Microsoft pursues deal to buy TikTok’s US operations following talk with Trump

Brief:

  • Microsoft is working to complete a deal to acquire the U.S. operations of TikTok from owner ByteDance by Sept. 15, the company said in a Aug. 2 blog post that indicates Microsoft CEO Satya Nadella spoke with President Donald Trump about the deal. Microsoft said it may invite other American investors to make a minority investment in the purchase.
  • Following those discussions, the software giant said that it was prepared to continue talks to make a deal, subject to a complete security review. After weeks of secret negotiations between Microsoft and ByteDance, the deal almost fell apart after the president said he preferred that TikTok be banned in the U.S. because of national security concerns, the Wall Street Journal reported.
  • Microsoft and ByteDance’s discussions also include buying TikTok’s service in Canada, Australia and New Zealand, per Microsoft’s blog post. The goal is to build on the current TikTok experience by adding “world-class” security, privacy and digital safety protections that would ensure transparency for user and appropriate oversight by governments. Such measures would include transferring private data of American users to the U.S.

Insight:

Microsoft’s announcement about its talks with ByteDance to buy TikTok’s operations in several markets is the latest twist in a series of events that may radically reshape the social media landscape. For mobile marketers, Microsoft’s ownership of TikTok in English-speaking markets may give them another reason to develop advertising campaigns on the popular video app and more assurance of data security. Microsoft already has a significant advertising sales operation among its various digital properties that include MSN, Bing and LinkedIn, and can build on those relationships with marketers by adding TikTok to its lineup of media brands.

The deal, if it happens, would also set up Microsoft to compete against Facebook, which has been trying to lure away TikTok creators for its Reels offering on Instagram. YouTube is also pursuing a TikTok-like offering. Similarly, upstart video app Triller is pursuing TikTok creators and has sued TikTok for patent infringement.

For TikTok, a possible acquisition by Microsoft would remove a major overhang to its potential U.S. growth as a mobile marketing platform. The app has become a global sensation with a massive user base rivaling those of more established companies like Facebook and Google’s YouTube. However, its ownership by a Chinese company has become a hindrance in countries that have expressed concerns about national security. India in June included TikTok among a list of Chinese apps that it had banned after a military clash along its border with China. That restriction was a significant blow to TikTok, considering that India is its biggest market. Among TikTok’s more than 2 billion lifetime downloads, 611 million were in India, or about 30% of the total, per an estimate by researcher Sensor Tower.

TikTok has worked to shake off concerns about data privacy, with several pronouncements about its measures to keep data about U.S. users in the country, or backed up in Singapore. TikTok said the Chinese government had never requested information about U.S. users, and it would refuse to provide the information if asked. TikTok also hired Kevin Mayer, a former Disney executive, as its first CEO. His appointment did little to quell criticism of TikTok, with White House trade adviser Peter Navarro calling Mayer an “American puppet” for the Chinese-owned company in an interview. Secretary of State Mike Pompeo also sounded the alarm about TikTok, saying on several occasions that the U.S. government was looking to ban the app.

These developments over the past few months has appeared to make a small impact on TikTok’s relationship with U.S. companies. At one point, Wells Fargo asked its employees to remove TikTok from their phones. However, overall brand interest in TikTok has not been dampened, with Aerie, Hollister and Chipotle among the big brands teaming up with the app to reach its growing userbase. 

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