Spring was a time of explosive growth for TikTok, but summer is turning into the Chinese social media giant’s season of discontent.
The video-sharing app saw its popularity explode during the global pandemic, fed by content-hungry teenagers around the world looking for something to do while locked in their homes. But now, TikTok has gone from a harmlessly entertaining diversion for millions of homebound consumers to a digital pariah increasingly eyed with suspicion and banned by governments and private companies worldwide as a potential security threat.
The European Union first sounded the alarm with an investigation in June. Then, India banned TikTok and dozens of other China-based apps from its smartphone networks, citing concerns about “data sovereignty.” And most recently, U.S. President Donald Trump announced that U.S. citizens and companies can’t do business with ByteDance, TikTok’s China-based parent firm beginning Sept. 15.
However, Microsoft — which normally focuses on enterprise software — faces a complicated and competitive field if it wants to own TikTok’s U.S. operations. For openers, Twitter seems to be a possible alternative TikTok buyer, and speculation is increasingly swirling around other potential dark-horse bidders, Netflix being a particularly favorite.
Meanwhile, other social media companies are aiming to grab TikTok’s audience rather than buy the firm.
But that doesn’t mean the social media giant won’t make a grab for TikTok users while the Chinese company’s ownership is up in the air. Facebook’s new Instagram Reels app — widely seen as a TikTok rip-off — seems designed to do just that.
Let’s look at who could be the winner in buying the company’s U.S. arm — and whether a TikTok 2.0 would perform as well as the current version that millions of American teenagers know and love.
Microsoft + TikTok: A Data Match Made In Heaven
Given Microsoft’s rocky history with consumer-facing products — the Groove Music service, the Zune MP3 player and the Windows phone, just to name a few more spectacular misses — the firm’s potential purchase of TikTok has many observers surprised. They wonder what Microsoft is going to do with the world’s No. 1 up-and-coming social media service, or why Microsoft would want it anyway.
The “why” is answerable in a single word: data. What TikTok offers Microsoft is a window into building products for consumer uses and services. That’s become pressing for Microsoft in the mobile era, where the company totally blew mobile and has persistently been playing catch-up with players like Apple and Google.
Moreover, TikTok would give Microsoft a connection point to millions of younger consumers worldwide — the very people most likely to miss building a connection with Microsoft Office products. Microsoft would also get an easy entry into the world of mobile-based social media and a captive audience to which to promote products like Surface tablets and Xboxes — and even to build out its own streaming gaming platform.
But integrating TikTok with the Microsoft universe of products and services would be a technical challenge, particularly if it has to build in the privacy protections that regulators worldwide worry the app currently lacks. Microsoft is reportedly likely to ask for a one-year grace period to implement the transition even as some executives question whether it could take several years to do so.
If Microsoft can’t make a deal work, Twitter has already had preliminary talks with TikTok about coming in with a rival bid, according to The Wall Street Journal (WSJ).
Given its status as a top social media platform, Twitter would be a more natural fit for TikTok’s user base — many of which are already Twitter users as well. Such a deal would also benefit from the fact that Twitter is smaller than Microsoft, so buying TikTok’s U.S. arm would likely raise fewer antitrust alarms, sources told WSJ.
But being smaller would also be a disadvantage in the bidding round. While there’s no hard number publicly available for what ByteDance will want for TikTok’s U.S. arm, WSJ said there’s wide agreement that it would be in the tens of billions of dollars.
WSJ reported that Microsoft has roughly $136 billion in cash on hand versus about $7.8 billion for Twitter. Twitter's market cap is likewise a little over $29 billion versus about $1.6 trillion for Microsoft. If it comes down to a bidding war, the winner seems pretty well preordained.
And that’s just winning the race to buy TikTok’s U.S. arm. Retaining its 100 million American users (out of 800 million worldwide) is another matter. After all, Facebook sees TikTok as the most serious challenger it has faced in social media for some time, so it’s putting lots of effort into Reels.
Facebook: If You Can’t Buy ’Em, Beat ’Em
Given lawmakers’ loudly articulated regrets at a Capitol Hill hearing two weeks ago that U.S. antitrust regulators let Facebook buy Instagram in 2012, it’s not surprising that the House that Zuck Built isn’t even bothering to attempt a TikTok buy.
CEO Mark Zuckerberg and company can certainly afford it, and could probably even go toe-to-toe with Microsoft in a bidding war if they had to. But antitrust regulators would probably die laughing if Facebook so much as proposed such a deal, so the company likely won’t.
Instead, Facebook has built its own rival — Instagram Reels, a product that works a lot like TikTok. Users can record 15-second clips, sync them with music or audio effects and share them with the world at large or just with a curated list of friends. And Reels doesn’t require adding a new app, as it’s built right into Instagram.
“Reels gives people new ways to express themselves, discover more of what they love on Instagram and help anyone with the ambition of becoming a creator take center stage,” Instagram said in a blog post announcing the service’s launch.
The site is already live in America and parts of Europe, as well as in India (which, as noted above, banned TikTok last month within the country’s borders). And Facebook is clearly going after the TikTok influencer set. WSJ reported that Instagram is offering popular TikTok creators hundreds of thousands of dollars to jump ship to Reels.
Will Instagram Reels succeed? That depends.
Instagram Stories, which is now one of the app’s most popular features, is actually an idea “borrowed” from Snapchat. But Hobbi — Facebook’s answer to Pinterest — never quite took off.
Which way will Reels go? Well, if a Microsoft-owned TikTok takes on Facebook in social media, it will learn that Instagram is a formidable competitor with a well-established base of very loyal users. Twitter might theoretically be able to keep up with Facebook in a social media innovation race, but buying TikTok might simply be out of Twitter’s price range.
Meanwhile, TikTok has said it will head to court to challenge Trump’s order banning the company from America. Any good news there could mean that ByteDance might lose interest in selling the app’s U.S. arm altogether.
All of that is a long way of saying “keep watching.” The race to determine TikTok’s fate looks like there are plenty of twists and turns still left to “tock” before the clock “ticks” all the way down on Trump’s Sept. 15 deadline for banning the app from America.