TikTok, owned by China's ByteDance, has a new suitor. Retail giant Walmart confirmed on Thursday it was joining Microsoft in a bid for social media company TikTok's US assets.
For social media watchers, this revelation that came hours after the company's CEO Kevin Mayer said he was stepping down, was not only out of the blue, but it added a new twist to the bidding war of spinning out TikTok from ByteDance in the US.
A diplomatic storm is currently raging between Washington and Beijing since President Trump signed an executive order on August 6 giving Americans 45 days to stop doing business with ByteDance. And, in the fray to grab TikTok in the US as well, is the IT giant Oracle, which has reportedly put in a bid of $20 billion in cash and stock.
TikTok owner ByteDance aims to enter exclusive talks with one of the bidders in the next 24 to 48 hours and ink a deal by September 15, reported Reuters.
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But doesn’t the Walmart-TikTok pairing look spooky? After all a social media app like TikTok, popular among lip-synching and fickle minded teens, could hardly be synergistic for Walmart, known for selling large cereal boxes and cheap clothes.
“Walmart and TikTok is bizarre,” said Nii Ahene, chief strategy officer of Tinuiti, a digital-marketing agency. “But it gets Walmart in front of Gen-Z consumers who don’t watch television and have ad blockers on their phones.”
According to Walmart though, TikTok is not only a social media platform but it also possesses e-commerce capability, which Walmart can use to sell advertisement and its wares.
“We believe a potential relationship with TikTok US in partnership with Microsoft could add this key functionality and provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses,” Walmart said in a statement.
Besides, since Microsoft and Walmart are already business partners with Microsoft providing cloud computing services for the retailer's stores and online shopping, a unique three-way integration is also a distinct possibility.
“Walmart could advertise its own brand on TikTok or allow its vendors to advertise there, splitting the fee with Microsoft,” said Edward Jones analyst Brian Yarbrough. “The margins on digital advertising are very high.
Meeting US expectations
The sale of TikTok is happening as the company is under fire from the administration of US President Donald Trump as a potential national security risk due to the vast amount of private data the app is compiling on US consumers.
The Trump administration has demanded that China's ByteDance, which owns TikTok globally, sell its US operations. Earlier this week, TikTok also sued over an executive order effectively banning it in the US.
"We are confident that a Walmart and Microsoft partnership would meet both the expectations of US TikTok users while satisfying the concerns of US government regulators,” Walmart said.
That apart, according to Reuters, ByteDance founder and CEO Zhang Yiming said in a separate that the company was "moving quickly to find resolutions to the issues that we face globally, particularly in the US and India".
Amid growing distrust between Washington and Beijing, TikTok has also been targeted in India, where it was one of 59 Chinese apps banned by the Indian government in June following a border clash between India and China.
That month, ByteDance wrote to India's government saying China's government has never requested user data, nor would TikTok turn it over if asked.
TikTok has become a global sensation since ByteDance launched the app in 2017, with operations in countries such as France, South Korea, Indonesia, Russia and Brazil. In April, the app hit 2 billion downloads globally.
Mayer’s exit a blow
Meanwhile, Mayer’s exit that comes just three months after this high-profile former Disney executive joined TikTok, has been a blow in the middle of the negotiations of TikTok’s carve-out in the US.
Mayer was scheduled to leave TikTok as part of the planned sale, as the global role he had been hired for would no longer exist, reported Reuters.
"Whether TikTok reaches an agreement to sell its US business or decides to duke it out in the courts, the role for Mayer will not be anything like that he had envisioned when he joined," said Mark Natkin, managing director of Marbridge Consulting in Beijing.
Mayer's departure is not a great boost for company morale right now, Natkin said.
- Reporting by Yingzhi Yang in Beijing, Kanishka Singh in Bengaluru and Katie Paul in San Francisco, and Echo Wang in New York