Walmart: knock-knock at the door for TikTok
Donald Trump threw TikTok’s future into the abyss when he announced on 6th August that the app would effectively be banned in the US in mid-September. He then issued a separate order which gave TikTok’s parent company Bytedance just 90 days to sell TikTok’s US operations and data.
And there you were thinking that only the South African government cares about asset expropriation…
It all goes back to mistrust of the Chinese government and what happens to user data. There’s a huge power play between Trump and China at the moment. When the elephants fight…you know the rest. In case you don’t, the grass gets trampled.
Luckily for Bytedance, there is no shortage of interest in TikTok. Microsoft immediately put its hand up which makes sense because the tech giant doesn’t have a consumer social media platform in its arsenal. Microsoft does own LinkedIN which is doing rather well at the moment, but that’s obviously not the same thing as selling ads to singing and dancing teenagers.
Bytedance is facing a similar problem in India which is receiving far less media attention than the US issues. There will in all likelihood be an Indian buyer for the app’s Indian operations after that government also forced the issue.
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In-country partners: a tricky future?
It’s weird to imagine a social media company that has different shareholders in different countries. Tech platforms are global by nature and don’t usually need an in-country partner to be effective. Companies in every industry avoid in-country shareholders as far as possible because it creates huge operational complexities in multi-national groups.
It must be even worse in tech. Where is the user data stored? Who owns it? How will advertising work? Is there a royalty paid to the parent company for use of the app?
This reality has been forced onto Bytedance through general mistrust of the Chinese government by other countries.
Nightmare stuff, but a massive cheque for TikTok’s operations in these countries will make Bytedance feel better.
Walmart looks to the future
Out of absolutely nowhere, Walmart has joined the fray. The world’s most famous traditional retailer will Teams up with Microsoft (a terrible joke, I know) to convince Bytedance that they are the preferred buyers.
The reason? Walmart is tired of being the dinosaur.
Walmart’s market cap is just under $400bn. Amazon’s is $1.7 trillion. Bricks and mortar retailing has been left in the dust, at least from a shareholder value perspective.
Through TikTok, Walmart would suddenly have a juicy digital channel through which it can build an online marketplace. The integration of e-commerce and advertising is extremely powerful and the Chinese arguably know how to do it best when one looks at Alibaba or WeChat as other examples.
I find it impossible not to laugh at the thought of Walmart owning a social media platform. People of Walmart videos have brought joy to many users on platforms like YouTube.
The other guys: Oracle
There is a competing bid. TikTok must choose between the Microsoft-Walmart (!!) offer or an offer from Oracle which may include a consortium of investors.
Oracle is to tech what Walmart is to retail. Traditional (boring?) and focused on enterprise software, Oracle certainly isn’t an obvious player in this space. The thesis seems to be that Oracle would use TikTok’s data about social interactions to benefit its cloud, data and advertising interests, but quite how that works I’m not sure.
Trump threw his weight behind Oracle, calling Oracle a “great company” and refusing to comment on whether he believed it would be a better choice than Microsoft. You can decide for yourself whether an endorsement from the Donald is a positive or a negative in this negotiation.
When will we know?
Bytedance needs to choose a preferred bidder soon. There will likely be a due diligence and regulatory approval phase and 90 days will be eaten up quickly.
One wonders if Oracle was in front before the Microsoft-Walmart development. With an estimated value of $35bn – $50bn for TikTok’s US operations, there is a significant cheque required. Oracle only has around $40bn in cash, so it’s bringing a small gun to this fight.
Perhaps Oracle bought the gun at Walmart. Perhaps you’ll soon be able to buy Wamart’s guns through a social media app.
2020 gets crazier by the day.
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