Buy TikTok, Microsoft to return to the C side?

With the 45-day deadline now in the countdown, the direction of TikTok has yet to be determined, with the most likely acquisition now being acquired by Microsoft. On August 3rd Microsoft issued a statement confirming it was in talks with Byte Dance to buy TikTok, saying the deal would close by September 15. On the same day, ByteDance founder Zhang Yiming also said in an internal letter that the company would try to discuss a preliminary partnership with a technology company to form a plan and ensure that TikTok continues to serve U.S. users.

Buy TikTok, Microsoft to return to the C side?

But on the evening of August 4th,media reported that Google and Facebook had shown interest in Tiktok and Apple had expressed strong interest in buying TikTok, but then an Apple spokesman responded to media reports that there was no discussion of buying TikTok and was not interested. The many false messages make TikTok’s future even more uncertain.

But Microsoft has an advantage over other U.S. tech giants in terms of capital strength, acquisition momentum and government regulation, but the deal negotiations are never easy, and whether Microsoft can finally win The TikTok remains uncertain. If Microsoft’s acquisition is completed, it will be another big deal in recent years and an important move in its social and digital consumer business. Can Microsoft, which has failed to capture the dividends of the mobile Internet era, use it to re-establish the influence of the C side?

Can Microsoft complete the acquisition?

Over the past five days, TikTok’s fortunes have been flipping. After U.S. President Donald Trump said on July 31st that he would ban TikTok in the U.S., news broke that Microsoft was in talks to buy TikTok’s U.S. business, but Microsoft suspended the acquisition because of Trump’s opposition to a U.S. acquisition of TikTok’s U.S. business. Meanwhile, media reports say Byte Dance founder Zhang Yiming and other investors are more inclined to spin off TikTok than it sold to Microsoft.

However, Microsoft then said in an official statement on August 3rd that it would move forward with discussions with Byte Dance, the parent company of TikTok, and complete the deal by September 15 after talks with U.S. President Donald Trump. Microsoft will acquire TikTok’s operations in the U.S., Canada, Australia and New Zealand, allowing it to own and operate TikTok in those markets, the statement said.

Mr. Trump also for the first time on August 4th said of TikTok: “Unless Microsoft or other U.S. companies can buy TikTok and close a deal, TikTok will be forced to close its U.S. operations on September 15th.” “

He also proposed a new requirement that a portion of the exchange be turned over to the U.S. Treasury. “A large part of this money will go to the U.S. Treasury because we’re making this deal possible.” Trump explained. But the claim is said to have “no legal basis for antitrust laws.”

However, on the evening of August 4th, Fox reported that Google and Facebook had shown interest in Tiktok in the past. Axios, citing several non-Apple insiders, said Apple was also interested in acquiring TikTok. But an Apple spokesman responded to Axios by saying there were no discussions about acquiring TikTok and that the company was not interested.

The deadline for TikTok’s final fate has been set, but the course remains elusive. After twists and turns, there has been no substantial progress on the Tiktok deal. Media reports show that ByteDance and Microsoft have not reached a consensus on the price, terms, payment methods and details of technology sharing or asset transfer.

The market view is that the valuation of TikTok in the deal will be difficult to negotiate. Steve Ballmer, Microsoft’s largest shareholder and former CEO, said in an interview that buying TikTok was an exciting offer for Microsoft, apparently depending on the price.

Given TikTok’s growing popularity around the world, especially among young people and Big V, it could be worth tens of billions of dollars. It follows reports that Transatlantic Investment Group and Sequoia Capital have also made bids for ByteDance, valuing TikTok at about $50bn in investment proposals, equivalent to 50 times its expected revenue this year. But market participants believe that TikTok has greater potential if it stays ahead of Facebook’s $700bn market capitalisation.

However, in the limited time, whether the overall valuation of TikTok will be depressed is noteworthy, and Microsoft’s intention to buy the U.S., Canada, Australia, New Zealand business and how to make a price, and how to sell is also a question, about The core algorithms of TikTok’s development, intellectual property and other core asset will also need to be packaged for sale.

Moreover, there are still uncertainties about whether the final plan will satisfy Mr. Trump and the White House, and their capricious attitude will add to the uncertainty. Microsoft also appears to be trying to give Mr. Trump a head shot, saying in a statement that it is fully aware of the importance of addressing the president’s concerns and is committed to acquiring TikTok while conducting a thorough security review that provides appropriate economic benefits to the U.S. government, including the Treasury Department.

At the same time, after completing the acquisition, Microsoft said it would build on the experiences that TikTok users currently love, while increasing world-class security, privacy, and digital security protection to ensure that TikTok is transparent to users and subjected to appropriate government security oversight in these countries.

Microsoft said it would ensure that all TikTok U.S. users’ private data is transferred to the U.S. and retained in the U.S. Microsoft will ensure that any data currently stored or backed up outside the United States will be removed from servers outside the United States after it is transferred to the United States.

This is the first time Microsoft has issued a statement on the acquisition of TikTok and said it will not provide further updates until the final results are discussed. It remains to be seen whether Microsoft’s statements will finally land and win Over Mr. Trump.

Byte Dance said it had not yet finalized a final plan. In an internal letter dated August 3, Mr Zhang said the final solution had not yet been decided and that it would not give up exploring any possibilities, and that concerns and rumours about TikTok would continue for some time. Indeed, there is still no definitive answer as to where TikTok is going into the countdown.

Buy TikTok, Microsoft to return to the C side?

Why is Microsoft?

In addition to the previous revelations about TransAtlantic Investment Group and Sequoia Capital, four u.S. internet giants have appeared, Microsoft, Google, Facebook and Apple, and Microsoft said in a previous statement that it might invite other U.S. investors to participate as minority shareholders.

However, the current market forecast is that Microsoft may be the final “winner”. So why is Microsoft?

U.S. tech giants such as Apple, Amazon, Google and Facebook are all thought to be potential suitors for TikTok. One advantage, however, is that Microsoft faces far less criticism and regulation than its peers on antitrust and data protection, and Apple, Amazon, Google and Facebook, which dominate the U.S. Internet market, are recently being scrutinised by U.S. regulators over monopoly issues.

Facebook, the US social media boss, has bought Instagram and Whatspp, which is considered a monopoly in the social media sector. But at a hearing last week of the big four, the CEOs of the four companies denied the key issues and repeatedly stressed that the company did not have a monopoly.

Notably, all four companies have competing businesses similar to TikTok’s. Such as Facebook’s social media business, Apple’s streaming service, Amazon and Google’s Internet advertising business, Google and Facebook have even mimicked parts of TikTok’s features. In June, Google’s YouTube began testing 15-second videos with features similar to TikTok, and Facebook’s Instagram announced in July that its imitation TikTok feature was officially launching to the global market.

The acquisition of TikTok by these giants would undoubtedly further exacerbate the monopoly and discourage competition in the US internet market. Microsoft, which specializes in enterprise and cloud services, is less likely to have a business similarity to TikTok and is therefore more likely to be agreed to be acquired by the U.S. government. The company’s continued push to acquire TikTok after a phone call with Mr. Trump by Microsoft’s CEO is partly a sign of trust.

Foreign commentators also argue that Microsoft’s acquisition of TikTok faces fewer regulatory hurdles than several other US internet giants. But analysts say the potential deal to buy TikTok could reignite regulatory scrutiny of Microsoft.

In addition, Microsoft has the most abundant cash flow, which also makes it ready to complete the acquisition. At the end of the first half of this year, Microsoft had $136bn in cash and liquidity investments that could be converted into cash, ahead of the four other internet giants, according to the results.

From ByteDance’s point of view, TikTok is now the only app in the U.S. that can compete with the dominant social media platform in the market, and it is also more willing to choose a relatively friendly acquirer who will not compete directly with TikTok in the future, resulting in more negotiating chips and higher offers. Microsoft is also more likely to gain recognition than U.S. internet giants such as Facebook, which was directly named and discredited by ByteDance.

Media reports suggest that Microsoft may have been the first U.S. company by ByteDance to reach out, about a month after talks with Tiktok began, when the Trump administration appeared to be pushing ahead with a decision to withdraw from Tiktok. It was then that Byte Dance approached Microsoft executives to say they were considering selling its U.S. business.

Another detail shows that Byte Dance founder Zhang Yiming joined Microsoft in 2008 but quickly left out of his tatters because he didn’t adapt to the culture of big companies. He also had an exchange with Microsoft founder Bill Gates, who sat down with him at the U.S.-China Internet Forum in 2015 and discussed the future of the operating system. In a difficult time, Zhang Yiming may have thought of his old owner.

Can Microsoft get back to the C-side?

But for a company worth tens of billions of dollars, buying a company like TikTok needs not only strength and recognition, but more importantly, enough motivation. Liu Xingliang, director of the DCCI Internet Research Institute, told Sohu Technology that Microsoft needs TikTok because social is an area that Microsoft has always wanted to and has been trying.

In recent years, Microsoft has become more and more corporate business software and services, leading to a degree of rebirth, but also deepened its own image of To B. In the fourth quarter of fiscal 2020, Microsoft’s productivity and business process business (Office, LinkedIn, Dynamics Business Solutions) and Smart Cloud Business (server products, enterprise and cloud services) combined accounted for 66% of revenue, and better-than-expected results continued to drive up its share price.

At the same time, Microsoft is cutting back on its huge spending on consumer businesses, abandoning music services, wearables and streaming services, and shutting down AI’s personal business, Cortana, the voice assistant. But in fact, Microsoft has had a number of big-money layouts in consumer-facing social, device and app businesses, but it has stumbled, and it is not feeling as much as it is squeezed by giants such as Apple and Facebook.

Microsoft’s social space layout began at the end of the last century with the birth of MSN, but quickly stalled after rapid growth, microsoft eventually shut down MSN in 2013 and replaced Skype, the $8.5 billion instant messaging product it bought in 2011, but has since been marginalized by mistakes. Although Microsoft has previously said that Skype had 40 million daily active users during the outbreak, a significant increase, it is still not a match for apps such as WhatsApp.

As social media exploded after 2010, in addition to the acquisition, Microsoft launched the Socl project, hoping to compete with Facebook, but it also closed in 2017. Microsoft’s search engine, Bing, launched in 2009, did not make a profit until the third quarter of 2015 and has so far failed to shake Up Google, whose search ad revenue fell 18 percent in the fourth quarter of fiscal 2020. In addition, Microsoft bought The professional social networking site LinkedIn (LinkedIn) for $26.2 billion in 2016, the company’s current relativepresence in the social space, but with a high age.

On consumer devices, Microsoft bought Nokia’s handset business for more than $7 billion in 2013, but just six months later, the new Nadella reversed the “devices and services” strategy proposed by former CEO Ballmer, focusing on “mobile and cloud” and “devices” being abandoned. In 2015, Microsoft announced a $7.6 billion writedown and 7,800 job cuts for Nokia, marking a formal failure in the consumer business.

In June, Microsoft also announced that it would permanently close all retail stores and focus on digital retail, and rumors of Microsoft abandoning its Surface hardware business were on the rise. Microsoft, meanwhile, shut down its live gaming platform, Mixer, because it has fewer users than you can match the YouTube Gaming and Twitch platforms, less than four years after it was in operation.

One of Microsoft’s few bright spots in the consumer business is its Xbox-centric gaming business. Amy Hood, Microsoft’s chief financial officer, has previously revealed that the company’s gaming software and subscription business has crossed the $10bn-a-year threshold, but accounting for less than 7 per cent of fiscal 2020 revenue. Microsoft’s gaming business, which focuses on Xbox content and service revenue, grew more than 60 percent year-on-year to $1.3 billion in the fourth quarter of fiscal 2020, but only 3 percent, helped by home entertainment products during the outbreak.

Microsoft, which has been accused of lacking social genes and missing out on the dividends of the mobile Internet era, is undoubtedly another bold move to To C if it buys a mobile social product that focuses on short video and is attractive to young people. TikTok has been the fastest-growing social media in the U.S. in the last two years, with more than 2 billion downloads worldwide and more than 100 million downloads in the U.S. In June 2020, TikTok topped the list of downloads of non-gaming apps, with Facebook and its WhatsApp and Instagram snr 3-5, according to Sensor Tower.

If Microsoft takes down TikTok, it may help it become more at a stake with social giants such as Facebook. The Wall Street Journal says that once Microsoft owns TikTok and reaps the benefits, it could be seen as a big competitor by YouTube and Facebook, which could be microsoft’s biggest ambition for the future.

At the same time, the acquisition is expected to be in collaboration with Microsoft’s existing business. Liu Xingliang also said that in the current short video of the new style, Microsoft if the acquisition of TikTok can be liked by many young people, and the combination of existing business is also possible, Tencent is a very good combination of social and gaming example.

Specifically, Microsoft, backed by its Bing search engine, can cross-promote TikTok’s social media video capabilities on Xbox consoles and cloud services, and use TikTok to increase exposure to products such as Microsoft’s Surface and Xbox, attracting more potential users. Steve Ballmer says the acquisition could really expand Microsoft’s consumer base by constantly trying new things to build new businesses.

However, there are also market voices are not optimistic about Microsoft this step of the “dangerous chess”, it does not have the experience of operating and managing similar TikTok social products, itself does not have the algorithm advantage for a large number of user experience, and after the acquisition of the company will often adjust, which will be a challenge for Microsoft.

The next 45 days will be a critical period for TikTok. This may also be an important opportunity for Microsoft to reshape its C-side influence, and will it be able to seize it this time?