CNBC's Julia Boorstin joins ‘Money Movers’ to report on TikTok's agreement to create a new U.S. joint venture, what it means for its advertisers and user base, algorithm and more.

TikTok has formalized the creation of a new U.S.-based joint venture, TikTok USDS Joint Ventures, with Oracle, Silverlake, and Abu Dhabi-based MGX each acquiring a 15% stake. This structure gives the new company over 50% U.S.-based ownership and reduces ByteDance's share to below 20%. Oracle will be responsible for auditing compliance with national security terms and storing sensitive U.S. data in its data centers.

The transition aims to keep the user, advertiser, and creator experience unchanged, with the U.S. entity managing domestic data and content moderation. Industry analysts note that the main challenge will be executing the transition smoothly, as TikTok currently holds 4% of U.S. digital ad spending, compared to Meta's 23% and Google's 25%.

TikTok signs agreement to create new U.S. joint venture

TikTok's long-awaited U.S. spin-off now official, we think, the company signing a deal to create a new entity backed by a group of mostly American investors, including Oracle. And for today's tech check, Julia Boorstin has details on what it might mean for the social media landscape in this country. Morning, Julia. Good morning, Carl. Well, this is a key milestone for the deal for TikTok's U.S. operations to become a joint venture, and that deal is set to close on January 22nd. This new entity called TikTok USDS Joint Ventures signed agreements with Oracle, Silverlake and Abu Dhabi-based MGX, each of which will take a 15% stake in this new company, giving the new company more than 50% U.S.-based ownership, also pushing ByteDance's ownership below 20%. Oracle will audit and validate that this new company complies with agreed-upon national security terms, and Oracle data centers will store sensitive U.S. data. Now, that news was expected, but we're still seeing it bolster Oracle shares today. The question now is whether the user, advertiser and creator experience remains unchanged, as TikTok says it will, with a new U.S.-based company taking responsibility for U.S. data, content moderation and what they call algorithm security, while the global organization manages the likes of advertising and e-commerce and interoperability. Now, ad industry analyst Brian Wieser writes, quote, The formal closing of the deal may prove more disruptive than the long period of regulatory limbo that preceded it. The main risk is not ownership, but execution. The transition could introduce friction across the consumer experience, advertiser infrastructure and algorithmic performance. Pending full details of how the transition will be managed. Now, TikTok's share of U.S. digital ad spending is 4% this year. It's just a fraction of Meta's 23% and Google's 25%. So now the question is whether TikTok, without this regulatory overhang, can gain share on the likes of Snap. Its stock is down today. Or whether it becomes more of a threat to Meta and Google's YouTube. Back over to you. Julia, technically speaking, you know, social media companies operate all over the world. And I'm just curious how it works to kind of decouple the algorithm for just the U.S. How would that actually change the user experience, especially if they're looking at videos from China and elsewhere across the globe? They really want it not to impact the user experience. They want the U.S. data to be based here. But if you retrain this algorithm on U.S. based data, the question is whether people will notice. You also want ads to be able to be global. You want to be able to buy ads. If you're Coca-Cola, you want to be able to buy ads across the world with a seamless experience. And that's what's happening now in this transition, making sure all of that stuff isn't noticeable.

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