try to work
Speaker 4: with Congress to repeal the law that they put into place,
Speaker 4: but that appears highly unlikely considering the bipartisan support that
Speaker 4: this bill originally received when it passed back in April.
Speaker 4: I'm talking about unlikely allies coming together to push it forward,
Speaker 4: such as the Democratic House Leader Hackeing Jeffreys and House
Speaker 4: Speaker Mike Johnson working hand in hand on this one.
Speaker 3: Bipartisan ship perhaps has its limits. Tyder Kendall, we thank
Speaker 3: you so much. Let's get out more for intricacies around
Speaker 3: the legal arguments. Bloom back Sarah Forden for more in DC.
Speaker 3: And you're really analyzing how it's all unfolding inside the
Speaker 3: court the arguments.
Speaker 2: Anything struck here?
Speaker 14: Well, first, let's go back to the legal framework. Why
Speaker 14: this is in front of the Supreme Court. They're basically
Speaker 14: being called to decide on a request from Trump to
Speaker 14: pause the start of the band January nineteenth. So they're
Speaker 14: going to have to decide do they pause the band
Speaker 14: and if they do, is it just a temporary pause
Speaker 14: so they can figure out what they want to do
Speaker 14: on the underling issues of the law, or is it
Speaker 14: a permanent band. They're also being asked by TikTok to
Speaker 14: ponder the national security versus the First Amendment rights question.
Speaker 14: Of course, TikTok is really really bearing down hard on
Speaker 14: the fact that this reflects a violation of people's First
Speaker 14: Amendment rights. But then you have the Justices coming in
Speaker 14: and saying, well, actually, foreign actors don't have First Amendment
Speaker 14: rights the way Americans do. So there's a lot of
Speaker 14: parsing there. You know, is TikTok considered a foreign actor.
Speaker 14: It's technically a US company, but it's owned by a
Speaker 14: Chinese company, and so there is so much to unpack
Speaker 14: in these arguments.
Speaker 3: That is very briefly, probability of thirty percent that TikTok
Speaker 3: wins is what Bloing Bag Intelligence thinks. Have you got
Speaker 3: a probability what people have been saying?
Speaker 14: Yeah, I mean, I think that our analyst is really
Speaker 14: calling it pretty pretty correctly. And as we're seeing, as
Speaker 14: Tyler mentioned, you know, the Justices are expressing a lot
Speaker 14: of skepticism about the First Amendment arguments, and they are
Speaker 14: also raised in concerns about the national security arguments. It's
Speaker 14: true that we don't have as much visibility on what
Speaker 14: the government feels as the most concerning about TikTok, but
Speaker 14: we've had a lot of examples of propaganda and data security,
Speaker 14: privacy and more.
Speaker 2: Sarah Forden the latest from DC.
Speaker 3: We so appreciate it on those legal arguments, But that
Speaker 3: does it for this particular edition of Bloomberg Technology.
Speaker 2: Do not forget to check out the podcast. You'll find
Speaker 2: it on the
Speaker 3: Terminal as well as online on Apple, Spotify, Aniheart, this
Speaker 3: is Bloomberg