Can Microsoft Pull Off Buying TikTok on a Deadline – and Is the App Worth It?

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A Microsoft deal for TikTok wouldn’t present the same antitrust concerns as a potential Facebook bid would, one antitrust expert tells TheWrap

Microsoft CEO Satya Nadella
Microsoft CEO Satya Nadella

Microsoft is on the clock. President Trump has set a September 15 deadline for the tech giant to acquire TikTok’s U.S. operations, as the wildly popular video app faces scrutiny from both the right and the left over national security issues. If a deal isn’t reached by then, Trump said he’ll ban TikTok from the U.S., in the same way India blocked TikTok and several other China-based apps last month. Can Microsoft pull this off? From a regulatory standpoint, the optics might not be great, with the second most valuable company in the world gobbling up a powerhouse social app. Microsoft, which is worth about $1.6 trillion, is looking to buy TikTok from its Beijing-based parent company Bytedance for $50 billion, Reuters reported. John Lopatka, an antitrust expert from Penn State University, said that Microsoft’s acquisition likely wouldn’t alarm the FTC and other regulators as much as another social media-focused company buying TikTok’s U.S. business (along with its operations in Australia, Canada and New Zealand, as Microsoft aims to do). “I think it will be scrutinized, but on the face of it, it shouldn’t raise serious problems” for regulators, Prof. Lopatka said. “Microsoft is in the enterprise sector and hasn’t done a whole lot in the consumer sector, so its acquisition of a consumer platform like TikTok doesn’t present the same apparent acquisition of a competitor that, say, Facebook’s acquisition would present.” Lopatka pointed out that lawmakers and regulators are both more aware of and more concerned about the size of tech companies now. It’s a “lurking issue,” Lopatka said, that was apparent during last week’s congressional hearing featuring Apple, Amazon, Facebook and Alphabet, Google’s parent company. But Microsoft already being a huge company isn’t enough to block a deal on antitrust grounds, Lopatka explained, especially when Microsoft isn’t a major player when it comes to social media. “From an antitrust perspective — a competition perspective — an acquisition of TikTok doesn’t look problematic,” he said. “Just because it makes a big company bigger, it doesn’t provide grounds to block the deal. Under our existing antitrust laws, I don’t see how they could block that acquisition.” Regulatory issues aside, would Microsoft be a great fit for TikTok? It’s a tech blue blood at this point, albeit one that prints money each quarter. Still, its areas of expertise seem to be a world away from TikTok’s. Microsoft reported $38 billion in revenue for its most recent quarter, with those sales broken down fairly evenly between personal computing, cloud services and its productivity division, which includes Office software and LinkedIn. That doesn’t exactly scream “Gen Z” in the same way TikTok does. On top of that, Microsoft has had an “up-and-down consumer strategy” over the last 10 to 15 years, Wedbush analyst Dan Ives told TheWrap. Some of Microsoft’s highlights include trying and failing to acquire Yahoo in 2008 — which now looks like a stroke of good fortune — pushing into gaming with its 2014 acquisition of Minecraft’s parent company and buying LinkedIn for $26.2 billion in 2016. Social media may not be Microsoft’s bread and butter, Ives said, but what Microsoft has going for it, though, is the stewardship of CEO Satya Nadella. Since taking over in early 2014, Nadella has pushed for Microsoft to take more risks; most notably, he spearheaded the company’s push towards the cloud — a move that has helped Microsoft’s stock price jump 470% since Nadella became CEO. The bet with TikTok is that Microsoft and Nadella are smart enough to know what they don’t know. The leadership and infrastructure, Ives said, is enough to offset any lingering questions Microsoft is cool enough to lead TikTok. “The one thing I would say is, they’re not going to tinker with TikTok’s magic formula,” Ives said. “If you get the marketing and distribution that Microsoft has behind TikTok, to me, there’s no reason this can’t just be a massive success story.” Microsoft will have every reason to make the relationship work. By adding TikTok, Microsoft enters a digital ad space that’s dominated by Google, Facebook and Amazon. There’s a steady stream of ad dollars waiting to be unlocked with this deal, and that wasn’t really an option for Microsoft until this deal popped up. The barriers to competing for digital ad dollars with Facebook, which also owns Instagram, and Google, which owns YouTube, were too great for Microsoft to ever launch an organic competitor, Ives said. But now, with a readymade social media giant essentially put on a platter for them, Microsoft can buy their way into a new and frothy sector. “I think for Microsoft, Christmas came early. This fell into their laps at a time when every other tech giant is up to their eyeballs in regulatory scrutiny,” Ives said. “They have a chance to buy an asset for $40-50 billion, and in my opinion, three years from now it’ll be worth $200 billion.”


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