Microsoft talks with TikTok started small, says new report

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Email Twitter: @kipkniskern Aug 26th, 2020 inNews

About a month ago, news broke that Microsoft was in talks to acquire at least some of TikTok from Chinese owner ByteDance, Ltd. In a new report, the New York Times has laid out a timeline of what’s happened so far, starting early this summer. TikTok has been under pressure by the US government and others over concerns that it is allowing the Chinese government access to data collected by the popular short form video platform.

According to the report, Zhang Yeming, ByteDance’s CEO, after the company’s acquisition of Musical.ly in 2017 came under scrutiny by CFIUS (Committe on Foreign Investment in the US) late last year, reached out to Microsoft about a partnership to ensure that US TikTok data would be held on US servers. Zhang, a former Microsoft engineer, rejected other large US tech companies like Google, Facebook and Amazon because of their own antitrust scrutiny issues, but felt that Microsoft could be a good fit.

In July, Microsoft joined in talks, initially for a minority investment and hesitant about taking on ownership of a social media company. However, the Redmond company became more interested in how TikTok’s social interaction data could strengthen their own data science efforts, and began to explore ways that TikTok could work with Microsoft’s advertising business. Talk began to turn from minority investment to some form of acquisition:

ByteDance and Microsoft came to see an acquisition of TikTok’s U.S. operations as a cleaner option, they added. Microsoft could allow TikTok to operate as a stand-alone unit, similar to how it had treated past large acquisitions, such as its $2.5 billion acquisition of the company behind the video game Minecraft in 2014 and its $26 billion purchase of professional networking site LinkedIn in 2016.

In the meantime, pressure continued to mount from the US. Treasury Secretary Steven Mnuchin, who also leads CFIUS, presented President Donald Trump with a proposal: “that ByteDance be ordered to sell TikTok to an American owner, with Microsoft acquiring most of TikTok’s business and the stakes held by ByteDance’s Chinese shareholders winnowed to a minority investment.”

Later that day, however, Trump announced to reporters aboard Air Force One that he planned to ban TikTok entirely, an unexpected turn that left some of the President’s advisors furious. Since then, Microsoft has acknowledged its interest in TikTok, the President issued an executive order giving TikTok 45 days to divest or be shut down, and a number of other investors, including Oracle, have surfaced. On Monday, TikTok filed suit against the executive order.

What will happen next? Well in this unusual case, we won’t have to wait long to find out. It’s unclear what kind of political damage shutting down the highly popular TikTok might have in an election year, or how much Microsoft is willing to pony up to remain in contention. Microsoft has said it will say more by September 15th, and the ban is set to take effect on September 20th. As always, stay tuned to OnMSFT.com for all the latest Microsoft news and information.

 

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