Microsoft makes bid for control of TikTok in the U.S.

Published : August 03, 2020 18:00 IST

Chinese and United States flags next to the TikTok logo. Photo: Florence Lo/REUTERS

Global technology heavyweight Microsoft announced on August 2 its first tentative foray into the social media space by making a bid for TikTok, the Chinese platform that has been under relentless attack in the United States in the last few months.

Taking control of the hugely popular video platform, which is owned by the Chinese company ByteDance, would give Microsoft the opportunity to enter the social media space, where it has virtually no presence. The social media landscape is currently dominated by Facebook, YouTube (owned by Google) and Twitter.

The announcement followed a telephonic conversation between Microsoft CEO Satya Nadella and U.S. President Donald Trump. The following day, the Financial Times reported that Trump had expressed “reservations” about a possible deal.

In a statement issued on the same day, Microsoft said the deal would allow the company take control of TikTok’s operations not only in the U.S. but also in Canada, Australia and New Zealand. It said it “appreciates” Trump’s “concerns”.

The company also said the possible acquisition of TikTok would only follow a “complete security review” and would be incumbent upon the deal “providing proper economic benefits to the United States, including the United States Treasury”.

Talks between ByteDance and Microsoft have been on for weeks. The two companies had notified the Committee on Foreign Investment in the United States (CFIUS) about the discussions. Microsoft had notified that it may also invite participants in the U.S. to partner it on “minority basis”.

Microsoft also said that TikTok’s operations in the U.S. would follow “world class” security, privacy, and digital protocols as well as be subjected to government oversight. It promised that data of American users of TikTok would be transferred and remain in the U.S. “Microsoft would ensure that this data is deleted from servers outside the country after it is transferred,” it added.

It said it hoped to conclude the deal by September 15.

Meanwhile, U.S. Secretary of State Mike Pompeo said the government would act against TikTok and “countless” other Chinese software companies that posed a threat to national security. These Chinese platforms “are feeding data directly to the Chinese Communist Party”, he alleged.

“It could be their facial recognition pattern, it could be information about their residence, their phone numbers, their friends who they’re connected to,” he added.

Earlier, on July 31, Trump reportedly dismissed the idea of TikTok’s acquisition by Microsoft.

Meanwhile, U.S. Treasury Secretary Steven Mnuchin said that TikTok would have to be banned or sold to another company. Mnuchin is also reported to see attractive possibilities of a U.S. company gaining access to TikTok’s advanced algorithms.

TikTok’s unique ability to “decide” which user sees which video is regarded to be a major attribute that makes it attractive to users. These features of the app’s algorithm could potentially enable much better targeting of advertising, which, in turn, is a commercial goldmine.

This explains why companies such as Microsoft are interested in the deal. It would offer Microsoft the opportunity to make an entry that is a commercial hit from the start.

TikTok is reportedly used by 100 million users in the U.S. ByteDance bought musical.ly, a social media app, in 2017 for $1 billion, and rebranded it to create TikTok.

The platform, which enables users to quickly create and share short videos with customised music, has quickly built a huge subscriber base all over the world, especially among youths.

Vanessa Pappas, TikTok’s general manager in the U.S, had earlier said that the app was “not planning on going anywhere”.

“We are here for the long run,” she said in a video after Trump’s threat of a ban on July 31.

According to reports, ByteDance founder Zhang Yiming is staunchly opposed to selling TikTok to any company, including to Microsoft.

The Chinese media outlet Global Times quoted sources in ByteDance as saying that the company is encountering “complex and unimaginable difficulties” in becoming an international company.

The publication also referred to a statement issued on August 3 by the Chinese company, which levelled “copying and slandering” charges against its competitor Facebook. Facebook recently launched Reels on Instagram, a new Instagram Stories format, which TikTok alleges is a clone of its own product.

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