After a green signal from the US government, Microsoft plans to acquire Chinese social media platform, TikTok. Let’s explore why tech giants care about social media platforms, as well as how this deal can potentially transform Microsoft’s foothold in the consumer market.
In 2006, Google bought YouTube for $1.65 billion, one of the biggest acquisitions in the company’s history. At the time, YouTube was just a few months away from being sued into obscurity. Once Google acquired the video platform, it paid all the settlements and kept the site up and running. In turn, Google was able to sell ads on YouTube while cross-promoting its products, and the rest, as they say, is history.
Back in 2012, Facebook bought Instagram in a $1 billion deal. With this strategic acquisition, Facebook was able to gain access to Instagram’s young users, an area where Facebook was facing major challenges at the time.Â
Now comes news of Microsoft’s potential acquisition of TikTok. Does a similar win-win scenario for both the companies await?
After uncertainty over TikTok’s future in the US, Microsoft has now announced that it is in talks to acquire TikTok from Chinese company ByteDance. Microsoft aims to buy TikTok’s operations in the US, Canada, Australia, and New Zealand. This purchase will drive the Redmond giant’s long-term efforts to cater to the consumer market and become a strong competitor to established social platforms, including YouTube, Snapchat, and Facebook. In addition, this deal will save TikTok from losing its 100 million American users, transferring them into the custody of Microsoft.
Microsoft’s Focus on Data Privacy
One of the primary reasons why the US government wants Microsoft or any American company to acquire TikTok is data privacy. The US government has always feared China’s misuse of user data. Due to similar security concerns, the US government had also banned Chinese telecom company, Huawei, last year – a move followed by other countries in the recent past.
The announcement of a potential acquisition came via a post in Microsoft’s official blog, that sharedOpens a new window , “Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States. To the extent that any such data is currently stored or backed-up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred.â€
With this acquisition, and the resulting access Microsoft will gain to TikTok’s user data, the company can expect to bolster its consumer services, with deeper insight into consumer digital behavior.Â
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Expansion of Digital Ad Business
Microsoft has struggled to establish a strong foothold in the ad revenue business, which is currently dominated by Google, Facebook, and Amazon. With this acquisition, the company can use TikTok’s platform to create ads and monetize its online service and products. Additionally, it could even integrate the social media platform with its existing consumer products portfolio and expand its ad business.
Global analyst John Bersin shares a fresh perspective on what Microsoft could do with TikTok, in case they are seeking ideas. In his blog, Bersin writesOpens a new window , “What if TikTok was used for corporate training? I’ve often told training vendors that the model for micro-learning is not YouTube; it’s TikTok. We could all use TikTok to create easy-to-understand “how do I…†videos that would work better than ever. Imagine the public education channel that could be created!â€
Under the reins of Satya Nadella, Microsoft has made some promising acquisitions, including LinkedIn, GitHub, and Mojang. It will be interesting to see how TikTok will enable Nadella to transform Microsoft’s future in the consumer space, and of course, whether the execution is able to give more established competitors such as Facebook and Alphabet a run for their money.
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