The TikTok Talk: Microsoft's Efforts around Pocketing a Big deal

  • Aug 05, 2020 AEST
  • Team Kalkine
The TikTok Talk: Microsoft's Efforts around Pocketing a Big deal

Summary

  • The buzz in the market related to the possible acquisition of TikTok’s US division by Microsoft came to an end when the Company confirmed that it had a discussion with ByteDance on this front.
  • Considering the US President’s concern related to TikTok app, the Company confirmed the acquisition only happen after security review and seeing the economic benefits to the US.
  • The conversations with ByteDance will build upon a notice made by Microsoft and ByteDance to the Committee on Foreign Investment in the United States.
  • Microsoft confirmed that the discussions are in the preliminary stage and it does not assure that the transaction might proceed.

There was a buzz in the market related to Microsoft buying Chinese technology company TikTok. On Sunday 2 August 2020, Microsoft confirmed the buzz that it had a discussion with the Chinese technology Company ByteDance concerning the acquisition of the social app TikTok in the US.

In the official blog of Microsoft, it was highlighted that Microsoft’s CEO Satya Nadella and US President Donald J. Trump are ready to continue discussions to explore a purchase of TikTok in the US.

Before the blog release, President Donald Trump had announced to ban the Chinese-owned video-sharing app in the US. He also confirmed that he could sign an executive order by Saturday because of the concerns raised by the US security officials regarding the theft of the personal data of US citizens.

TikTok is widely used for making short-form mobile videos, which inspire people to become more creative and bring joy. In the US, TikTok has over 80 million active monthly users. President Trump has raised concerns over data privacy of the app.

DO READ: US-China clash and TikTok controversy

The Redmond, Washington-headquartered tech giant realizes the significance of addressing the President’s worries and hence is committed to acquiring TikTok after the security review and seeing the economic benefits to the US, which includes the US Treasury.

In the next couple of weeks, the Company would have discussions with the parent Company of TikTok and would be completing these discussions by no later than 15 September 2020. Meanwhile, Microsoft would also have discussions with the United States Government and the President.

The conversations with ByteDance will build upon a notice made by the two parties to the Committee on Foreign Investment in the United States. The two firms have presented a notice of their intent to discover an initial proposal that would involve the acquisition of the TikTok service in the United States, Canada, Australia, as well as New Zealand. In case this becomes successful, Microsoft would be owning and operating TikTok in these markets as well. Also, Microsoft would invite other American investors to participate, on a minority basis, in the purchase.

The new structure would be built on the existing experience of TikTok lovers and simultaneously would add superior security, privacy, and digital safety protections. The new operating model for TikTok service would ensure transparency to users plus proper security supervision by governments in these nations.

Also, Microsoft would make sure that all the private data of the American TikTok users get transferred and remains in the US. Further, the Company stated that these discussions are in the preliminary stage, and it does not guarantee that the transaction will proceed.

Challenges Faced by TikTok In Present Times:

India was the biggest overseas market for TikTok, and with the concerns related to the data theft, the Indian Government banned this app along with 58 other Chinese apps. In India, TikTok had more than 200 million users. Out of the total 2 billion downloads of this application, India alone accounted for more than 600 million downloads. Before TikTok’s ban in India, there were over 80 million monthly active users. However, the ban on the app was a massive blow for the Company.

Because of the growing concerns that the China-owned app allows the Chinese Government to access personal data, there is a word in the market that other countries might also follow the same path of banning the app.

Since the app was banned in India, officials from countries like Australia and the US also raised concerns over data privacy.

TikTok has been under inspection for months, and the Government also launched a national security investigation of ByteDance in November 2019.

In January 2020, cybersecurity firm Check Point, in its research, found loopholes in the app. The flaws in the app could allow attackers to manipulate content and get personal data of the users.

Challenges Which Microsoft may Encounter While Acquiring TikTok:

  • As highlighted above, there are broad issues and flaws with TikTok concerning data privacy. The US companies need to resolve the massive issue with the app by 15 September 2020 before securing this Chinese app.
  • Other than the geopolitical issues, Microsoft might have to persuade the influential investors in China, the west, along with the Trump Administration.
  • The US business unit of TikTok includes regions like New Zealand, Australia, and Canada. Now, another challenge that comes here is that valuing this unit is relatively complicated. This is because during the promotion of this app in the US, it involved huge expenditure in the promotion and content development. Despite this, the app was non-profitable in the region.
  • There is still enormous ambiguity concerning the acquisition of TikTok’s US division, and how the division will be separated from the rest.

 


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