TikTok Saga In US Is Far From Over

At the beginning of the week, we saw many headlines saying Oracle beat Microsoft in the deal for TikTok’s US operations.

It turns out the deal is far from done.

This Friday, the Department of Commerce said it would ban Americans from downloading TikTok and WeChat, another Chinese-owned app, on Sunday at 11:59 pm.

For now, the existing 100 million TikTok users in the US will still be able to use the app, but if the Beijing-based company doesn’t sell its operations in the US by November 12, its use will be banned.

The messaging app WeChat, which also offers other services like the transfer of money and payments, will face more severe restrictions from Sunday. The changes will reduce its usability and functionality.

Alleging potential national security threats, President Donald Trump signed an executive order on August 14, setting a 90 days deadline for the Chinese company ByteDance to sell or spin-off its TikTok business in the US. 

However, the proposal Oracle and TikTok submitted to the Trump administration earlier this week was not a sale. It was more like a partnership.

Oracle would take a minority stake in TikTok and be a “trusted technology partner.” Walmart would have a minority stake, as well.

According to some media outlets, ByteDance would also do an IPO of global TikTok on a US exchange.

But all this wasn’t enough to convince the government.

Now Oracle, Walmart, and TikTok will probably work against the clock over the weekend to find a solution that pleases the White House and avoids the sanctions.

But even if they cannot find a solution by then, technically they have until November 12 to come up with a new proposal.

Why do Oracle and Walmart want to make a deal with TikTok?

Whoever ends up buying TikTok’s operations in the US will become a real competitor to Facebook and YouTube virtually overnight.

In some ways, this is enough to explain why big companies would be interested in the deal.

In late July, Microsoft was the first to officially confirm that it was in talks with ByteDance to acquire TikTok’s US, Canadian, Australian, and New Zealand operations. Last Sunday, though, on September 13, Microsoft said its bid was rejected.

Oracle then became the virtual winner.

According to “Reuters,” investors value TikTok at $50 billion, 50 times its projected 2020 revenue of about $1 billion.

The app’s algorithm is considered highly valuable. 

TikTok was launched in 2017 in most markets outside of mainland China, but it only became available worldwide, including in the US, after merging with Musical.ly two years ago.

Today, TikTok has about 100 million monthly active users in the US, nearly 800% more than in January 2018. About 50 million are daily active users.

Globally, it has about 700 million monthly users.

It isn’t apparent, though, the exact benefits that a potential acquisition of TikTok could offer to Oracle. 

The enterprise-focused database and cloud giant never had the experience of running a consumer-facing business. 

However, Oracle has a unique advantage in the dispute: its cofounder Larry Elisson is one of the few top technology executives to openly support President Trump. 

Plus, according to some media reports, Oracle is backed by General Atlantic and Sequoia Capital, two major investors of ByteDance.

For Walmart, the app would be a potent tool to help the world’s largest retailer fight against Amazon’s online dominance. 

Since most TikTok users are young, it would open a way for Walmart to get closer to these consumers, which are not so keen to shop in brick-and-mortar stores.

Regardless if a deal will be approved or not, who ends up buying TikTok operations in the US will face challenges ahead.

No one has ever acquired just a part of a global social network. This acquisition would impact not only regular users and influencers but also advertisers.

Even if they find a way for all users to keep connected globally, this will be a challenge from the technology perspective. Not to mention the costs involved…

The saga continues.