The TikTok and Microsoft contract could be the best and most elegant solution for all parties involved

Kim Tae

The TikTok spinout scenario seems to be fully functional.

For a few weeks, White House officials, including Secretary of State Mike Pompeo and President Donald Trump, have raised the possibility of a ban on ByteDance Ltd.’s TikTok app in the United States because of national security concerns. But now the government seems to be more likely to be in a neutral position. On Friday, Bloomberg News reported plans that Trump would order ByteDance Ltd. to sell ownership of TikTok. Later later in the afternoon, some media reported that Microsoft Corp. was in talks to purchase the TikToks US business.

For clarity, if ByteDance was forced to sell TikTok under government pressure, the story doesn’t end. TikTok is the only front line of a broad campaign of rising political and economic tensions between the United States and China. China may retaliate by aiming for American business interests on that soil or by taking other steps to further fuel the situation. But let’s set that aside and think about the benefits of the TikTok sale for now.

There seem to be two active bidders for the app. One is Microsoft. On the other, Reuters earlier this week reported that some U.S. investors in Vitedans offered bids on a majority of TikTok’s shares, valuing its non-China business at $50 billion. .. According to Reuters, the offer is about 50 times more than TikToks predicts $1 billion in revenue this year.

At the individual level, an independent TikTok owned by an American venture capital firm is the preferred option. By staying separate, the social media apps can hire and maintain the best appetizing engineers for pre-IPO stock compensation. You need top-notch technical talent to keep your company on the cutting edge. And history is full of examples of start-ups that were acquired by a large company and then lost the ability to react quickly to their competitors. Examples of M&A failures include the acquisition of Tumblr by Yahoo and the acquisition of Myspace by News Corp.

However, Microsoft is the best choice in this case. On the surface, it might seem strange to consider such a large plan in an environment where regulatory authorities are more closely monitoring acquisitions in the technology industry. In fact, we were dismissed in front of the House subcommittee by the CEOs of four other Big Tech companies in just a few days over anti-competitive practices. However, this merger is counterintuitive and makes sense from the perspective of antitrust principles. The Microsoft-TikTok combination is a much more competitive US digital advertising market by establishing a strong third player against two dominant Internet advertising groups, Google’s parent companies Alphabet Inc. and Facebook Inc. To produce. TikTok is even about banning apps that are hugely popular with giants like Microsoft and millions of Americans.

Microsoft companies will also benefit from adding scale to their fast-growing digital advertising business, backed by Bing’s search engine. The company can also co-promote TikToks social media video capabilities across Xbox game consoles and cloud services. And finally, ByteDance may appreciate trading with Microsoft for purely convenient purposes. A huge software valued at around $1.6 trillion can quickly and easily pay Chinese companies the value of tens of billions of TikTok.

So, after all, the Microsoft-TikTok combination could be the best and most elegant solution for all involved parties. The happiest are actually the app users, celebrating the survival of their favorite services.

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