Microsoft’s offer to buy the controversial Chinese video sharing app was rejected, with Oracle now likely to step up.

US President Donald Trump gave a September 15 deadline for the Chinese-owned app to sell or shut down its operations in the United States, claiming TikTok and other Chinese apps are national security threats. TikTok is a hugely popular video sharing app where people make and upload 15 second clips. It has been downloaded an estimated 2 billion times worldwide. 

Faced with the ultimatum from the Trump administration, Microsoft and Oracle led the race to buy the app from Chinese firm ByteDance. On Monday, The Wall Street Journal and Reuters both reported that Oracle, which sells database technology and cloud systems to businesses, had won the bidding war. Twenty-four hours earlier, Microsoft announced that “ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft. We are confident our proposal would have been good for TikTok’s users, while protecting national security interests.” This paves the way for Oracle, who President Trump said would be “a great company” to take over TikTok’s US operations last month.

Oracle’s chairman Larry Ellison is a supporter of Mr Trump and held a fundraising event for him in February.

Why is this happening?

The demand from the Trump administration that TikTok sell its US business is part of a wider crackdown on Chinese technology firms in America amid a burgeoning tech “cold war.” Mr. Trump has said apps such as TikTok, WeChat and equipment maker Huawei pose a national security threat because data collected about users can be shared with the Chinese government. The firms in question deny this claim.

Huawei also faces a ban which will come into effect on September 15 and through which the company’s suppliers will have to stop shipping to Huawei if their products contain US technology. 

TikTok is now the second example of a high profile Chinese company that has become caught up in the US China tech cold war. The Trump administration says this is about protecting Americans’ data and privacy. Beijing argues this is the US throwing its weight around on account of the country losing ground to China in the great global tech race. 

What does it mean for TikTok?

It’s still not clear what will change if TikTok ends up in American hands—or whether it will remain popular with American users. The ongoing bad publicity could naturally slow down the firm’s growth in the US, but ByteDance has already hinted that it will turn its focus elsewhere and invest in South East Asian markets instead. TikTok currently has around 100m active users in the US.

Any deal to buy the app will still need approval from a number of interested parties including the US and Chinese governments, ByteDance, and investors.