Microsoft to continue discussions on TikTok purchase

An update into the TikTok discussions by Georgia M. Griesbaum

Tech giant Microsoft is in discussions to acquire TikTok ahead of a newly extended November 12th deadline set by President Trump.

Donald Trump has stated that he would ban the app (invoking the International Emergency Economic Powers Act) following fears that TikTok’s Beijing-based parent company Bytedance may share user data with Chinese authorities. Microsoft envisions buying TikTok’s operations in the US, Canada, New Zealand and Australia, although the Financial Times have recently reported Microsoft may be aiming to purchase TikTok services globally. Twitter, another possible TikTok suitor, may have issues financing the purchase, leaving Microsoft as the favoured contender. However, recent reports suggest Oracle may also be working on a rival bid.

Given the approximate 50 billion dollar valuation of TikTok, the deal would be almost double the amount Microsoft paid to acquire LinkedIn 4 years ago, making it the largest acquisition in Microsoft’s history. Importantly, Microsoft would be acquiring a presence in the social media sector invading the market now largely dominated by Facebook and Google (who were unable to pursue the deal due to antitrust issues).

TikTok boasts more than 100 million monthly users in the US alone, making the potential ad revenue immense, with secondary effects of reinvigorating the Microsoft brand in the eyes of younger consumers and potentially bringing a refreshing new wave of engineering and marketing professionals to the Microsoft offices. Nevertheless, were Microsoft to further extend its social media business beyond LinkedIn, additional risks could follow. Namely, Microsoft would have to consider ethical and content moderation issues, which they have largely avoided, unlike Apple, Facebook, Google or Amazon who were subject to a Congressional grilling concerning issues of political interference on their respective platforms.

Congress, however, might be the least of Microsoft’s risks in acquiring TikTok. Importantly the Chinese media have, in recent days, labeled the pending ban and potential deal as a state sponsored theft of Chinese technology and have issued unspecific threats of retaliation. Should Microsoft be perceived as being a willing accomplice to this ‘theft’, it will risk its other businesses in China for a chance to enter the social media market!

Assuming that Microsoft does not suffer from reprisals, successfully integrating and monetizing TikTok is not a given. Look no further than the swift rise and fall of the now defunct Vine app as a warning. Given Microsoft’s lack of experience with social media, the question must be posed if TikTok has a successful future in Microsoft’s hands. Although LinkedIn is a success, the same is not guaranteed for TikTok which caters to a younger audience. Xbox and Minecraft being exceptions, Microsoft is not perceived as a ‘young’ brand.

Further complicating the issue is the newly launched Instagram Reels, developed by Facebook as a competitor for TikTok. While the major difference currently remains the duration of videos that may be posted, Reels, using Instagram as a platform, represents heavyweight competition that cannot be ignored. A parallel example from 2016 can be used to illustrate; to compete with Snapchat, Instagram launched Stories, proving itself to be a worthy competitor by exceeding Snapchat in daily users in less than a year.

Given the nature of the social media market, Microsoft should look very critically at the potential pitfalls ahead for TikTok.

Written by Georgia M. Griesbaum and edited by Stephanos Christodoulou.

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