By September 24, 2020September 25th, 2020For Business
Reading Time: 5 minutes
TikTok on cellphone on laptop

Big Businesses Make Their Pitches for TikTok

Video sharing service garners interest from U.S. companies

TikTok, the Chinese video-sharing social networking service, has inspired a whirlwind of U.S. business activity. Several tech companies are vying for the opportunity to buy TikTok’s U.S. operations, including Google, Oracle, Twitter and Microsoft.

TikTok, along with sister app WeChat, is owned by Chinese internet technology company ByteDance. American companies are bidding to buy the platform in an effort to ensure it remains operational in the U.S.

In August 2020, Walmart hitched its wagon to Microsoft for a joint bid that seemed to gain some traction. However, Oracle has risen to be the winner. That is if the company can win the approval of the U.S. and Chinese government approval.

Export restrictions
At the end of August, China announced new technology export restrictions, which means the pending sale of TikTok may require Chinese government approval.

Though Oracle and TikTok have struck a deal estimated to be worth billions of dollars, China-U.S. tensions over technology could still derail the agreement.

Two businessmen shaking hands

Why did Oracle want TikTok?
I bet most people could not rattle off what Oracle really does. The answer is a clue to why it so badly wanted TikTok. Oracle has evolved from its database roots, made a name for itself in marketing automation and is a leader in cloud infrastructure.  So here’s your answer: Data, data, data.

Oracle is a massive operation that makes money off of data. At the beginning of the pandemic, Oracle teamed up with online meeting platform Zoom, which is on a massive upward trajectory, even despite security concerns. By June 2020, there were about 265,400 companies with over 10 employees using Zoom, a 354% increase from 2019. This translates to a 169% gain in revenue, and participation continues to grow. If Oracle is able to bring the same sort of experience to TikTok, both companies will see significant advancement.

Both Oracle and Microsoft are major players in cloud computing and are keen to tap into the online ad market. Online ads are exploding, expanding by about 16% in 2019, according to eMarketer. While the pandemic has temporarily slowed that growth, by acquiring TikTok, Oracle could be a serious competitor to Facebook and Google in the digital advertising space.

Walmart is still in the picture
When Microsoft lost the bid for TikTok, Walmart switched teams and is now planning to partner with Oracle on TikTok’s U.S. operations.

Where Oracle may be interested in data and ad space, Walmart is focused on online retail. The move is just one part of an overall strategy to better compete with Amazon. Walmart plans to launch a membership program, to go head to head with Amazon Prime. A Walmart+ subscription service is slated to include original TV shows and movies, as well as products.

There has been no word on how Walmart would integrate with TikTok’s existing e-commerce and advertising. However, it would give the retailer access to hundreds of millions of consumers, including the sought-after Generation Z market. This would be a huge boost for Walmart’s online efforts.

Outline of the Deal

+ The U.S. government imposed a deadline of Sept. 20, 2020 for TikTok to find a buyer for its U.S. operations, or be banned from the U.S.
+ On Sept. 19, a deal between Oracle and TikTok was approved, allowing the platform to continue operating in the U.S.
+ California-based Oracle will be a minority shareholder in TikTok. The share is purported to be 12.5%.
+ Oracle will control TikTok’s U.S. data.
+ Walmart and several U.S. venture capital firms will also own small chunks of TikTok.
+ Parent company ByteDance will retain about 80% ownership of TikTok. However, the majority of ByteDance is owned by American and international investors.
+ TikTok will locate its global headquarters in the U.S. and appoint U.S. leadership.
+ TikTok said it plans to create 10,000 jobs in the U.S. during the next three years.
+ Oracle and Walmart said TikTok’s investors will pay $5 billion in new tax dollars and develop a curriculum of online videos to teach children subjects such as reading, math, history and computer engineering.
+ TikTok is expected to go public in 2021.

What happened to Microsoft?
Not much has been reported on why frontrunner Microsoft did not prevail, other than the company saying that TikTok rejected their offer.

What this means for TikTok users
The sale still must be approved by the U.S. Committee on Foreign Investment and a similar Chinese government regulatory body.

For now, if you are one of tens of millions of people in the U.S. on TikTok, you are free to continue to post your awkward dance routines, unique recipes and comedy skits.

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