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Perplexity AI Proposes Merger with TikTok U.S. to Prevent Ban

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U.S.-based search engine startup Perplexity AI has submitted a proposal to merge with TikTok U.S., according to a source familiar with the matter. The bid, submitted to TikTok’s parent company ByteDance on Saturday, aims to address the looming threat of a U.S. ban on TikTok, set to take effect on Sunday unless the platform severs ties with ByteDance.

President-elect Donald Trump indicated on Saturday that TikTok could receive a 90-day reprieve starting Monday, offering the company more time to resolve its ownership issues.

The proposal, first reported by CNBC, suggests a merger between TikTok U.S. and Perplexity AI to form a new entity that would also incorporate New Capital Partners. This structure would allow ByteDance’s existing investors to retain their equity stakes while Perplexity AI’s advanced search tools would enhance TikTok’s functionality by integrating video content with rapid, citation-based search capabilities.

A source close to the negotiations, speaking on condition of anonymity, stated that Perplexity’s approach is unique as it proposes a merger rather than a sale, which could appeal to ByteDance’s interests. TikTok and New Capital Partners have yet to comment on the proposal.

Perplexity AI, known for its cutting-edge language model-powered search tools, sees this merger as an opportunity to expand its capabilities while maintaining TikTok’s popularity. TikTok currently boasts nearly half of the U.S. population as users, influencing online culture and driving growth for small businesses.

Meanwhile, TikTok announced on Friday that it would halt operations in the U.S. on Sunday unless the Biden administration provides assurances to tech giants like Apple and Google that enforcement actions under the ban will not apply to them.

TikTok Faces Utah Lawsuit Over Alleged Exploitation of Children in Livestreams

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TikTok is accused of knowingly exploiting children through its livestream feature, TikTok Live, as outlined in newly unsealed court documents in a lawsuit filed by the state of Utah. The state’s Division of Consumer Protection claims TikTok ignored the dangers posed by its livestreams, which allegedly facilitated sexual exploitation and connected minors with adult predators in real time. Utah’s Attorney General, Sean Reyes, argues that TikTok turned a blind eye because it profited significantly from these activities.

The lawsuit cites internal TikTok communications and investigations, including Project Meramec, which found that children aged 13-15 bypassed age restrictions and were allegedly groomed for sexual acts in exchange for virtual gifts. Another investigation, Project Jupiter, revealed that TikTok Live was used for illegal activities such as money laundering, drug trafficking, and terrorism funding. TikTok has denied the accusations, emphasizing the safety measures it has implemented, and claims that the complaint selectively uses outdated and misleading information.

The case is part of broader concerns over TikTok’s potential dangers to minors, with other U.S. states also pursuing legal actions for similar issues. The lawsuit is set against the backdrop of ongoing discussions about a potential U.S. ban on TikTok, with President Joe Biden signing a law in April 2024 authorizing the ban over national security concerns.

 

What Happens After the TikTok Ban?

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The U.S. Supreme Court’s decision on Friday denied TikTok’s request to avoid a ban, putting the app at risk of shutting down in just two days, potentially affecting millions of users in the U.S. who rely on it for entertainment, e-commerce, and advertising. The ban stems from a 2024 national security law requiring TikTok’s parent company, ByteDance, to sell the app or face its closure in the U.S. by January 19.

While President-elect Donald Trump, set to take office on Monday, has hinted at seeking a political solution, the immediate effects of the ban remain uncertain.

What Happens to the App?

  • TikTok will be unavailable for download from Apple and Google app stores, and updates to the app will be prohibited. The law restricts any entity from facilitating the app’s download or maintenance.
  • Oracle, which hosts TikTok’s U.S. user data, may experience disruptions in its work with the app.
  • Despite the ban, TikTok plans to continue paying its 7,000 U.S. employees.

How Will Users Be Affected?

  • TikTok’s 170 million U.S. users who have already downloaded the app will still be able to use it for a time, but the lack of updates could render it obsolete. A web-based version may emerge but will likely offer fewer features.
  • Some users might attempt to access TikTok through virtual private networks (VPNs) to bypass the ban.
  • Alternative Chinese social media platforms, such as Xiaohongshu (RedNote), could see an increase in U.S. users.
  • Content creators on TikTok are redirecting their followers to platforms like Instagram and YouTube to prepare for the potential shutdown.

What Will Advertisers Do?

  • Advertisers have started to devise contingency plans, aware that a TikTok ban would disrupt their campaigns. If the ban is enforced, over $11 billion in annual U.S. ad spending could shift to other platforms.
  • Marketers will be watching Meta, Snap, and others to see who benefits from the spending shift.
  • Some advertisers may continue their campaigns beyond January 19 to monitor TikTok’s performance in the U.S. before reassessing their investments.

What Happens to U.S.-China Trade Relations?

  • A TikTok ban could escalate the already tense trade relations between the U.S. and China, following previous export restrictions on American semiconductor technology to Beijing.
  • Analysts suggest that President Trump could use a potential reversal of the ban as leverage in negotiations with China, possibly securing concessions or other trade benefits.

Who Are the Potential Buyers?

  • Despite TikTok’s repeated stance that it cannot be sold, some buyers are still interested. Billionaire Frank McCourt, former owner of the Los Angeles Dodgers, has valued TikTok without its algorithm at approximately $20 billion.
  • Reports have surfaced suggesting that Chinese officials might be considering a sale of TikTok’s U.S. operations to Elon Musk, though TikTok has dismissed this as “fiction.”