I believe it's the US-based operations, which includes USA, Australia, New Zealand, and Canada.
The story of how the US can force them to sell is long, but it boils down to some powers granted to the President that allow the office to freeze assets of foreign people or groups if they're determined to be a threat to the American economy or national security. It's useful in that it allows the US to freeze assets for e.g. terrorist organizations, but also as we can see, can be abused somewhat.
Abused? China is actively allowed to spread its all hearing and seeing app in the US while US social media companies are banned from operating in China.
Re the forced sale: I think USA is saying, unless TikTok (US operations) is owned by a US-company, it gets outright banned in the US.
So TikTok the company needs to choose between the loss of revenue, and a buyout price (presumably affected by the sale under duress). Quite naughty policy, you could say, though probably insignificant compared to what China does to western companies.
> though probably insignificant compared to what China does to western companies.
It's certainly not espionage. And we're not brain draining away top talent with above-market, state-funded pay (anticompetitive, but nice to the workers that get offers -- something maybe we should do).
While we're not being nearly as imposing as China has with US companies, we need to be careful. Tesla, Starbucks, Apple, and a whole host of other American companies are making quite a lot of money in China. If we escalate, we might expect the same treatment.
I think the safer play is to decentralize the supply chain by re-outsourcing to Vietnam, India, Mexico, and Africa in the near term, then re-onshore with automation in the long term.
We should also try to duplicate the whole One Belt thing. It'd give us allies, influence, and hedge our risks.
the deal was already in the works before Trump threatened to block it. The odds to Trump actually following through on this in the event of no sale, are extremely low. It may not even be Constitutionally enforceable.
It's almost definitely not legal, but I suspect it will regardless get pulled from the app stores until a lengthy legal process goes through, which will kill the market anyway.
Will probably be downvoted like crazy but it's insane that the US would allow TikTok to operate in the US when China doesn't allow most US apps to be used at all.
If the Chinese want equal access to US markets they need to cooperate too.
According to Lee Kai-Fu who launched Google in China: "Chinese laws are clear about what foreign companies can do to operate in China. In TikTok's case, though, the company was left no choice but to consider a forced sale."
China doesn't not allow western companies to operate. Google proactively made the choice to exit China (it also somewhat didn't. Google ads has a sizable market share in China as does Facebook). I'm not arguing that they should have elected to follow Chinese laws but the actions the Chinese government took with western companies was not to either tell them to stop existing in the Chinese market or abdicate their ownership to a domestic company.
These were also the same laws domestic companies follow.
Conversely, I don't see the executive actions being applied to TikTok applied uniformly to the US market.
How many western social networks can you name that work in China? Zuck literally asked Xi Jinping to name his child he wanted to be in China so much and he still got denied.
The VCs and record labels must be madly trying to get their investment back out of this. They poured money into musical.ly, bytedance and others, then have been riding the wave up (and now down).
In July they bought out at least one SPV for a crazy valuation to consolidate holdings, probably imagining that things would continue to rise. I think they'll be lucky to get 1/4 of the cash they spent on that back, though they've probably still 10X'd the cash they put in much earlier.
> The VCs and record labels must be madly trying to get their investment back out of this.
TikTok are suing the US Administration so they're not forced to sell their US operations [1].
From what I can see TikTok have only had a recent 3B funding round on Softbank (after becoming popular at 75B valuation) and could only find 1x 100M funding round for musical.ly (at 500M valuation). Considering the expected sale price for the US part of their business is circa 50B, even SoftBank are likely to get many times return on their investment. Early investors must be due for an insane return.
Why is suddenly everyone so keen to buy TikTok? And why such bizarre buyers - Microsoft, Oracle, now Walmart? None of these are companies I would associate with a social media presence. Their business is generally the "boring" - office application, data munging, groceries.
Microsoft did buy LinkedIn and Skype, they don't seem in any way integrated in what it does (in fact, doesn't Microsoft undercut its own Skype app with Microsoft Teams?). And, this is opinion-based, but from a technical point of view, they seem very inferior to comparable non-Microsoft products (Zoom, Facebook etc.).
>None of these are companies I would associate with a social media presence
This is exactly why. They see TT as the "new" form of social media, since everyone is sick of FB-style feeds and profiles, and want a piece of the action. TT's growth and young userbase demonstrates pretty clearly that traditional social media isn't cool anymore.
Maybe. The sort of 'I see cool kids have skateboards so I'll get one too'. But surely this is backwards.
I guess when you are bidding against other people, the highest bidder wins. That means you have to, in a way, overpay for the product, and reap some special synergy bonus that other buyers can't get. This is what is missing to me, I can't see how owning a social media app enhances the rest of the business for either of Microsoft, Oracle, or indeed Walmart.
Optimistically, you could also be betting that everyone else is still underpricing the product.
The problem with trying to buy a business like TikTok at its prime is that it's trying to buy "cool". It's the most perishable commodity imaginable.
Let's assume that you manage to skate by the initial purchase process intact-- that the audience doesn't revolt en masse and say "I don't want to be associated with Walmart/Microsoft/Oracle". In a way, a unfamiliar foreign owner has a bit of mystique-- everyone in the target demographic has been in a Walmart or dealt with a Windows PC, so those brands have baggage already, whereas this was most people's first contact with ByteDance.
A lot of the potential 'synergy bonus' opportunities have to be intentionally slow-walked to avoid setting off the audience's spider-sense. Push "buy goods via TikTok" too hard, or push the wrong ad inventory because it's all you have, and users will walk away.
It took forever for more than the HN crowd of people to remember that Facebook owns IG and Whatsapp. Parent company isn’t that important. Fox buying MySpace and Fox’s brand weren’t what hurt MySpace.
I doubt every party talking about buying TikTok is interested in buying TikTok.
If I were a product manager at a large-ish company even remotely related to video or social media, I'd be bugging my PR team to put out such a release.
Hmm, dunno. Maybe. But I look at the current line-up of buyers, and I think they are just making themselves look silly. I can't see the benefit in even bidding, for these guys.
Microsoft wants the Azure business and was willing to purchase a percentage of TikTok to get it. My understanding is they are less interested in owning all of TikTok so partnering with Walmart who has been trying to increase their ad business over the last year makes sense.
> Microsoft... because they want more clients for Azure
Why spend 50B to buy it then? After owning them they'll be the ones paying for hosting costs.
IMO they want it for the same reason as Minecraft, a cultural phenomenon and access to its massive youth user base & their best chance to rival Facebook/IG.
This could be their entrance into the social media space, it is a profitable industry(in the billions of dollars), so why not? A company can have multiple strategic units.
The Chinese version of TikTok is very integrated with their own eCommerce platform. A video creator can link in the video the cloth they are wearing, the product they are using, or the hotel they are staying at. Also the live stream part in the Chinese version is hugely successful with selling products (think of it as QVC + Amazon). So I'm sure Walmart saw the potential as part of of their eCommerce strategy for the younger generation.
It's also important to note that TikTok is one of the first platforms where young people expect the platform to curate globally-trending content for them. This is a stark contrast to the algorithm-driven news feeds and hands-off trending-sections of most other social media, and it opens the doors to thinking about TikTok the way one would think about a traditional media and advertising play, albeit one executed with significantly more sh$tposting. MSFT, especially post-Ballmer, is full of smart and agile-minded and empowered people who can understand this.
Whatever the curation algorithm in Tiktok is, it is so much better than Youtube or Instagram. One actually feels that they are a part of a movement bigger than themselves and something that is globally trending.
Tiktok is a revolutionary social media application. They did what twitter couldn't do with vine.
This is an interesting premise. And it makes TikTok (and Douyin) possibly even more valuable.
Someone like Walmart (or Amazon), that sells millions of items, can tap into the mass Chinese market of 1.4 billion people that are coming online and entering the middle class.
This can easily be Walmart’s ace to finally challenge Amazon domestically and worldwide.
In that case, I suggest TikTok refuse to sell out, at fire sale prices. They can make more money themselves.
Just take the American ban. And wait out Trump. If Biden wins, and he still enforces the ban, then it’s the American market that will lose out. Think of it, all those teenagers that are hitting the TikTok lottery, with their videos that go viral, and TikTok is sharing in the proceeds with them.
The young adult market, should realize what is happening and vote out Trump. This can at least send a message to the establishment.
Admittedly, the rumors that teenagers used TikTok to register for tickets to Trump’s rally, only to not show up, is rather hilarious. And he got bitter and butt-hurt for it. But couldn’t they have also spread that message around on other forums like Twitter or Instagram or Facebook too? So I don’t see why TikTok got singled out for it.
I'm betting that Verizon is going to be next in line. They've been acquiring content companies for quite a while now- the remnants of AOL and Yahoo. They seem to be a good choice as far as strange buyers go.
Highly doubt it. Literally all of the Verizon execs who were deeply involved in those acquisitions are long gone. The integration of Yahoo was pretty horrendous in execution, even by large corp M&A standards, which is a low bar.
Verizon sold Tumblr for nothing. They’ve written down the majority of AOL and Yahoo. That attempt of theirs is a failure and Verizon for now has moved on.
Other companies have had similar fates with trying to make media content mini-empires.
Almost all of these bad decision are with hindsight. Though some may be more obvious
- CBS paid too much for Last.FM and CNET’s network of sites that at one point extended pretty far.
- Fox paid too much for MySpace and IGN Whose smaller network of sites extended pretty far too before. Fox sold both off for fractions of their purchase costs.
- NYTimes sold off About.com and didn’t do too much with their other small attempts.
—-
- IAC is the most successful, but they spin off most of their best stuff and so the actual main companies market valuation isn’t too high. Though the not too long ago spun off Match has a higher market cap.
Amazon is fairly successful though how much that has to do with Amazon doing well as well can be debated. They did some ruthless stuff like Diapers.com. IMDB, Box Office Mojo, Goodreads, Twitch, and one or two other purchases have worked out well enough
Comcast’s very small web media sites have fared well enough too until covid hit. Their Fandango umbrella of sites including Rotten tomatoes was doing well.
—
It’s hard to break into the web in a big way. Especially with being content centric or with niche social media sites.
Agree, these buyers remind me of the Steve Buscemi meme where he has the backwards baseball hat and skateboard in tow, asking "How do you do fellow kids?". A really strange group that has no relation to social media at all. What is even stranger is the cost of tikTok should be exceedingly high(70B+), and would wreck the balance sheets of these companies if they do decide on a purchase.
Yes exactly, the price is astronomical, makes my intestines bleed just hearing it. Makes it all the more relevant to ask what's in it for these buyers.
My pet theory is that its because these are "old guard" enterprises who have a strong presence in Washington. TikTok's blood is in the water, and all of these companies realize that they could get it at a substantial discount thanks to US Government intervention.
For a minute (or forever, whatever suits you), operate on the assumption that Trump is an idiot, who doesn't actually understand the modern business landscape, let alone the modern tech business landscape. He believes Boeing is one of the greatest companies in the world [1], the DoD has a huge contract with Microsoft, the federal government is also rife with Oracle contracts, these "traditional" companies are the ones that our government interacts with on a daily basis.
On the flip side, they just had an antitrust hearing with Big Tech (and while Microsoft was there, they didn't get nearly the heat that Apple, Google, and Facebook did; I wonder why). In fact, many of these companies, and others in SV, have publicly disavowed the administration; some had representatives on high profile advisory panels at the beginning of the administration, but many have left.
Who is left talking to Washington? The old guard companies, who have big contracts, big traditional names, personal contacts scattered around the federal government.
I don't believe this has anything to do with cohesion with these companies existing business models. Look at your confusion about who's coming forward, and then recognize that if the world doesn't make sense, something else is going on that you're missing. Oracle doesn't want to integrate TikTok with Oracle Cloud: They want to use their contacts in the government to acquire it at a serious discount, then bleed it dry to remake the investment. Microsoft feels like the only exception I've seen: While it still doesn't make sense for them, they at-least dabble in social networking, they'd probably run it into the ground, but it wouldn't be malicious.
TikTok is on Google Cloud. If it moved to Azure it would be one of its largest customers. This is why Microsoft wants a controlling interest but not to own it outright.
A bit off topic but I'm just curious, why TikTok (Chinese company) uses Google Cloud? AWS/Azure is operated in China (by local company) but Google Cloud isn't.
Because the product TikTok itself, is not targeted at users in China? TikTok is more like "Douyin International", or say, there is a separate "TikTok China" named Douyin. So whether these cloud services operates in China is irrelevant.
Its China version Douyin also uses a mix of Aliyun and their own infrastructure, so ByteDance likely have plenty of experience operating in multi/hybrid cloud environment.
I know that TikTok isn't operated in China but If I were TikTok dev, I'll think something like: adopt AWS/Azure to make possible to share code between Douyin and TikTok (just possibility, for future).
I also suspect that Google Cloud's learning resource in Chinese is fewer than AWS/Azure.
> Google Cloud's learning resource in Chinese is fewer than AWS/Azure
Yes, that's true. But it's not like there are a lot of learning resources in Chinese for AWS/Azure, either. At least compared to Aliyun (Alibaba Cloud). So likely it doesn't matter.
Microsoft makes lots of sense. They own Minecraft and Xbox Live. Both highly social products and roughly the same demographic as Tiktok. Both have tens of millions of young teen users. Tiktok is the perfect complement.
All of them have one thing in common: they want to be seen as "new tech" companies, not dying older companies.
Microsoft wants to be seen up against apple, google
Oracle wants to be seen up against AWS
Walmart wants to be seen up against amazon e-commerce
From a shareholder management of company funds perspective, I think it's a stupid decision, but as executives within these companies looking to make a name for themselves, people advocate for stupid flashy acquisitions and imagine seamless synergies with ecommerce and advertising existing product lines.
In most cases, according to studies, large acquisitions seem to harm the company long-term.
Because Trump has ordered them to shut down if they aren't sold.
In the absence of any buyers that actually add value, and the fact that TikTok has no BATNA, this means it will almost certainly be sold below value.
Therefore, unlike most corporate acquisitions, this can be viewed as a pure "profit play", rather than relying on complicated synergies, economies of scale, fending off competition, etc. to justify the purchase.
In this light, the parent company doesn't really have to have anything in common with TikTok. It mostly comes down to which companies have a) the cash to purchase it, b) management that is smart enough not to mess it up, and c) the best use of the company's cash if the price is low enough.
In the end it will probably be purely a financial play, rather than the product/strategy play most acquisitions are. So the acquiring company just needs to be good at the basics of tech management. They just hire or keep on TikTok management that is good at the social media stuff.
There is a domestic political side to this. The president has stated that he wants TikTok sold. Even if these companies never buy anything, the fact that they are participating in the negotiation, or at least making public statements in support of an eventual sale, wins them favor with the president.
Forgetting their access to extremely cheap debt, MSFT has $140bn in cash which they need to use to return as much value to shareholders as possible. They can spend 30% or so of their cash to aggressively enter a fast growing trillion+ dollar market, with a service that has the potential to take a chunk of out FB. And it pushes them in to closer proximity to commerce. From a return to shareholders perspective, I don't really see why MSFT wouldn't at least seriously entertain this. It's not every day a non-US product scares the hell out of US social media giants and then gets dropped in your lap due to a forced sale. Especially when they were willing to pay $25bn+ for LinkedIn.
Then you have AMZN becoming 3rd largest online ad service, and WMT sees another area in which they'll get crushed by Bezos. They get access to the advertising side via Tik Tok, and can rely on MSFT's team's to help them avoid screwing up the product.
I think Walmart is making an honest investment in tech. They have some solid open source tools (Hapi.js, Electrode) and they have Walmart Labs / Kosmix.
Walmart also purchased Jet.com and Bonobos. They're catching up to Amazon, and even beating them in some ways (their pickup/delivery service has way more inventory than AmazonFresh).
>Microsoft did buy LinkedIn and Skype, they don't seem in any way integrated in what it does (in fact, doesn't Microsoft undercut its own Skype app with Microsoft Teams?).
Microsoft has LinkedIn loosely tied to other Office 365 products now. When you hoover over a name, it'll show you whether the person is on LinkedIn, or that they have _x_ possible matches.
They also have a resume assistant integrated to Word, and have some data linking to LinkedIn if you so choose.
It was certainly an expensive purchase, but the premium tools and access to employee information may have also been valuable in terms of benchmarking objectively how good an employee's background is for a job or compared to their peers. I don't know how powerful the employer side of LinkedIn is for this type of work.
At the level of dollars being discussed, there's a strategic benefit to engaging in negotiations just to force the counter-party to raise their bid or force concessions. For example, it's suspected that Google famously did this against Verizon for the FCC Spectrum licensing [1].
So take Walmart: If they believed there's a 10% chance that Amazon might join the fray (to target younger demographics), then there's a good game-theoretic argument that Walmart should be at the negotiating table too.
Tik Tok is the only way for MS to get big data from the social side.
Besides they can integrate it into their many platforms, XBox, Bing, Windows (Windows is still the preferred streaming platform, for example), etc.
However, seeing the other bizarre collection of companies getting into this fight, Oracle, and Walmart, I have a feeling this is more of a play towards getting into the Chinese governments good graces. I’d be interested to see if after paying a premium to buy Tik Tok, if the purchaser starts getting a higher share of China business.
If that is true, which I strongly suspect it is, or at least is a big part of this, then once again a thoughtless US action ends up giving China more leverage.
Microsoft has had various attempts at different social media, services, and more. They had a music streaming service, the shut down Twitch competitor. A few different social media sites like a photo and gif sharing site.
Microsoft seems like one of the best fits for TikTok when you consider the amount of money it will cost too.
It is remarkable how big these companies have gotten over the past few years. Walmart is so big that it is extending beyond its retail business model and going after social media, of all things. It reminds me of the AOL Time Warner merger. Although unlike in 2000, I do not think that this portends to a market top, a bubble, or that it will be a disaster.
> It is remarkable how big these companies have gotten over the past few years.
Walmart hasn't gotten much bigger in the past few years. They've lost position in terms of scale & power versus other large companies and Amazon has been taking a lot of retail market share. Walmart has also lost a big chunk of their profitability, their business has become less profitable (a business that was already operating on tiny margins). They've only been growing their sales a few percent per year the past five years. Their operating income is below where it was four years ago.
On an inflation adjusted basis, Walmart is lucky if they've been standing still the past decade. Their peak was circa ~2000-2010. It's unlikely they'll ever exceed the position of dominance they held at that time.
I'm not sure how Walmart - a $524 billion sales global juggernaut - eating a comparatively tiny social media company, reminds of the AOL Time Warner merger? The AOL merger was a merger of near-peers in terms of valuation, AOL at the time was booming and massively profitable. TikTok isn't profitable, and they're barely a rounding error compared to Walmart in sales.
AOL was somewhat in the publishing & media platform business, they were both in the ad business, and both AOL and Time Warner were in the connectivity business.
Walmart's business has nothing in common with TikTok, there's no sound synergy at all (even theoretical). About the only distant reach, would be the idea of trying to appeal to younger consumers, to use (abuse) TikTok for that purpose. It would of course end disastrously for WMT shareholders, Walmart would take a giant write-down eventually.
There's nothing new about it of course. GM bought Hughes and EDS for example. Giant companies do this type of thing historically.
Nassaq 100 is trading at 36 p/e it was at close to 20 6 months. The future p/e is like 31. If you used discount cash flow analysis you really couldn't get to most of these valuations.
Not a bad move. It can shorten the number hops to buying an item. If a Walmart buy button is in a popular social media app thats not a bad thing. The influencer crowd is after all trying to sell stuff.
Plus they constantly have to deal with Zuckerberg, Google, Bezos, Apple etc trying to get between them and the customer.
SpaceX is the obviously better choice. Or even Elon just by himself! Ha, imagine the headlines that would give! Probably Boeing would jump in to compete. It's an insane world.
>But the proposed deal is being complicated by a split between ByteDance CEO Zhang Yiming and General Atlantic and Sequoia Capital, two U.S.-based ByteDance investors with long ties to the Trump administration and Republican causes who both would like to see the sale happen. They approached Ellison to buy TikTok and have reached out to the White House to close the deal, according to two individuals with knowledge of the matter.
>However, Zhang is resisting any sale, the two individuals said, and did not inform his investors before suing the White House on Monday to block any sale. The insiders said Zhang is being advised by Silicon Valley billionaire Yuri Milner, another early investor in Zhang’s company.
Apparently Zhang thinks he can still save his company. Maybe the $45 billion will help change his mind.
I'm going to use a political trigger word but please give this a moment to consider because I found it fascinating when someone suggested it to me.
We hear a lot about the social/cultural aspects of fascism, but we don't talk as much about the economics of fascism. Think about all this talk about acquiring TikTok in the context of this definition:
> Fascism is an economic system in which the government controls the private entities that own the factors of production… A central planning authority directs company leaders to work in the national interest.
"the government controls..."
"A central planning authority directs..."
But sometimes isn't it the other way around with Fascism? ie corporate or money interests have great influence over the government and influence it so as to increase the power of the corporate influencer? It seems more like with fascism it's hard to tell the difference between the government and the moneyed interests (be they corporations, companies, extremely wealthy individuals, etc.) because they're so intertwined.
I do think the key here is that the government doesn't have to cave to moneyed interests, but a fascist leader does (either because they're weak, complicit or some other reason).
how about using the actual definition of facsism instead of your version, which is wrong and biased?
from Merriam Webster dictionary:
Definition of fascism
1 often capitalized : a political philosophy, movement, or regime (such as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition
2 : a tendency toward or actual exercise of strong autocratic or dictatorial control
> Fascist governments exercised control over private property, but they did not nationalize it. Scholars also noted that big business developed an increasingly close partnership with the Italian Fascist and German fascist governments. Business leaders supported the government's political and military goals. In exchange, the government pursued economic policies that maximized the profits of its business allies.
> While other Western capitalist countries strove for increased state ownership of industry during the same period, Nazi Germany transferred public ownership and public services into the private sector.
Seems consistent with the point he's trying to make.
I don't understand why the ban on tiktok should be delayed for the acquisition talks. The ban is imposed allegedly because its sending the data of US citizen back to the CCP. Ok, that is still true today and so the ban should have been in effect immediately if that is the reason. This jerking around is not a good thing in a free capitalistic country like the US.
CCP could just buy the data from databrokers including DMV data for you picture. All your data is up for sale including location data from you mobile device. Can’t stop foreign governments from getting sensitive data about US citizens unless privacy laws are enacted to prevent the sale of data.
Is Tiktok's userbase so loyal that they want to spend $50B on it, the app effectively has no moat.
Why not just launch a competitor and pay content creators to post there, all of these companies(including other FAANG group as well) have deep pockets and engineering talent.
I think this is one good case of value from execution vs from idea. The idea's pretty dead simple but I think there are execution reasons why creators and viewers are on TikTok. The AI recommendations, video editing abilities and live AI filters are fairly unmatched. YouTube has all the reasons for me to spend more time on it than TikTok if its recommendations system doesn't keep thinking I want to become a plumber after watching one DIY video.
I am not sure how the kind of videos that do well on Tiktok will do on Youtube. Tiktok video seems to be the 10-30 second entertainment ones. Youtube by its very nature has a whole breadth of other content. Their recommendation can be certainly improved though.
I'm not saying their contents are interchangeable. I'm just saying there are more diverse and deeper contents on YouTube and I should be spending more time on YouTube if the recommendation system's execution was more on point.
i.e. I'm disagreeing with the GP that the app has no moat. The app idea is a simple one but the execution isn't that trivial to copy.
Yes, users on TikTok are loyal, at the very least creators are. I haven't heard of any creators, at least none that I follow, moving to Instagram's competing offering.
I think there may also be a sense of broad injustice that makes people more loyal to the offering. The President's actions have laid bare the reality that this is just a smash and grab on behalf of US interests, and not based in any actual national security concern, painting him and the US government as dishonest and corrupt.
There are claims we did similar things in the Middle East, interfering under false pretenses to get oil, and it turns out in 2020 that approach is unpopular to the general public, even if it is 'in the US interest'.
But creators can always be enticed with money, after all isn't that why most of them are there.
The way he is going about this is definitely thuggish, he would have probably earned more fans by not forcing a sale and instead using alternatives to stifle it.
Is the brand really that valuable? Because the app is not magical. With a few million dollars you could replicate it top to bottom. Couldn't the US government just ban it and help the new US-based competitor succeed? This is what China would do if the roles were reversed.
Eliminate TikTok from the US markets completely and watch how fast Facebook and others would rush to improve it. The reason they haven't is those efforts wouldn't be guaranteed to yield market share. That could change with a ban. Also training data comes from usage, so saying they have the best AI is the same as saying they're the market leader. That could change (artificially).
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[ 3.6 ms ] story [ 197 ms ] threadI also didn't understand how USA forced TikTok to sell the company it owned.
The story of how the US can force them to sell is long, but it boils down to some powers granted to the President that allow the office to freeze assets of foreign people or groups if they're determined to be a threat to the American economy or national security. It's useful in that it allows the US to freeze assets for e.g. terrorist organizations, but also as we can see, can be abused somewhat.
So TikTok the company needs to choose between the loss of revenue, and a buyout price (presumably affected by the sale under duress). Quite naughty policy, you could say, though probably insignificant compared to what China does to western companies.
It's certainly not espionage. And we're not brain draining away top talent with above-market, state-funded pay (anticompetitive, but nice to the workers that get offers -- something maybe we should do).
While we're not being nearly as imposing as China has with US companies, we need to be careful. Tesla, Starbucks, Apple, and a whole host of other American companies are making quite a lot of money in China. If we escalate, we might expect the same treatment.
I think the safer play is to decentralize the supply chain by re-outsourcing to Vietnam, India, Mexico, and Africa in the near term, then re-onshore with automation in the long term.
We should also try to duplicate the whole One Belt thing. It'd give us allies, influence, and hedge our risks.
If the Chinese want equal access to US markets they need to cooperate too.
https://www.msn.com/en-us/news/world/tiktok-china-state-medi...
According to Lee Kai-Fu who launched Google in China: "Chinese laws are clear about what foreign companies can do to operate in China. In TikTok's case, though, the company was left no choice but to consider a forced sale."
China doesn't not allow western companies to operate. Google proactively made the choice to exit China (it also somewhat didn't. Google ads has a sizable market share in China as does Facebook). I'm not arguing that they should have elected to follow Chinese laws but the actions the Chinese government took with western companies was not to either tell them to stop existing in the Chinese market or abdicate their ownership to a domestic company.
These were also the same laws domestic companies follow.
Conversely, I don't see the executive actions being applied to TikTok applied uniformly to the US market.
In July they bought out at least one SPV for a crazy valuation to consolidate holdings, probably imagining that things would continue to rise. I think they'll be lucky to get 1/4 of the cash they spent on that back, though they've probably still 10X'd the cash they put in much earlier.
TikTok are suing the US Administration so they're not forced to sell their US operations [1].
From what I can see TikTok have only had a recent 3B funding round on Softbank (after becoming popular at 75B valuation) and could only find 1x 100M funding round for musical.ly (at 500M valuation). Considering the expected sale price for the US part of their business is circa 50B, even SoftBank are likely to get many times return on their investment. Early investors must be due for an insane return.
https://newsroom.tiktok.com/en-au/tiktok-files-lawsuit
Why is suddenly everyone so keen to buy TikTok? And why such bizarre buyers - Microsoft, Oracle, now Walmart? None of these are companies I would associate with a social media presence. Their business is generally the "boring" - office application, data munging, groceries.
Microsoft did buy LinkedIn and Skype, they don't seem in any way integrated in what it does (in fact, doesn't Microsoft undercut its own Skype app with Microsoft Teams?). And, this is opinion-based, but from a technical point of view, they seem very inferior to comparable non-Microsoft products (Zoom, Facebook etc.).
Oracle/Walmart though? Doesn't make much sense... Especially Oracle.
This is exactly why. They see TT as the "new" form of social media, since everyone is sick of FB-style feeds and profiles, and want a piece of the action. TT's growth and young userbase demonstrates pretty clearly that traditional social media isn't cool anymore.
I guess when you are bidding against other people, the highest bidder wins. That means you have to, in a way, overpay for the product, and reap some special synergy bonus that other buyers can't get. This is what is missing to me, I can't see how owning a social media app enhances the rest of the business for either of Microsoft, Oracle, or indeed Walmart.
The problem with trying to buy a business like TikTok at its prime is that it's trying to buy "cool". It's the most perishable commodity imaginable.
Let's assume that you manage to skate by the initial purchase process intact-- that the audience doesn't revolt en masse and say "I don't want to be associated with Walmart/Microsoft/Oracle". In a way, a unfamiliar foreign owner has a bit of mystique-- everyone in the target demographic has been in a Walmart or dealt with a Windows PC, so those brands have baggage already, whereas this was most people's first contact with ByteDance.
A lot of the potential 'synergy bonus' opportunities have to be intentionally slow-walked to avoid setting off the audience's spider-sense. Push "buy goods via TikTok" too hard, or push the wrong ad inventory because it's all you have, and users will walk away.
I doubt every party talking about buying TikTok is interested in buying TikTok.
If I were a product manager at a large-ish company even remotely related to video or social media, I'd be bugging my PR team to put out such a release.
Oracle... Similar to Microsoft but reversed - they probably want the Ads/Data first
Walmart... ¯\_(ツ)_/¯
Why spend 50B to buy it then? After owning them they'll be the ones paying for hosting costs.
IMO they want it for the same reason as Minecraft, a cultural phenomenon and access to its massive youth user base & their best chance to rival Facebook/IG.
https://www.youtube.com/watch?v=mTxjdh2hI1o
Tiktok is a revolutionary social media application. They did what twitter couldn't do with vine.
Following creators is something that emerged out of Instagram organically. You first logged in because you wanted to see what your friends were up to.
In contrast, following friends was likely not your original reason for joining TikTok - it was to find interesting content.
An ad from a "creator" in your Instagram feed might evoke stronger resistance than in your TikTok feed.
Someone like Walmart (or Amazon), that sells millions of items, can tap into the mass Chinese market of 1.4 billion people that are coming online and entering the middle class.
This can easily be Walmart’s ace to finally challenge Amazon domestically and worldwide.
In that case, I suggest TikTok refuse to sell out, at fire sale prices. They can make more money themselves.
Just take the American ban. And wait out Trump. If Biden wins, and he still enforces the ban, then it’s the American market that will lose out. Think of it, all those teenagers that are hitting the TikTok lottery, with their videos that go viral, and TikTok is sharing in the proceeds with them.
The young adult market, should realize what is happening and vote out Trump. This can at least send a message to the establishment.
Admittedly, the rumors that teenagers used TikTok to register for tickets to Trump’s rally, only to not show up, is rather hilarious. And he got bitter and butt-hurt for it. But couldn’t they have also spread that message around on other forums like Twitter or Instagram or Facebook too? So I don’t see why TikTok got singled out for it.
Other companies have had similar fates with trying to make media content mini-empires.
Almost all of these bad decision are with hindsight. Though some may be more obvious - CBS paid too much for Last.FM and CNET’s network of sites that at one point extended pretty far. - Fox paid too much for MySpace and IGN Whose smaller network of sites extended pretty far too before. Fox sold both off for fractions of their purchase costs. - NYTimes sold off About.com and didn’t do too much with their other small attempts.
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- IAC is the most successful, but they spin off most of their best stuff and so the actual main companies market valuation isn’t too high. Though the not too long ago spun off Match has a higher market cap.
Amazon is fairly successful though how much that has to do with Amazon doing well as well can be debated. They did some ruthless stuff like Diapers.com. IMDB, Box Office Mojo, Goodreads, Twitch, and one or two other purchases have worked out well enough
Comcast’s very small web media sites have fared well enough too until covid hit. Their Fandango umbrella of sites including Rotten tomatoes was doing well.
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It’s hard to break into the web in a big way. Especially with being content centric or with niche social media sites.
They still might, but it looks a lot less likely now.
For a minute (or forever, whatever suits you), operate on the assumption that Trump is an idiot, who doesn't actually understand the modern business landscape, let alone the modern tech business landscape. He believes Boeing is one of the greatest companies in the world [1], the DoD has a huge contract with Microsoft, the federal government is also rife with Oracle contracts, these "traditional" companies are the ones that our government interacts with on a daily basis.
On the flip side, they just had an antitrust hearing with Big Tech (and while Microsoft was there, they didn't get nearly the heat that Apple, Google, and Facebook did; I wonder why). In fact, many of these companies, and others in SV, have publicly disavowed the administration; some had representatives on high profile advisory panels at the beginning of the administration, but many have left.
Who is left talking to Washington? The old guard companies, who have big contracts, big traditional names, personal contacts scattered around the federal government.
I don't believe this has anything to do with cohesion with these companies existing business models. Look at your confusion about who's coming forward, and then recognize that if the world doesn't make sense, something else is going on that you're missing. Oracle doesn't want to integrate TikTok with Oracle Cloud: They want to use their contacts in the government to acquire it at a serious discount, then bleed it dry to remake the investment. Microsoft feels like the only exception I've seen: While it still doesn't make sense for them, they at-least dabble in social networking, they'd probably run it into the ground, but it wouldn't be malicious.
[1] https://www.cnn.com/2020/03/17/business/boeing-bailout-trump...
Its China version Douyin also uses a mix of Aliyun and their own infrastructure, so ByteDance likely have plenty of experience operating in multi/hybrid cloud environment.
I also suspect that Google Cloud's learning resource in Chinese is fewer than AWS/Azure.
Yes, that's true. But it's not like there are a lot of learning resources in Chinese for AWS/Azure, either. At least compared to Aliyun (Alibaba Cloud). So likely it doesn't matter.
Microsoft wants to be seen up against apple, google Oracle wants to be seen up against AWS Walmart wants to be seen up against amazon e-commerce
From a shareholder management of company funds perspective, I think it's a stupid decision, but as executives within these companies looking to make a name for themselves, people advocate for stupid flashy acquisitions and imagine seamless synergies with ecommerce and advertising existing product lines.
In most cases, according to studies, large acquisitions seem to harm the company long-term.
In the absence of any buyers that actually add value, and the fact that TikTok has no BATNA, this means it will almost certainly be sold below value.
Therefore, unlike most corporate acquisitions, this can be viewed as a pure "profit play", rather than relying on complicated synergies, economies of scale, fending off competition, etc. to justify the purchase.
In this light, the parent company doesn't really have to have anything in common with TikTok. It mostly comes down to which companies have a) the cash to purchase it, b) management that is smart enough not to mess it up, and c) the best use of the company's cash if the price is low enough.
In the end it will probably be purely a financial play, rather than the product/strategy play most acquisitions are. So the acquiring company just needs to be good at the basics of tech management. They just hire or keep on TikTok management that is good at the social media stuff.
Then you have AMZN becoming 3rd largest online ad service, and WMT sees another area in which they'll get crushed by Bezos. They get access to the advertising side via Tik Tok, and can rely on MSFT's team's to help them avoid screwing up the product.
"MMMM that sweet, sweet user data mmmm yummmmyyy" - said some corporate middle manager at ${megaTechCorp}.
Especially young people. Corporate America can't figure out young people.
Of course whether or not that data can be successfully leveraged into profits is another story.
Now potentially acquiring tiktok.
Microsoft has LinkedIn loosely tied to other Office 365 products now. When you hoover over a name, it'll show you whether the person is on LinkedIn, or that they have _x_ possible matches.
They also have a resume assistant integrated to Word, and have some data linking to LinkedIn if you so choose.
It was certainly an expensive purchase, but the premium tools and access to employee information may have also been valuable in terms of benchmarking objectively how good an employee's background is for a job or compared to their peers. I don't know how powerful the employer side of LinkedIn is for this type of work.
So take Walmart: If they believed there's a 10% chance that Amazon might join the fray (to target younger demographics), then there's a good game-theoretic argument that Walmart should be at the negotiating table too.
[1] https://www.cnet.com/news/spectrum-auction-google-wins-by-lo...
Besides they can integrate it into their many platforms, XBox, Bing, Windows (Windows is still the preferred streaming platform, for example), etc.
However, seeing the other bizarre collection of companies getting into this fight, Oracle, and Walmart, I have a feeling this is more of a play towards getting into the Chinese governments good graces. I’d be interested to see if after paying a premium to buy Tik Tok, if the purchaser starts getting a higher share of China business.
If that is true, which I strongly suspect it is, or at least is a big part of this, then once again a thoughtless US action ends up giving China more leverage.
If Microsoft cared about that then why did they get rid of Mixer?
Microsoft has had various attempts at different social media, services, and more. They had a music streaming service, the shut down Twitch competitor. A few different social media sites like a photo and gif sharing site.
Microsoft seems like one of the best fits for TikTok when you consider the amount of money it will cost too.
Skype used to be the standard for video calls. These days I'm using FaceTime or Messenger.
What Microsoft did to Skype's UI/UX was nothing short of brtual dismemberment, which left me teaching my grandma to use FaceTime instead.
For shame.
Walmart hasn't gotten much bigger in the past few years. They've lost position in terms of scale & power versus other large companies and Amazon has been taking a lot of retail market share. Walmart has also lost a big chunk of their profitability, their business has become less profitable (a business that was already operating on tiny margins). They've only been growing their sales a few percent per year the past five years. Their operating income is below where it was four years ago.
On an inflation adjusted basis, Walmart is lucky if they've been standing still the past decade. Their peak was circa ~2000-2010. It's unlikely they'll ever exceed the position of dominance they held at that time.
I'm not sure how Walmart - a $524 billion sales global juggernaut - eating a comparatively tiny social media company, reminds of the AOL Time Warner merger? The AOL merger was a merger of near-peers in terms of valuation, AOL at the time was booming and massively profitable. TikTok isn't profitable, and they're barely a rounding error compared to Walmart in sales.
AOL was somewhat in the publishing & media platform business, they were both in the ad business, and both AOL and Time Warner were in the connectivity business.
Walmart's business has nothing in common with TikTok, there's no sound synergy at all (even theoretical). About the only distant reach, would be the idea of trying to appeal to younger consumers, to use (abuse) TikTok for that purpose. It would of course end disastrously for WMT shareholders, Walmart would take a giant write-down eventually.
There's nothing new about it of course. GM bought Hughes and EDS for example. Giant companies do this type of thing historically.
Plus they constantly have to deal with Zuckerberg, Google, Bezos, Apple etc trying to get between them and the customer.
>But the proposed deal is being complicated by a split between ByteDance CEO Zhang Yiming and General Atlantic and Sequoia Capital, two U.S.-based ByteDance investors with long ties to the Trump administration and Republican causes who both would like to see the sale happen. They approached Ellison to buy TikTok and have reached out to the White House to close the deal, according to two individuals with knowledge of the matter.
>However, Zhang is resisting any sale, the two individuals said, and did not inform his investors before suing the White House on Monday to block any sale. The insiders said Zhang is being advised by Silicon Valley billionaire Yuri Milner, another early investor in Zhang’s company.
Apparently Zhang thinks he can still save his company. Maybe the $45 billion will help change his mind.
https://www.thewrap.com/oracle-nears-20-billion-tiktok-deal-...
We hear a lot about the social/cultural aspects of fascism, but we don't talk as much about the economics of fascism. Think about all this talk about acquiring TikTok in the context of this definition:
> Fascism is an economic system in which the government controls the private entities that own the factors of production… A central planning authority directs company leaders to work in the national interest.
https://www.thebalance.com/fascism-definition-examples-pros-...
But sometimes isn't it the other way around with Fascism? ie corporate or money interests have great influence over the government and influence it so as to increase the power of the corporate influencer? It seems more like with fascism it's hard to tell the difference between the government and the moneyed interests (be they corporations, companies, extremely wealthy individuals, etc.) because they're so intertwined.
I do think the key here is that the government doesn't have to cave to moneyed interests, but a fascist leader does (either because they're weak, complicit or some other reason).
you can contort words to mean anything by stretching definitions or being vague enough but i don’t think that’s a useful definition
from Merriam Webster dictionary:
Definition of fascism
1 often capitalized : a political philosophy, movement, or regime (such as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition
2 : a tendency toward or actual exercise of strong autocratic or dictatorial control
https://www.merriam-webster.com/dictionary/fascism
https://en.wikipedia.org/wiki/Economics_of_fascism
> Fascist governments exercised control over private property, but they did not nationalize it. Scholars also noted that big business developed an increasingly close partnership with the Italian Fascist and German fascist governments. Business leaders supported the government's political and military goals. In exchange, the government pursued economic policies that maximized the profits of its business allies.
> While other Western capitalist countries strove for increased state ownership of industry during the same period, Nazi Germany transferred public ownership and public services into the private sector.
Seems consistent with the point he's trying to make.
Why not just launch a competitor and pay content creators to post there, all of these companies(including other FAANG group as well) have deep pockets and engineering talent.
i.e. I'm disagreeing with the GP that the app has no moat. The app idea is a simple one but the execution isn't that trivial to copy.
I think there may also be a sense of broad injustice that makes people more loyal to the offering. The President's actions have laid bare the reality that this is just a smash and grab on behalf of US interests, and not based in any actual national security concern, painting him and the US government as dishonest and corrupt.
There are claims we did similar things in the Middle East, interfering under false pretenses to get oil, and it turns out in 2020 that approach is unpopular to the general public, even if it is 'in the US interest'.
The way he is going about this is definitely thuggish, he would have probably earned more fans by not forcing a sale and instead using alternatives to stifle it.