The overseas version of TikTok is now under scrutiny by U.S. regulators over a deal it made two years ago. Tik Tok may not know that the trouble with the deal was already expected on Facebook. In 2016, Facebook negotiated for months whether to buy Musical.ly, a U.S. rival and social media app, people familiar with the matter. But Facebook eventually dropped the deal because of concerns about Music.ly’s younger user base and Chinese ownership.
In the end, TikTok’s parent company, ByteDance, bought Music.ly for $800 million. However, Facebook’s interest in acquisitions at the time may be linked to the current U.S. government investigation into Facebook’s acquisition of rivals. The unfinished deal led Facebook to fail to capture the short video phenomenon that is prevalent in China and the United States.
Facebook abandons Music.ly over regulatory concerns
Facebook’s takeover talks began three years ago. At the time, Kevin Systrom, then CEO of Instagram, Facebook’s photo-sharing app, visited Shanghai on a trip unrelated to the acquisition and met the founder of Musical.ly. Facebook CEO Mark Zuckerberg eager to enter China But when Strom first proposed to buy Music.ly, Zuckerberg hesitated because Musical.ly’s growth had slowed and was largely popular among the teen community.
But after meeting the founder of Music.ly and seeing the app become popular in the United States, Zuckerberg became interested in the offer. In the fall of 2016, he began takeover talks with Music.ly executives at Facebook’s headquarters. The negotiations were serious, but never reached the point of discussing the purchase price. That’s because Facebook realizes that having a China-based app can be complicated, and is increasingly worried about Musical.ly’s younger audience because it makes it difficult for Facebook to comply with U.S. laws on children’s Internet privacy and security.
Figure 2: Zuckerberg
In the end, Facebook decided not to make an offer for Music.ly. “We want to provide services in China because our mission is to connect the whole world, but we have never reached an agreement on measures. A Facebook spokesman said he declined to comment on the details of the talks. A spokesman declined to comment on Facebook’s interest in acquiring Music.ly.
Hard brother, hard brother.
TikTok has had regulatory troubles this year, but for the same reason facebook initially feared. The U.S. government is now investigating whether the acquisition of Music.ly two years ago and its merger with TikTok pose a national security risk. Under this pressure, ByteDance is stepping up efforts to hire lobbyists in the United States, including U.S. policy chiefs.
Ironically, TikTok’s growth is partly to thank Facebook. ByteDance have been investing heavily in ads for TikTok on platforms such as Facebook and Instagram, and even bought users from their biggest rivals. However, according to Sensor Tower, a market research firm, the spending on byte-beating advertising has fallen sharply since the second quarter, and TikTok’s user growth has slowed accordingly.
Compared to TikTok, Facebook’s troubles are unprecedented. Facebook’s reputation has been badly damaged by last year’s massive data breach scandal, and it is still not out of the shadows.
Any new facebook move is a case in point, with libra at a time when outside trust is at a low ebb. Facebook had planned to launch Libra in 2020, but a series of outstanding issues made it difficult for it to pass regulators.
At a hearing in July, U.S. lawmakers made it clear to Facebook that they “don’t trust” Facebook. “Facebook is dangerous,” Senator Sherrod Brown, Democrat of Ohio, said at the hearing. ”
Facebook’s previous string of acquisitions has also triggered antitrust scrutiny. The U.S. Federal Trade Commission (FTC) has set up a task force to oversee the tech industry to investigate anti-competitive behavior by tech giants. Bruce Hoffman, director of the FTC’s competition bureau, said that if anticompetitive behavior is found to have been completed, measures are not ruled out to remove the deal.