There is no obvious new owner for TikTok, a video sharing app that captured the attention of the nation—most recently, President Donald Trump—during the Covid-19 pandemic.
TikTok is a formidable player. It’s trendy, musical, funny, great fodder for memes and unabashedly creative. It relies on advertising, but ads seem secondary to original content on the app, aside from an ad upon first-open. Its biggest brag is having a powerful algorithm that knows what delights users.
There’s a chance the handful of companies—which includes Oracle, Twitter and Microsoft—can save TikTok and shield the app from further scrutiny. And maybe TikTok can even make those companies cooler.
Twitter and Oracle are reportedly intrigued by the company, though neither has confirmed their intent to buy. Microsoft, meanwhile, has said it is interested in purchasing TikTok in the U.S., Canada, Australia and New Zealand.
Microsoft emerged as the likely new owner after President Trump announced executive orders that put pressure on ByteDance, TikTok’s parent company, to divest from its U.S. holdings and sell the company by Sept. 20. Trump has also heightened the speculation surrounding Microsoft’s pending new ownership when he gave the company his blessing after talking to CEO Satya Nadella.
Microsoft isn’t an obvious match for TikTok at first glance, though it has experience integrating high-profile consumer acquisitions, including Skype for $8.5 billion in 2011, LinkedIn for $26.2 billion in 2016 and Minecraft for $2.5 billion in 2016. In recent years, the company has moved more toward cloud and business enterprise software, capitalizing on its dominance with the Windows operating system and its Office suite.
Both Microsoft and TikTok declined to comment for this story.
When Debra Aho Williamson, eMarketer’s principal analyst for social media and marketing, first heard murmurs of Microsoft acquiring TikTok, she was taken aback. “My reaction was … Microsoft?” she said. “Why, how, when and where could Microsoft and TikTok be a match?”
After thinking more on it, Williamson still doesn’t see the “synergy” between the two companies, but admits it is an “opportunity for both sides to make the best of what has quickly become a crazy and unpredictable scenario.”
On the consumer side, Microsoft has tried and failed with new product launches, such as its iPod competitor Zune and mobile operating system Windows Phone. Microsoft also had its own social media flop once upon a time, shuttering So.cl after an unsuccessful five-year run.
The deal “makes a ton of sense” to Jed Meyer, managing director for North America at Ebiquity. He believes it will give TikTok the financial backing to keep innovating while showing regulators some commitment to better security.
“To me there are four winners in this: consumers, brands, government … and it’s a win for the competitive marketplace as well,” he said. The deal could give brands “comfort” in conducting business with TikTok that might otherwise be searching for alternatives, like Facebook’s new Instagram Reels.
New advertising opportunities
Microsoft’s advertising business pales in comparison to Google, Facebook and Amazon, but many companies have advertised with Microsoft through properties such as Bing and LinkedIn.
The two would combine at a formidable scale. Microsoft sites had 222 million U.S. users in June 2020 while TikTok had 68 million U.S. users as of June, according to Comscore.
Acquiring TikTok could improve Microsoft’s market share in digital advertising, Williamson said. The company is already projected to grow in this space without the acquisition, according to eMarketer, and is expected to hold 1.5% of the digital display ad market, “slightly ahead of Snapchat but well behind Facebook’s 42.0% and Google’s 10.4%.”