The winner of this race will determine the future of American data privacy.
Following President Trump’s order that the US government will impose a ban on TikTok if the app is not bought by American companies by September 15th, the race for Microsoft to settle a deal on time seems threatened by Oracle’s emerging interest.
Why is TikTok being sold?
The Chinese video-sharing social media app TikTok has 800 million active users worldwide and continues to increase in popularity as a result of much-needed online entertainment during COVID-19 lockdowns. However, the app has come under regulatory scrutiny with regards to the data security of its users; specific issues focus on data sovereignty which is where data collected by the app is transferred and stored, and privacy rights over what happens to the user’s personal information.
In the United States, President Trump and US lawmakers have expressed concern about national security risks arising from TikTok, owned by the Chinese parent company ByteDance, because of potential connections to the Chinese government. ByteDance claims that the data of American users is stored in the US with backup in Singapore and has no connection to China. It further denies links to the Chinese Communist Party despite speculation of association and apprehensions concerning whether the CCP has access to American user’s data.
However, the 2017 National Security Law in China requires organisations to “support, assist and co-operate with the state intelligence work" in compliance with the law, which could lead to breaches of TikTok user’s privacy. Considering TikTok (previously Musical.ly) was fined in the US for handling under-13’s data and subsequently violating children’s privacy laws, the company evidently has flawed internal regulation when it comes to data privacy which may clash with US laws and national security goals. Whether or not the potential ban of TikTok in the US is justified, the intricacies of politics combining with business is evident here.
President Trump’s 90-day ultimatum led to ByteDance agreeing to sell the US operations of TikTok, which may be important in maintaining branding and popularity of the app itself.
Whilst the US alone is valuable to TikTok because of its sheer popularity in the country, it is also home to TikTok’s biggest stars like Charli D’Amelio who has over 80 million followers.
Due to the company’s internal structure, any negotiations to acquire US operations of TikTok will include Canada, Australia and New Zealand because these subsidiaries report to the US office. US operations of TikTok have been valued by analysts at between $20bn to $50bn, making it an expensive deal. After all, in today’s technology-driven world, data is arguably the most valuable commodity.
Microsoft’s talks to acquire TikTok
Microsoft confirmed its interest in acquiring TikTok and revealed that it is currently in talks with ByteDance to secure a deal. In its blog, Microsoft acknowledged the importance of data privacy and ensures the security of its users by protecting data sovereignty, which will bode well to solve current national security concerns of the Trump administration. Although the Financial Times reported that Microsoft wants to acquire TikTok on a global scale, this has not been confirmed and ByteDance has already expressed its reluctance to sell TikTok operations outside of the US, so further talks are unlikely.
Despite its potential, Microsoft has struggled to compete with other giant tech companies like Google and Facebook which dominate the technological and social media world, so acquiring TikTok could be beneficial for the company. The acquisition means that Microsoft will have access to millions of user data monthly, and these users are highly engaged which may be particularly useful for digital marketing. The digital advertising market is emerging quickly, but Microsoft has yet to become a leader; this could be its chance.
Oracle’s talks threatening Microsoft’s deal
The software company Oracle has recently proposed a rival deal to acquire the US operations of TikTok, which has subsequently been endorsed by President Trump. Having held talks with ByteDance, Oracle has also been working with some of the TikTok’s current investors, namely the capital venture firms General Atlantic and Sequoia Capital.
Upon first glance, it seems unlikely that a company like Oracle – best known for its database software – would want to buy TikTok in the first place; unlike Microsoft, Oracle has few consumer-facing businesses, making any benefit of the purchase unclear. However, its ‘data as a service business’ will benefit immensely from the acquisition of TikTok’s abundant user data which Oracle will be able to offer to advertising services so they can access user profiles. Furthermore, Oracle’s accomplished reputation in security and data protection means usage of data is likely to be in conformity with regulations.
Which company is favoured to seal the deal?
Though Microsoft and Oracle present the main competition for the acquisition of US operations of TikTok, Twitter has also expressed interest. Twitter previously owned Vine, a video streaming app, so has experience in a similar service to TikTok and has reportedly held early stage talks with TikTok. Yet, it is doubtful whether the company can even finance the deal because Twitter’s market cap is roughly $30bn itself. Conversely, as the second most valuable tech company globally, Microsoft may have a financial advantage in being able to afford to buy TikTok ahead of Oracle too. Furthermore, Microsoft’s services extend to the entertainment industry and even social networking since its 2016 acquisition of LinkedIn, so it has considerable experience in social media.
Whichever company acquires TikTok, though there is significant potential for growth and revenue, this comes with substantial risk. TikTok as a social media app is a hotbed for problematic content like misinformation, prejudice and violence so content monitoring and regulation will be of primary importance so as not to repeat the mistakes of ByteDance under the Trump administration’s watch.
By Puruvi Ruparel
Final Year Law with Study Abroad
Bibliography:
Kommentarer