Let me take you back to the summer of a pandemic is gripping the world, leading to hundreds of thousands of debts in the US alone. The economy took a dive and a lot of people were losing their jobs. And then, unexpectedly, the daily flood of headlines turned to something else, entirely a social media app called TikTok. A stern rebuke from the US President, We're not going to
do anything to jeopardize security. White House alleges the popular Chinese based apps TikTok and wheat Chat are stealing American users private information, handing it to the government in Beijing. We want no security problems with China. It's got to be an American company. Has got to be American security has got to be owned here. They have millions and millions of US US. They're probably the single most popular
social media app among people under age twenty. TikTok provided an escape from the anxiety and boredom brought on by the pandemic for tens of millions of Americans. Scrolling through never ending feeds of dance videos and funny memes seemed to make people feel better, and this cemented TikTok into the mainstream in a way we haven't seen with any other social media platform since Facebook. TikTok entered kind of a golden period, but then in the span of a
few weeks, TikTok's fortunes changed. One night in late July, the US President threatened to ban TikTok because it was owned by a Chinese company that he thought was spying on American users. That night, people on TikTok freaked out. The app was flooded by videos of teenagers giving premature eulogies to TikTok, talking about how special it was, how much they relied on it, especially during the pandemic, how
sad they were. It felt like a funeral. I don't know. Okay, so you know how we stopped freaking about what about tiktoking literally shaking um, yeah, yeah, this might be it? Well ship fuck vollowme on Instagram. I guess I know. You guys may think it's not that big a deal, but two creators like me and my brother and other creators is a big deal. Getting TikTok band. You're listening
to Foundering, I'm your host, Shelley Banjo. This season will tell you the story of TikTok, how a mysterious tech founder from China outsmarted Facebook, YouTube and Snapchat to change the Internet while capturing the attention of an entire generation and becoming an obsession for the most powerful man in the world. TikTok almost got wiped out in the process, in a cautionary tale of what happens when you get so big you wind up in the middle of a
standoff between the world's two greatest superpowers. I've been covering TikTok for three years out of Hong Kong, China and the US, and even though TikTok has been in the news for a while now, I realized few people really know the whole story. I want to tell you just how surprising it's been. Every step has been full of twists and turns, from TikTok's crazy rise to its run ins with the law, to its all out battle with Facebook and other Silicon Valley giants, all leading to the
first ever social media powerhouse to emerge from China. For this season, you'll hear from current and former TikTok employees, investors, and influencers about what it was really like inside the company. You'll also hear from the CEO of TikTok's controversial Chinese parent company, Byte Dance, in one of his only interviews with Western media. We'll tell you more after this quick break. To truly understand TikTok, you have to spend time with
someone like Katie Peeney. My name is Katie Heeney. I'm seventeen years old and I've been on TikTok since musically back in two thousand fifteen. If you haven't heard of TikTok, TikTok is the most addicting app in the entire world. If you get it, I'm warning you, you will be on it for four hours just scrolling through your four you page. Katie is a true TikTok evangelist for people who have never been on the app before. She tried
to explain the appeal. I mean, it's like if you were to watch a movie for an hour and a half. I guess TikTok is like watching a movie. It's just it's that entertaining, like you could I mean, I could watch TikTok's longer than I could watch a movie. To explain how TikTok became a cultural institution with tens of billions of dollars. I want to take you back to its roots. The app that we now know is TikTok is actually based on a lip syncing app called music Lee.
Musically became TikTok after it was acquired in ten by a giant Chinese tech company. It's users and design were all absorbed into TikTok. The two apps look and feel pretty similar. This episode will focus on the rise of Musically and the story of its founder, a thirty six year old guy from China who seemed to have an uncanny understanding of American teenagers. His name is Alex Jew. He kind of had a metal Jesus style haircut. This just long, black, flowing hair. That's Josh Ellman. He was
one of Musically's first investors. Josh likekens Alex to an artist or a poet. He totally looks like a poet, like an ancient Chinese painter sitting by the side of a river, you know, doing one of those giant scroll paintings. Alex was a mysterious figure. He was also really hard to pin down. Multiple people told me that when they wanted to connect for a business deal, they literally couldn't find him. Here's Josh introducing Alex at a conference. I
was like, Oh, I'd love to meet up. Are you in San Francisco maybe l A. He was like, no, I'm in Shanghai, China, And that's where the entire team was based on where they were, where they were building it out, and and so I think he just has this incredible perspective of building this company, you know from China that you know, American teenagers are using kind of more than anything right now, So that I'd love to bring up Alex you. Alex was known for being kind
of out there for years before creating musically. He worked at a big global software company and he had a super vague job title. They called him a futurist. Futurist songs to be a fancy job title, but actually the job was pretty easy. What I did as a time was quite a simple sitting in my tent, playing it around with my small crystal ball telling the future. Futurist is one of those wacky titles in the tech industry, but it played right into the way Alex approached life.
Many people I spoke to told me Alex was a thinker. His head was in the clouds. So I got really bored. I want to walk out of my tent. I want to be a black smith. I want to be a carpenter. I want to be a fisherman. I want to be a duel carpenter, blacksmith, fisherman. Alex speaks in these sort of extended metaphors, but what he's getting at is that he's ready to walk away from his job and start
his own company. First, Alex made an education app. He had this idea that people could teach each other lessons online by watching short videos that though I got a brilliant idea, everybody can be ta true, everybody can learn from everybody else. We spent seven months creating the first education and finally it turned to be a very miserable fidel and it was a failure because people didn't want to learn that way. They mostly used their phones to
socialize or have fun. And this was the breakthrough that led to musically the app that would one day become TikTok In. Alex was doing a stint in the US and living in the Bay Area. One day he was riding the train and he sat across from a group of teenagers. One day I was on Cultread from Mountain View to San Francisco, and on that train so with lots of high school students, and I was observing their behavior, he says. Watching these teenagers good for around on their
phones gave him an epiphany. So we're listening to music and the other they were taking videos and photos selfies. So that give me some idea. First, entertainment is going to be much easier the education, because education is against the human nature, and entertainment is basically following the human nature. Education is against human nature. This is the moment Alex abandoned his education app and he went all in on fun. He turned his new idea into musically in just thirty days.
It launched in July for high school students, especially in the US, that spent laws of time on social media and the love music to love videos, and can we combine these very powerful elements into one platform, creating a social network around music and around video music videos and American teenagers. It sounds a lot like TikTok. I'm always struck by how clear and immediate Alex's vision for the
app was. Honestly, Alex is so smart about design and user experience and He's also so eccentric and captivating in the way he speaks. These are the sorts of founders that the tech industry usually loves, But Alex Ju isn't a household name, and in fact, as TikTok grew bigger, they even replaced him with an American CEO. You gotta wonder if Alex wasn't from China, if he would be more famous. For a new social platform, a new a
new social media to take off. It's about it to have young people as an early adopter, especially the teenagers in the US. Why they got a love time. When we talk about musically and TikTok, now, it almost sounds like it was an accident that so many young children ended up on the platform. But early on Alex comes right out and says that teenagers and even preteens were the target audience From the get go. He understood that
teenagers would help the app grow explosively. What he didn't realize was just how much trouble the kids would get the company into later on, and Alex was obsessive about seeing how young people behaved on his platform. He wasn't just looking at data, he was looking at them. I personally register a lot of fake accounts, right, and it uses this fake identity to talk with the users on the platform, comment on their videos and see why they posted these videos, and just to try to understand them,
try to give us empathy. I want to underscore just how unusual this is that a guy in his mid thirties has launched fake accounts to interact with his users online. These are mostly preteens. It sounds kind of creepy, right. And it went beyond fake accounts. I've heard stories from famous musically person ladies that Alex went even further. He'd called their parents at home, He'd take them in their families out for dinner. He was meticulous in learning everything
about them. To me, this is something really important about the roots of musically and later TikTok. TikTok feels impulsive, fun, organic, like this really spontaneous app where people can really be themselves. But it's not the people who got famous, the trends that were popular. Everything was centrally planned by Alex and the people he hired. Here's Katie Feeney, the TikTok or we heard from earlier. She was only twelve when she
got on Musically. Yeah. So I was very young and my friends and I were just super excited when this new app called Musically came out. So you would just make fun videos, and I did a lot of dancing videos with my dance team. It was like a big way for us to just you know, have fun with each other. Similar to TikTok. You would just scroll and there was like an endless amount of videos you and
you would never get bored on it. You could just like continuously watch for hours, and it really intrigued me and all my friends. Katie remembers the first time one of her videos blew up. Musically featured one of her dance clips on its homepage. I probably started crying because I like it was my dream to get featured, and a little part of me kind of always wanted to be famous, I guess you could say. So. I think I was just in my room or something and I
was bawling. Katie was on Musically during its early days. Back then, the app looked like a long shot to people in the tech industry. Silicon Valley dismissed Musically as a niche karaoke app for preteens. No one thought it would grow to become a major cultural force. We'll be right back in social media seemed almost locked up. Facebook and Instagram were already so dominant, Snapchat had cornered the teen market. Twitter had bought a video app called Vine,
which failed a few years later. Investors had been skeptical about putting money into another social media app, but Josh Allman, the investor we met earlier, said Musically was doing something different because the app made it easy for anyone to create their own videos, and then you were just seeing regular people around the country dancing and performing and lip syncing in ways that you know, I had never seen that fountain of creativity, you know before, especially not in video.
And by July, about a year after it launched, Musically had shot up to the number one spot in the Apple App Store. It never fell out of the top forty. Investors wanted to know who was behind it. Well, you know, this app just came out of nowhere, and it just became top five or something very very quickly, and all of the son and it just really skyrocketed. So I think a lot of vcs we're wondering, like, you know, like who are these people? You know, where they're coming from?
That's jogilely out. She was working at a venture capital firm at the time. Her bosses were literally trying to give Alex money and couldn't find him. It was not straightforward. It wasn't like another, you know, Slicon Valley based founder of who we could find in thirty seconds to be a LinkedIn. It was a bit more digging. It might seem strange that people were so confused by Alex being in China, but this is where you got to remember.
Silicon Valley is a small, insular place. These investors would be confused if Alex was in Ohio, so China was almost unthinkable to them. But I've also wondered if Alex was intentionally being coy about where he was based. I'm not saying that Musically was overtly trying to hide their Chinese roots, but the company clearly wasn't advertising it either.
Here's mar J Roberts, an early Musically employee. Something a lot of people don't know are they are starting to recognize now, is that Musically was always first and foremost a Chinese company. Our headquarters was based in Shanghai. Inside the company, it was clear the bosses in China were calling the shots. No, it definitely did not feel like an American company. Were in constant everyday contact with the
Chinese team. We very much took a lot of our cues from the Chinese team, especially since our founders are based there for the majority of the time. That was so a Chinese social media company in the US raised a few eyebrows, but it wasn't considered a geopolitical threat the way some politicians are looking at it now. That year, Musically opened its first US outpost in the scrappy We work in San Francisco. Here's marj We worked in a rework room. There was one room, yes, so we crammed
in as much as we can. That was very much like Harry Potter in a closet. There was a lot of urgency and excitement. Here's Jogia, who was so impressed by Musically's rise she decided to go work for them. You know, we were ready to kick it off our second summer, and really it's important time because it's one kids are out of school and they were born at home. You know, it was a great opportunity for us to
take the grove to the next level. And that's when the venture capitalists rushed in by Musically had raised over a hundred and fifty million dollars from some of Silicon Valley's biggest BC firms. It surpassed over a hundred million downloads, and the app was a huge sensation among teenagers, even if it was virtually unknown to adults. Here's March again. Musically was very underground, but I discovered that gen z knew all about it, but no one else did. So um,
I actually reached out to my knees. She's a preteen at the time. I was like, do you know what this app is called? Musically? And this was the moment of truth. She literally almost had a heart attack. She's like, oh my god, it's the biggest It's the coolest app ever. I love it. I'm obsessed with it. I'm like, what is going on? This was a really special moment for video. A landslide was about to happen. Remember back then people were just figuring out video on mobile phones. Instagram was
mostly pictures. YouTube was barely on mobile at all. Shooting video was considered difficult and expensive, and you needed editing software, not to mention the skills to use it. But Musically allowed you to shoot a video and then with a touch of a button at effects and a soundtrack. Within seconds, you had this striking finished product to be a British stereotype. Loves of t and gen Z took to it. You're
going to my head because I love you. So the short form video format is very perfect for younger folks because it requires very little attentions fan quite honestly and I think ultimately, which is very easy to get using. You know, it didn't require you to create an original
song or create, you know, an original joke. You could get started on the platform very easily by using um an existing clip or an existing song, because I know, in the hell and then their team users got the hang of it quickly, and some of them were so good at making these entertaining short videos. They were getting famous on the app. Thanks to all you guys on musically for supporting me, and I hope you guys like
my EP. We would have some of our users come in and meet the team, and they were so excited to meet us because they thought that, you know, we make them famous sometimes. Um So it was pretty great just to be there, like on the ground there and by famous, I mean just a massive number of eyeballs were on these teen influencers, even though musically hadn't hit the mainstream yet. They were even beating out Beyonce on Instagram.
Beyonce on Instagram posted this picture of herself announcing her pregnancy I think um, and it had a million views or likes in twenty four hours. The unique difference with musically is that our everyday influencers who were not traditional celebrities were getting three million likes in a in an hour. And because musically was getting so big and so influential, celebrities started to join. I remember the first big artist on musically was Jason Darue and he was really active
forecasting from dancing in his studio. Here's pop star Jason Derulo in one of his first videos he made for musically. I want to do some spect I'm gonna do something a little different. I want you to be a part of the next music video. And all you gotta do to be flown out to Elaine Barb, which you boy is post a music video to musically. And then more and more artists the camp like Selena Gomez, UM, Lady Gaga,
Katy Powery. I think Lady Gaga was probably Uh, one of the artists I personally felt so excited about because I loved no personality for Unique Nix. Famous musicians flocked to the app as a new way to connect with their fans, and users love the easy access to their favorite songs. But Musically was basically stealing the music. Ja
the early employee, describes as they did it. When Musically started out um back in UM, the company had actually been rapping the fifteen second song clips from the iTunes review. If you didn't hear her there, she's saying they were ripping the songs, like literally taking the music for free from iTunes, and so none of the music labels cared about it about us doing this in the beginning when we were just a small company, but then as we got bigger over time, the music labels were basically like,
you know, we want a piece of this success. Like many Silicon Valley startups, Musically was sort of skating around the rules, but as they grew they had to figure out how to work with the music industry rather than against it. By the way, when we asked TikTok about this, they gave us a statement TikTok places a high priority on its work with record labels and artists. Another big part of the app success was that it felt so personalized. Here's Josh Shellman. You know, how do you make sure
that the feed has content that's relevant to you? You know, if you're twenty two, you want to see different content than somebody who's sixteen. Musically showed different people different things, and that personalization made it incredibly engaging. But by the same token, it also made it hard for parents to track with their kids were doing on the app, so it might come across damaging clips about eating disorders, while that teenager's mom might see videos of cute puppies. Each
feed was tailored. Musically studied who you were over days or weeks. Multiple people told me it felt like it could read your mind, and this was intentional, according to Alex, so we have to focus on the mechanism the invisible hands. The invisible hands of Musically are way more controlling than apps like Facebook or Instagram. You're not choosing what videos you see. You don't curate your own fee. The app chooses for you. Even though it feels care free and fun,
it's actually very deliberate. Music Lease technology was considered advanced for its time. Behind the app. There was an engineering team in Shanghai that was working like mad. There was even a name for this kind of work culture in China. It's called nine nine six meeting. These employees worked nine am to nine pm, six days a week. To this day,
many people at TikTok still work these hours. You know, China tends to have a nine nine six work culture um, which is even a little bit more intense than many startups that I know in Silicon Valley. And so the rate at which they were just building and putting out features and putting out new things in their creation flow was felt phenomenally fast. With this insane workload and crazy growth, the Musically employees could barely keep up. So the company was kind of in this spot of like, Okay, how
do we get really big? How do we make sure that we're a network that's here to last? And they were struggling. They were actually struggling to higher engineers fast enough, especially deep algorithmic engineers, because people in China weren't as interested to work on a product they didn't use. By the fall of people in Silicon Valley started to hear that Musically might be willing to sell itself to a bigger company, and one of the contenders was Facebook. Here's Josha,
a man you know. Around the same time, when there's something with that much traction and activity, folks at Facebook would come kind of calling me or calling others involved with the company and saying, hey, should we get to know the team? Is there something here? This is something Facebook is known for. They are aggressive when it comes to scoping out the competition. Here's my colleague Sarah Fryar.
She's been covering Facebook now for almost a decade. Facebook takes every potential competitor extremely seriously, and TikTok in particular, was on their radar before it was even TikTok back when it was musically, and musically was happy to take Facebook's call because they thought maybe Facebook could help them get even bigger. You know, they decided, hey, look, we should at least take the calls and get to know
the teams. Alex was not in the US that often, so I believe at some point Facebook sent a team over to Shanghai to visit and to talk deeply about strategy and the numbers. But nothing ever seemed to make
sense or or came together on either side. There. Sarah says, the Musically executives visited Facebook to the founders did come down to Menlo Park and meet with Mark Zuckerberg and the growth team at Facebook, and they had a few discussions about whether it was a good idea to acquire them and ultimately decided no. Facebook saw some red flags
they started to look at some of the downsides. Facebook was very worried about the liability of having an audience that wasn't verified to be over the age of thirteen, because they worried about running a foul of child data privacy laws. Uh. They also worried about the Chinese ownership. Some people at Facebook that working with the Chinese company
might mean complications down the road. See Facebook had been blocked in China since two thousand and nine, so they knew that doing a deal with a Chinese company might be difficult the government might not approve. In the end, both sides walked away. Josh says that back then Facebook didn't think Musically was a serious threat. They thought musically
super young user base wouldn't stick around that long. I think somebody somebody once said, um, hey, look, I think that their churn is high enough that if we just wait a couple of years, they won't be much bigger and we can just add those features by then. But Facebook was wrong. Musically would go on to exceed everyone's expectations because it would morph into TikTok and become the biggest competitor that Facebook had ever seen. Here's Joja again,
the early Musically employee for me. I thought it was quite amazing that a team of founders from China built such a massive consumer social app that was used the time by American teenagers. And I don't think the teams at that time knew that their favorite app was may by to two guys in China. After TikTok's power and reach grew bigger and bigger, you gotta wonder if Facebook
regrets walking away from these negotiations. Facebook's exit left the door open for a massive Chinese internet conglomerate to come in. This new company would supercharge the Musically app at even more advanced artificial intelligence, collicked even more personal data on each of its users, and rebrand Musically as TikTok, a social media platform that would be downloaded around the world. That's next time on Foundering. Foundering is hosted by me
Shelley Banjo. Sean Wyn is our executive producer. Sarah Fryar, Chipping Kwang and Kurt Wagner contributed reporting to this episode. Raymondo is our audio engineer. Mark Million and Vander May and Ali Sturbar are our story editors. Production help from My Aquava, Molly Nugent and Isabel Lee. Francesco Levi is the head of Bloomberg Podcasts. Be sure to subscribe and if you like our show, leave a review. Most importantly, tell your friends see you next time.