After threatening to ban the Chinese-owned social media platform on Friday, President Trump is now considering a proposal by Microsoft to buy the US portion of TikTok if there is a complete separation from its Chinese parent.
The takeaways:
- Following talks between Microsoft CEO Satya Nadella and President Trump on Sunday, the company said it will “move quickly” to complete the deal by September 15th, 2020.
- Microsoft would ensure complete separation from the Chinese parent company, ByteDance, including not only private data and servers, but also software. It promised that all private data of American users currently stored outside the US would be deleted after it was transferred inside the US.
- In a statement, Mircosoft said they explored “a preliminary proposal that would involve a purchase of the TikTok service in the United States, Canada, Australia, and New Zealand and would result in Microsoft owning and operating TikTok in these markets. Microsoft may invite other American investors to participate on a minority basis in this purchase.”
What’s in it for Microsoft? While the benefits for the US government are clear, not everyone agrees on Microsoft’s rationale.
- The Wall Street Journal said, “The deal would land Microsoft the breakout social-media player of this decade.” Particularly at a time when mounting scrutiny facing its rivals Facebook and Google make it difficult for them to consider TikTok.
- Network effects advisor Sameer Singh considers buying the US portion of the company a “handicapped asset”, commenting in a tweet: “splitting off TikTok US from TikTok international weakens both. Fewer creators and fewer viewers in each network. Competitors must be licking their chops.”
- According to Wedbush Securities analyst Daniel Ives, TikTok could be the “right partner at the right time” for Microsoft, who estimated the app’s value at around $50 billion.
By the numbers:
- Earlier this year ByteDance was valued at a staggering $140 billion.
- TikTok reported more than 800 million regular users, with some 100 million of those users in the United States.
The roll-up: Microsoft sees an opportunity in keeping TikTok alive, and in US hands. If it goes ahead, the deal has the potential to reshape the global tech landscape. It remains unclear how TikTok would continue to operate in other markets not covered by the Microsoft takeover such as Europe.
