Partnerships / Acquisitions

TikTok’s Time Is Running Out

TikTok Owner Eyes Listing Change To Dodge US Sanctions

As the pandemic raged and millions lived under lockdown, one seemingly harmless diversion was TikTok, the amusing short-form mobile video app from Chinese tech firm ByteDance.

It was all rainbows and unicorn valuations for a bit as the app went viral, becoming a household name.

That tech success story is in tatters today, as TikTok is now a kind of digital pariah that’s been widely banned by governments and private companies worldwide, as mounting security concerns elevated TikTok to the level of national security threat here and abroad.

The European Union (EU) got it rolling by forming an investigative unit back in June. Then on June 29, India banned TikTok and dozens of other China-based apps from its smartphone networks citing “data sovereignty” amid political tension.

Things came to a high rolling boil on July 31 as the President Donald Trump administration ordered ByteDance to remove TikTok’s U.S. presence within 45 days.

Soon after, on Aug. 2, Microsoft confirmed via its corporate blog that “Following a conversation between Microsoft CEO Satya Nadella and President Donald J. Trump, Microsoft is prepared to continue discussions to explore a purchase of TikTok in the United States.”

“Among other measures, Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States,” Microsoft said in the blog post. “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.”

Should Microsoft complete the deal as currently proposed, it would take ownership of TikTok’s service in Australia, Canada, New Zealand and the U.S., “and would result in Microsoft owning and operating TikTok in these markets,” the company said in the post.

A Political Thrill-App

The fear is that TikTok’s ocean of private user data is being analyzed and employed by the Chinese Communist Party for its geopolitical value.

While some reports characterize ByteDance as essentially complying with government data demands, the company maintains that it has ceased any questionable data practices, and taken steps to insulate itself from the influence of Chinese authorities.

Assurances did little to assuage world leaders. Developments were fast and furious in July, as both Trump and Secretary of State Mike Pompeo began threatening to ban the app outright from access to the American market.

Branches of the U.S. military were instructed to remove the app from smartphones back in January. Months earlier, media reports surfaced that TikTok “moderators” had been told by authorities to censor topics like Tiananmen Square, Tibet and state criticism generally.

The Clock Is Ticking

TikTok’s bad fortune is a huge opportunity for a slate of players — some quite large — to essentially walk in and clean up easily, as the app needs no marketing. It’s already huge.

While it’s unclear how big a Microsoft-backed version of TikTok would be as a business, other platforms and tech innovators are jumping in to pick up where TikTok’s time ran out.

Facebook is rolling out Instagram Reels in several markets, which is a similar short-form lip-sync app with a number of creative features.

Not to be left out, Google’s in-house incubator, Area 120, unveiled its Tangi short-form video product in early 2020, when TikTok was still the game to beat — or be more like.

Before things went sideways, TikTok was the most promising new business unit in China’s highest-valued startup, ByteDance. With an estimated half-billion active users on the platform at the beginning of 2020, TikTok was reportedly doing a brisk business with in-app spending and ad agencies poised to leverage unique marketing opportunities TikTok afforded.

Earlier this year, Money.com reported that, “The Chinese version of TikTok, Douyin, offers splash ads that can cost up to 1 million Renminbi (about $150,000) for one day and newsfeed ads for 30 Renminbi (about $4) per click, according to the Nanjing Marketing Group. Brands like Pizza Hut have done such campaigns.”

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