TikTok found itself in hot water after President Trump expressed concerns about the app collecting data on American citizens and the threat that poses to national security. Owner ByteDance has so far been unsuccessful in working out a deal with the US government so an alternative solution is proposed – Microsoft could acquire TikTok.
The software giant officially confirmed that CEO Satya Nadella has been in talks with the President as well as ByteDance. Microsoft “is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury.”
The Due Diligence?
The talks with ByteDance will be completed by September 15 of this year, one way or another. If Microsoft strikes a deal, it will acquire TikTok operations in select markets and may invite other US investors to take on a minority share.
Note that the company is only looking to run TikTok services in the United States, Canada, Australia and New Zealand. ByteDance will continue operating the social network in the remaining markets.
Microsoft will ensure that the private data of American users is transferred to the US. The company is also committed to offering security oversight to the local governments.
TikTok’s US arm alone is valued between $15 and $30 billion. This will be a major get for the company as Microsoft’s other social networking attempt, streaming platform Mixer, was recently sent to the great server farm in the sky (this after signing multi-million dollar contracts with popular streamers to lure them away from Twitch).
Why Microsoft Wants To Buy TikTok?
- Microsoft’s future ambitions, though, a move to acquire TikTok’s operations in the US, Canada, Australia, and New Zealand could benefit many of Microsoft’s existing businesses while also setting the company up as a real competitor to YouTube and Facebook.
- The key part of any TikTok deal will be the data and users Microsoft gains access to. This is the driving force behind concerns from the Trump administration over TikTok’s potential ties to the Chinese government and how that data might be misused. Microsoft acknowledges the data’s importance in its blog post confirming acquisition talks, noting that “Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States.”
- This data could be used by Microsoft in a variety of ways. The software giant has long used Xbox Live to fuel parts of Microsoft Research for future software and hardware projects, and the usage data helps game developers and Microsoft better understand how people use their Xbox. Understanding how people interacted with and used the Kinect accessory for the Xbox ultimately helped Microsoft develop and improve HoloLens, too.
- TikTok could help correct a Microsoft blindspot and even influence how other software and services are developed inside the company. Microsoft has all the data it needs on business usage of software, but it hasn’t been successful with pure consumer services in recent years, which has left the company with a gap of insight into consumer behaviors.
- Microsoft missed the mobile revolution and has been playing catch-up ever since, but it doesn’t want to miss an entire generation of future workers.
- TikTok gives Microsoft a direct line to millions of youngsters using the app to watch videos and even those who use it to create content. Microsoft has tried desperately to adapt its Windows operating system to be more consumer-friendly with video creation apps, but TikTok offers an easy way for millions to create videos from their phones instead.
When Can We See A Decision?
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. During this process, Microsoft looks forward to continuing dialogue with the United States Government, including with the President.
The discussions with ByteDance will build upon a notification made by Microsoft and ByteDance to the Committee on Foreign Investment in the United States (CFIUS). The two companies have provided notice of their intent to explore 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.
This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections. The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries.
Among other measures, Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States. To the extent that any such data is currently stored or backed-up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred.
Microsoft appreciates the U.S. Government’s and President Trump’s personal involvement as it continues to develop strong security protections for the country.
These discussions are preliminary and there can be no assurance that a transaction which involves Microsoft will proceed. We do not intend to provide further updates until there is a definitive outcome to our discussions.