What an eventful weekend for the team at TikTok HQ.
To recap the current situation – earlier this month, following the Indian Government’s decision to ban all Chinese apps, including TikTok, in its nation amid ongoing border battles with Chinese forces, US President Donald Trump said that he too was considering banning the app as part of punishment for the COVID-19 outbreak.
US Secretary of State Mike Pompeo later clarified that the Government was indeed considering banning the app, but less so as a form of punishment, and more due to concerns that it could be used as both a surveillance and propaganda tool for the Chinese regime. That concern is not unfounded, with TikTok’s parent company ByteDance having in the past worked with the CCP to moderate anti-government content and distribute pro-China material within its apps.
TikTok has been under investigation on this front for some time, and two weeks after the initial suggestion of a possible ban by President Trump, the US House of Representatives voted to have the app banned from all Government-issued devices, due to the same concerns. TikTok is already banned on all military-issued devices in the US, UK and Australia because of its potential for data tracking.
And then, last weekend happened.
On Friday, reports emerged that Microsoft was reportedly considering an acquisition of TikTok in a bid to separate the app from its Chinese ownership, and quell the ongoing questions about its data-sharing obligations to the CCP. Then late Friday evening, when speaking to the press on Air Force One, President Trump said that he would be moving to ban the app in the US, likely within days.
That set off panic among TikTok creators, with downloads of alternate video apps spiking, while conspiracy theories about the Trump administration’s motivations for a ban flooding the app.
Was Trump serious? Could he actually institute a ban?
It’s difficult to say, on both fronts, but in theory, he could sign an Executive Order banning TikTok. There are legal complications within such a ruling, and any ban on the basis of potential surveillance or data-gathering would likely extend to all Chinese-owned apps, including WeChat and others (which the White House alluded to on Sunday). But yes, the ban threat could well be real – though speculation has been that Trump was merely using this as a push, at this stage, in order to force ByteDance into selling the app to a US-owned company.
And that does look to be what’s happening – on Sunday, Microsoft published an official statement which both confirmed that it is seeking a buy-out of TikTok, and that it had also arranged with President Trump to continue explorations of a possible purchase of the app.
As per Microsoft:
“Microsoft will move quickly to pursue discussions with TikTok’s parent company, ByteDance, in a matter of weeks, and in any event completing these discussions no later than September 15, 2020. During this process, Microsoft looks forward to continuing dialogue with the United States Government, including with the President.”
Trump has since reiterated this deadline, telling reporters that:
“It can’t be controlled, for security reasons, by China – too big, too invasive – and here’s the deal: I don’t mind if, whether its Microsoft or somebody else, a big company, a secure company, very American company, buys it. It’s probably easier to buy the whole thing than to buy 30% of it because they say ‘how do you do 30%?’, ‘Who’s going to get the name?’ The name is hot, the brand is hot. Who’s going to get the name? How do you do that if it’s owned by two different companies? […] I suggested that [Microsoft CEO Satya Nadella] can go ahead, he can try. I set a date of around September 15th, at which point it’s going to be out of business in the United States, but if somebody, whether it’s Microsoft or somebody else, buys it, that’ll be interesting.”
So Trump has said, clearly, that TikTok has till September 15th to become American-owned or it’ll be banned.
There are various nuances within that statement. What if TikTok becomes British-owned instead, for example, while Trump has also left the door open for any other players to step in with takeover offers for the platform, aside from Microsoft.
Trump also noted that:
“A very substantial portion of that price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen.”
Which is not legal, nor constitutional, according to various experts, so it seems like an element that will likely be overlooked. But the bottom line is that TikTok is fine, for now, and it’ll be re-assessed within six weeks.
Here’s a look at some of the key questions about the potential sell-off, and the future of the app.
Will TikTok eventually get shut down?
It seems unlikely. The platform itself is worth, according to some estimates, around $50 billion, and if the option is either to sell it to Microsoft – or someone else – for anywhere close to that amount, or lose out completely, you would expect a deal to get done, one way or another. That seems the most likely outcome, though it’ll be interesting to see if any other suitors emerge that might be a better fit, with TikTok not really meshing with Microsoft’s overall product suite.
Then again, Microsoft, buoyed by its success with LinkedIn, may see this as it’s time to step into social, and with the additional advertising potential and user data it can attain through the acquisition, it could better position the tech giant to go head to head with the Google’s and Facebook’s of the world moving forward. This could be a major, solidifying move for the company – or it could fall flat, like most of Microsoft’s other efforts when stepping out of the enterprise tech space. But given TikTok’s popularity, seeing it become a total flop would take some significant missteps.
Could Facebook look to take it over?
Maybe – though you have to wonder whether US officials would allow Apple, Facebook, Google or Amazon to acquire yet another significant tech platform, given the four of them appeared before a senate hearing into possible antitrust breaches just last week.
That would appear to go against the whole concept of the hearing – which may be another reason why Microsoft feels emboldened to step in now. It seemingly has to be one of these five that moves to buy out the app, and with four of them under a cloud, the negotiations could be fairly short.
Should you reduce your reliance on TikTok?
Well, yes – but if you’re reliant on any platform, you need to consider the fact that you don’t own that space, and it can be taken from you at any moment. The potential of a TikTok ban is another reminder that you’re operating on ‘rented land’, and the rules can switch, so you do need to diversify your digital presence and remain wary of stacking too much emphasis on one or the other.
Will Instagram’s ‘Reels’ now take off, when Instagram releases the TikTok-like option to US users next month?
I would say that’s a pretty safe bet, even if TikTok is bought out, because top creators will be looking to reduce their potential exposure and maximize their revenue potential. And if Instagram can offer better ad options, along with a similar, TikTok-type experience, it seems likely that Reels could catch on. Which is probably another consideration that any suitors need to consider in their offers for TikTok.
What about other options – like Byte, from the makers of Vine?
It’ll still be a significant challenge for any other players to take off, especially with the established revenue generation options available on YouTube and Facebook/Instagram.
But the challenge, which even TikTok faces, is building a sustainable eco-system for payments that can compete with other options. That, essentially, requires significant scale. TikTok is probably close to reaching the key threshold on this, its competitors are a distance behind.
I would expect that Instagram will be working to get Reels out as soon as possible, and that it’ll be looking to offer more contracts to TikTok creators in an effort to sink the app while the chips are down. The deep pockets of Microsoft could help to negate this, which means Instagram needs to push on this now, and TikTok has to hope that it can clarify a deal quickly in order to assure them that it will be able to offer payments long term.
Overall, this feels like an inflection point for TikTok, either way. The challenges before it are significant, and even if it’s sold off, it’s future is not certain.
And then also, what does the Chinese Government think of this, the US President essentially bullying a Chinese company into selling an element of itself to an American business?
You can’t imagine that sitting well with the leaders in Beijing.
It could be an interesting six weeks.
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