ByteDance, they said, will have two main revenue streams: a licensing fee from all TikTok US revenues for the right to use the algorithm and a share of the profits proportional to its remaining stake.
Overall, the Beijing company is estimated to continue to receive 50% or more of the total profits of the American division after transferring control to the new owners.
Trump discussed the deal with Chinese leader Xi Jinping by phone last week. The US side said an agreement in principle had been reached, but Beijing has yet to confirm the arrangements and the final terms of the sale have not yet been determined.
Adding to the confusion, Vice President JD Vance said the deal would be worth about $14 billion — significantly less than the $35–40 billion analysts had expected.
Revenue sharing partly explains the difference in valuations. Under the current plan, TikTok US would pay ByteDance a significant licensing fee for the use of the algorithm, a key technology that makes the service so popular.
According to the source, this is about 20% of additional revenue, that is, revenue generated thanks to the algorithm. For example, out of $20 billion in revenue, ByteDance can get up to $4 billion from the license alone.
The company will also take about 20% of the remaining revenue, based on its equity stake. The rest of the revenue will be shared by a consortium of U.S. investors, including Oracle Corp., Silver Lake Management and Abu Dhabi-based MGX, as well as existing shareholders. They will ultimately own about 80% of TikTok’s U.S. business.
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