Commentary

With The Clock Ticking, Why Does Microsoft Want TikTok Anyway?

The TikTok version of this developing story: President Donald Trump says, “go ahead and buy TikTok, Microsoft or whoever in the U.S., but our Treasury ought to get a big chunk of change for our giving our blessing to the deal.” 

The video ends with a montage of faces, all expressing bewilderment -- some over the President’s unprecedented pronouncement; others over why the purveyor of a vintage operating system wants to shell out big bucks for China’s version of Vine, which went bust  years ago.

“The President's requirement that some of the money from the deal go to the U.S. Treasury doesn’t have a basis in antitrust law, according to Gene Kimmelman, a former chief counsel for the U.S. Department of Justice's Antitrust Division and currently a senior adviser to the policy group Public Knowledge,” report   Rishi Iyengar, Oliver Effron and Nikki Carvajal for CNN Business.

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“‘This is quite unusual, this is out of the norm,’ Kimmelman said. ‘It's actually quite hard to understand what the president is actually talking about here. … It's not unheard of for transactions to have broader geopolitical implications between countries, but it’s quite remarkable to think about some kind of money being on the table in connection with a transaction.’”

TikTok is owned by China’s ByteDance. Despite its innocuous mission statement -- “Inspire creativity, enrich life” -- there are worries, which may or may not be rooted in reality, over its security and privacy practices.

“Given the national security concerns, Mr. Trump had the right to sign off on a plan to mitigate any risks TikTok posed. But the events followed a pattern that Mr. Trump set early on in his presidency, in which some of the world’s most powerful companies have found themselves at his whims,”  Ana Swanson and Michael D. Shear write  for The New York Times.

“Daniel Price, a former economics adviser to President George W. Bush, said Mr. Trump’s reversal on TikTok was ‘just another example of the president’s undisciplined and impulsive decision-making style, so bewildering to friend and foe alike.’”

For its part, “China will not accept the ‘theft’ of a Chinese technology company and is able to respond to Washington’s move to push ByteDance to sell short-video app TikTok’s U.S. operations to Microsoft, the China Daily newspaper said on Tuesday,” Reuters’ Brenda Goh writes.

“The United States’ ‘bullying’ of Chinese tech companies was a consequence of Washington’s zero-sum vision of ‘American first’ and left China no choice but 'submission or mortal combat in the tech realm,’ the state-backed paper said in an editorial. China had ‘plenty of ways to respond if the administration carries out its planned smash and grab,’ it added,” Goh continues.

Meanwhile, there’s the question of why Microsoft -- which pays its dividends by selling computing devices, software, and cloud systems and services to consumers and businesses -- would want to acquire an app so fraught with political baggage.

“Although the social platform’s clicky videos and ease of use have made it a phenomenon both in the U.S. and around the world, it's still small compared to Microsoft, which sports a market capitalization of $1.6 trillion and which had revenue of $143 billion last year. By comparison, TikTok is expected to generate as much as $1.4 billion in revenue this year,” observes  Stephen Gandel for CBS News.

But he offers several reason why the deal is attractive to CEO Satya Nadella and company.

For one, it “could help Microsoft turn the page on a series of acquisitions in recent years that range from modest successes to outright duds.” 

For another, “only about a third of Microsoft's revenue now comes from its consumer business, and only a small portion of that is from direct sales to individuals.”

And finally, “buying TikTok would also turn Microsoft into a serious competitor in online advertising with Facebook, Twitter and Google's YouTube.”

Indeed, acquiring “the social media service favored by American teens …  could be … the stodgy software giant's long-awaited fountain of youth,” point out Jessica Guynn and Mike Snider for USA Today.

“Getting TikTok would give [Microsoft] another chance to get in on a fast-growing, youth-oriented social media property and be a way to try to get back at Facebook for spurning its advances,” eMarketer analyst Debra Aho Williamson said in a statement cited by Guynn and Snider.

“Wedbush Securities analyst Daniel Ives agrees,” they write.

“‘This would be a major foray into the social media space which has been long overdue for Microsoft over the last decade,’ he said. A TikTok acquisition would be a ‘crown jewel’ snapped up at a discount, ‘an asset with 100 million users, massive momentum, engagement, advertising revenue and something they could cross-sell into the broader Microsoft base,’ Ives said.”

And have some fun  doing it, presumably.&nbsp

1 comment about "With The Clock Ticking, Why Does Microsoft Want TikTok Anyway?".
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  1. PJ Lehrer from NYU, August 5, 2020 at 10:33 a.m.

    Trump is still embarrassed that he was punk'd by teenagers, and afraid of what they might do next.  It's always all about him...
    http://pjlehrer.blogspot.com/2020/06/trump-was-punkd-by-teenagers.html

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