August 31, 2020
ByteDance is expected to soon make a deal to sell TikTok’s U.S. operations to one of two groups of suitors: Microsoft, now teamed up with Walmart, or Oracle, potentially supported by a coalition of investors. According to sources, discussions are still “fluid.” Walmart entering the fray has changed the calculus; its background in digital sales could push TikTok to evolve to a platform with e-commerce integration. A sale to Oracle, however, might focus more on TikTok’s data to buttress its own advertising, cloud and data businesses.
The New York Times reports that, “bankers and others have also called Netflix, Twitter and others to gauge their interest in doing a deal with TikTok, though the degree of interest has varied widely.”
The White House’s requirements are that ByteDance needs to sell TikTok U.S. operations “to reduce the app’s Chinese ownership … [and] sell to one or more companies that have a technology services provider, in part to transfer TikTok’s American user data over to U.S. servers.” Sources say the price tag discussed has “ranged from $20 billion to $50 billion.
Wedbush Securities analyst Dan Ives wrote investors that the addition of Walmart was probably “the final piece of the puzzle that ultimately cements Microsoft successfully acquiring TikTok’s U.S. operations for likely $35 billion to $40 billion.” ByteDance chief executive Zhang Yiming stated that he “cannot get into details at this point, but I can assure you that we are developing solutions that will be in the interest of users, creators, partners and employees.”
Bloomberg reports that, by making a bid with Microsoft to acquire TikTok, Walmart’s strategy is “part of a broader long-term play to bring more shoppers, advertisers and vendors into the fold as the lines between content and commerce continue to blur.” The company is on the verge of launching Walmart+, a delivery subscription service “making it a more credible threat to rival Amazon’s Prime offering … [and] TikTok could even become a platform to sell Walmart’s products.”
Coresight Research founder and chief executive Deborah Weinswig said the TikTok purchase “will be like a rocket in their pocket … a way to offer customers a hyper-personalized experience in both content and commerce.” In response to the news, Walmart’s shares rose 4.5 percent, “the biggest gain in seven weeks.”
Since Doug McMillon became Walmart’s chief executive in 2014, he has wanted to evolve the company “well beyond its brick-and-mortar roots.”
“A social platform like TikTok would give Walmart easy access to the very audience it wants and needs to attract,” said GlobalData Retail analyst Neil Saunders. “Having a serious stake in the world of social media would not only allow Walmart to bolster its marketing efforts, it would also give it access to a rich seam of data that would help it target shoppers more effectively.”
Right now, TikTok hasn’t engaged in much direct e-commerce, but Walmart could change that. “Combining social engagement with commerce is the magic formula for the future of retail,” said Tomorrow Retail Consulting founder and CEO Jordan Berke, who “helped lead Walmart’s Chinese digital operations before departing last year.”
TikTok Deal Is Complicated by New Rules From China Over Tech Exports, The New York Times, 8/29/20
In Bid for TikTok, Microsoft Flexes Its Power in Washington, The New York Times, 8/28/20
Why Does Walmart Want TikTok? Looking to China May Explain, The New York Times, 8/28/20