The recent reports indicate the potential of Microsoft Inc (NASDAQ: MSFT) to purchase Chinese-based ByteDance Ltd operations in the United States amidst heightened U.S.-China economic row. The Chinese tech firm that has attracted the attention of Microsoft is the brain behind social media sensation app TikTok, an app that has grown more in popularity world-wide amidst the coronavirus pandemic.
The acquisition talks are inspired by plans by President Donald Trump administration to ban the TikTok app on the premise that it is capable of being used to gather data on Americans for use by Beijing. The potential taking over of ByteDance U.S. operations potentially valued at $5 billion will help relieve the Chinese firm of the pressures from the White House.
The proposed deal will help Microsoft to take control of an app with a huge user base, and help advance the software giant’s reach in the social media world following its $26.2 billion acquired Corporate Networking App LinkedIn back in 2016.
Embattled TikTok and the Trump Grudge
TikTok has had to battle a lot of irregularities in recent times. The app is a Chinese video-sharing social networking service owned by ByteDance, a Beijing-based internet technology company founded in 2012 by Zhang Yiming. It is used to create short dance, lip-sync, comedy, and talent videos. The app has garnered a huge customer base. TikTok became available in the United States after merging with Musical.ly on 2 August 2018 and by October 2018, the app became the most downloaded app in the United States and around the world.
As reported by the Wall Street Journal, U.S. officials particularly president Donald Trump shares concerns that TikTok could be leveraged by China to collect data from American citizens. A probe into this allegation is supported by a 2018 legislation that allows regulators to investigate deals that involve foreign investment in companies with over a million U.S. users that have access to their genetic, biometric, financial, health, or location data.
The July 29 address to the press, TikTok CEO Kevin Meyer re-emphasized that the app was created to use innovation in helping to bring healthy competition. Concerning Washington’s data handling concerns, he noted:
“With our success comes responsibility and accountability. The entire industry has received scrutiny, and rightly so. Yet, we have received even more scrutiny due to the company’s Chinese origins. We accept this and embrace the challenge of giving peace of mind through greater transparency and accountability…We will not wait for regulation to come, but instead TikTok has taken the first step by launching a Transparency and Accountability Center for moderation and data practices.”
Compelling as the statement stands, TikTok’s transparency and accountability practices are not enough to get it off Trump’s radar.
Potentials of Acquisition of TikTok by Microsoft
Owing to the acquisition talks still been discussed privately, neither Microsoft nor TikTok has issued an official statement with respect to the acquisition deal. The deal, however, seems to be the best way to help the app keep its relevance as an outright ban will not be in favor of the well-loved app.
Microsoft Corporation through the deal will look to another source to merchandise its innovations as LinkedIn’s growth slowing down as reported by Forbes. The iconic business review outlet also tipped MSFT shares for a buy should the acquisition eventually hit through