TikTok has seen a rapid increase in recent times, recording 2 billion installations globally. With the border tensions increasing, India banned this video streaming app in late June causing it to lose nearly 200 million users.
The company is now faced with a crisis as concerns over its privacy and security controls are raised. It cannot afford to lose its business in the US. Will Microsoft acquire TikTok and be a knight in the shining armour? How will TikTok’s CEO, Kevin Mayer, slip through the net of this crisis?
TRUMP THREATENS TO BAN THE CHINESE APP
Tensions between the Chinese government and US administration is soaring into the sky. Escalating these tensions, President Donald Trump on 31st July threatened to ban TikTok from operating in his country, using emergency economic powers or executive order. “As far as TikTok is concerned, we’re banning them from the United States,”, said Trump. That day, He was initially not in complete favor of a deal to let a US company buy Tiktok’s operations.
The has up to 80 million active monthly users in America and therefore, the ban would be a fatal blow for ByteDance. A ban in North America would be a huge loss to its big business which is home to its biggest star Charli D’ Amelio with 70 million followers. American operations are very important to their brand image as a video platform that can rival YouTube.
TikTok has denied the allegations that it is controlled by or shares data with the Chinese government. It says that its US data is stored in the US with backup in Singapore and has recently moved its European privacy operations to Ireland.
USA’S DISLIKE FOR TIKTOK
Trump is of the fact that ByteDance, Tiktok’s parent company is harvesting the data of millions of American users. He does not keep any data in China and would never provide it to them.
His dislike for TikTok goes further than just privacy concerns. His previous experience with Tiktok cannot be overlooked. Last month users claimed to have ruined his Tulsa rally after signing up for tickets they had no intention of using.
IS TIKTOK TRYING TO LOOK LESS CHINESE?
It was recently revealed that Tiktok is checking the clipboard data on iOS devices. Since then, it had removed that feature, saying that the app is secure and it has a US-based server. But ByteDance is based in China. This fact puts Tiktok naturally under suspicion.
TikTok has taken steps to make it look more Americanized. It recently appointed former Disney+ streaming service head, Kevin Mayer as the CEO of TikTok. The company was reported to have plans to move the headquarters away from China to one of the locations where it has offices.
It recently removed 49 million videos that violated its platform guidelines. It is currently pacifying the Indian government to review the ban. Tiktok withdrew the app recently from Hongkong alongside Google, Facebook, and Twitter, because of new Chinese national security laws. For Tiktok that was a big political move to demonstrate that it isn’t tied to the Chinese Government. But TikTok has recently refused to appear at congressional hearings in the US to discuss security issues.
Tiktok has denied accusations that it is controlled by the Chinese government. “We are not political, we do not accept political advertising and have no agenda – our only objective is to remain a vibrant, dynamic platform for everyone to enjoy,” the CEO of TikTok, Kevin Mayer.
MICROTOKS TO PURCHASE TIK
On 31st July, it was reported that Microsoft was in talks to acquire TikTok. Microsoft confirmed that they want to buy the app on August 1, the company said that it will move forward with talks to buy Tiktok’s U.S. operations following a discussion between its chief executive, Satya Nadella, and President Donald Trump.
“Microsoft will move quickly to pursue discussions with TikTok’s parent company, ByteDance in a matter of weeks, and in any event completing these discussions no later than September 15, 2020”
Microsoft appreciates Trump’s concern and is committed to acquiring Tiktok only after a complete security review and providing proper economic benefits to the US. Microsoft would also buy TikTok in Canada, Australia, and New Zealand as part of the deal, inviting other American investors to participate in this purchase.
THE TIKTOK DEAL
Microsoft was facing roadblocks in the form of presidential sentiment. His position softened at the weekend. Trump gave his verbal approval to a potential deal between TikTok and an American Company like Microsoft but conditioned that TikTok had until Sept15 to close such a deal or face US ban.
Here’s the deal. “I don’t mind if-whether it’s Microsoft or somebody else, a big company, a secure company, a very American company buys it,” Trump told reporters at White House. “It’s easier to buy the whole thing than to buy 30 percent of it. Who’s going to get the name, the name is hot?”
WHY MICROSOFT WANTS A PIE OF TIKTOK
When Trump wants a complete ban on Chinese applications, Microsoft wants to buy TikTok. Why? The key is data. Microsoft wants it. Tiktok will give it. It all started with data, and the fears that data of US users was ending with US government. Microsoft knows about how people use business software and can create new business products using that knowledge. What they do not have is the expertise in user behaviour. TikTok will benefit them in this side of the spectrum.
Microsoft can easily run ads on this platform and can have access to an ever-growing user base to which they can show ads for their laptops and gaming consoles like Surface Pro and Xbox.
The software enterprise which acquired LinkedIn for $26 Billion needs a way into the attention space of younger age demographics and TikTok is the podium. This video making application is trending in the US. It can create a new revenue stream for Microsoft and help it gaining in a powerful position to compete with Facebook and YouTube. Google has YouTube. Facebook has Instagram. Microsoft can have TikTok. If Microsoft gets TikTok, it will give them a chance to engage Gen Z.
“Microsoft would ensure that all private data of TikTok’s American users are transferred to and remains in the United States,” Microsoft said.
TikTok would boost Microsoft’s share of the U.S. digital display ad market. If Microsoft saves TikTok, it would have a lot of grateful young people on its hands.
The acquisition can be described as a potential “coup” for an opportunity as it lays down as an opportunity to scoop up one of the world’s fastest social media growing platforms. Reuters reported it would cost $50 billion for Microsoft to complete the acquisition.
Under Satya, Microsoft has been more strategic than before and we can expect a positive outcome. Hoping that Microsoft keeps up the privacy policies just like it’s doing now after TikTok’s acquisition might ultimately benefit the consumers more than anybody else.
HOW LIKELY IS THE ACQUISITION?
There is a high probability that the acquisition will take place. Where TikTok is scrambling to keep its American presence alive, Microsoft emerged as a saviour.
The deal could be especially beneficial for Microsoft because the TikTok business in the US is valued in the $40 billion range and can move up to $200 billion if the deal goes down.
But nothing is set in stone. TikTok is leaving the door open for negotiations with other potential buyers. If the acquisition takes place, it might just turn a new page for Microsoft.