Walmart Joins Talks to Buy TikTok
nytimes.com
nytimes.com
Why is suddenly everyone so keen to buy TikTok? And why such bizarre buyers - Microsoft, Oracle, now Walmart? None of these are companies I would associate with a social media presence. Their business is generally the "boring" - office application, data munging, groceries.
Microsoft did buy LinkedIn and Skype, they don't seem in any way integrated in what it does (in fact, doesn't Microsoft undercut its own Skype app with Microsoft Teams?). And, this is opinion-based, but from a technical point of view, they seem very inferior to comparable non-Microsoft products (Zoom, Facebook etc.).
Tiktok is a revolutionary social media application. They did what twitter couldn't do with vine.
Following creators is something that emerged out of Instagram organically. You first logged in because you wanted to see what your friends were up to.
In contrast, following friends was likely not your original reason for joining TikTok - it was to find interesting content.
An ad from a "creator" in your Instagram feed might evoke stronger resistance than in your TikTok feed.
Someone like Walmart (or Amazon), that sells millions of items, can tap into the mass Chinese market of 1.4 billion people that are coming online and entering the middle class.
This can easily be Walmart’s ace to finally challenge Amazon domestically and worldwide.
In that case, I suggest TikTok refuse to sell out, at fire sale prices. They can make more money themselves.
Just take the American ban. And wait out Trump. If Biden wins, and he still enforces the ban, then it’s the American market that will lose out. Think of it, all those teenagers that are hitting the TikTok lottery, with their videos that go viral, and TikTok is sharing in the proceeds with them.
The young adult market, should realize what is happening and vote out Trump. This can at least send a message to the establishment.
Admittedly, the rumors that teenagers used TikTok to register for tickets to Trump’s rally, only to not show up, is rather hilarious. And he got bitter and butt-hurt for it. But couldn’t they have also spread that message around on other forums like Twitter or Instagram or Facebook too? So I don’t see why TikTok got singled out for it.
Other companies have had similar fates with trying to make media content mini-empires.
Almost all of these bad decision are with hindsight. Though some may be more obvious - CBS paid too much for Last.FM and CNET’s network of sites that at one point extended pretty far. - Fox paid too much for MySpace and IGN Whose smaller network of sites extended pretty far too before. Fox sold both off for fractions of their purchase costs. - NYTimes sold off About.com and didn’t do too much with their other small attempts.
—-
- IAC is the most successful, but they spin off most of their best stuff and so the actual main companies market valuation isn’t too high. Though the not too long ago spun off Match has a higher market cap.
Amazon is fairly successful though how much that has to do with Amazon doing well as well can be debated. They did some ruthless stuff like Diapers.com. IMDB, Box Office Mojo, Goodreads, Twitch, and one or two other purchases have worked out well enough
Comcast’s very small web media sites have fared well enough too until covid hit. Their Fandango umbrella of sites including Rotten tomatoes was doing well.
—
It’s hard to break into the web in a big way. Especially with being content centric or with niche social media sites.
Oracle/Walmart though? Doesn't make much sense... Especially Oracle.
So take Walmart: If they believed there's a 10% chance that Amazon might join the fray (to target younger demographics), then there's a good game-theoretic argument that Walmart should be at the negotiating table too.
[1] https://www.cnet.com/news/spectrum-auction-google-wins-by-lo...
Then you have AMZN becoming 3rd largest online ad service, and WMT sees another area in which they'll get crushed by Bezos. They get access to the advertising side via Tik Tok, and can rely on MSFT's team's to help them avoid screwing up the product.
This is exactly why. They see TT as the "new" form of social media, since everyone is sick of FB-style feeds and profiles, and want a piece of the action. TT's growth and young userbase demonstrates pretty clearly that traditional social media isn't cool anymore.
I guess when you are bidding against other people, the highest bidder wins. That means you have to, in a way, overpay for the product, and reap some special synergy bonus that other buyers can't get. This is what is missing to me, I can't see how owning a social media app enhances the rest of the business for either of Microsoft, Oracle, or indeed Walmart.
The problem with trying to buy a business like TikTok at its prime is that it's trying to buy "cool". It's the most perishable commodity imaginable.
Let's assume that you manage to skate by the initial purchase process intact-- that the audience doesn't revolt en masse and say "I don't want to be associated with Walmart/Microsoft/Oracle". In a way, a unfamiliar foreign owner has a bit of mystique-- everyone in the target demographic has been in a Walmart or dealt with a Windows PC, so those brands have baggage already, whereas this was most people's first contact with ByteDance.
A lot of the potential 'synergy bonus' opportunities have to be intentionally slow-walked to avoid setting off the audience's spider-sense. Push "buy goods via TikTok" too hard, or push the wrong ad inventory because it's all you have, and users will walk away.
Microsoft has LinkedIn loosely tied to other Office 365 products now. When you hoover over a name, it'll show you whether the person is on LinkedIn, or that they have _x_ possible matches.
They also have a resume assistant integrated to Word, and have some data linking to LinkedIn if you so choose.
It was certainly an expensive purchase, but the premium tools and access to employee information may have also been valuable in terms of benchmarking objectively how good an employee's background is for a job or compared to their peers. I don't know how powerful the employer side of LinkedIn is for this type of work.
I doubt every party talking about buying TikTok is interested in buying TikTok.
If I were a product manager at a large-ish company even remotely related to video or social media, I'd be bugging my PR team to put out such a release.
"MMMM that sweet, sweet user data mmmm yummmmyyy" - said some corporate middle manager at ${megaTechCorp}.
Especially young people. Corporate America can't figure out young people.
Of course whether or not that data can be successfully leveraged into profits is another story.
Now potentially acquiring tiktok.
Besides they can integrate it into their many platforms, XBox, Bing, Windows (Windows is still the preferred streaming platform, for example), etc.
However, seeing the other bizarre collection of companies getting into this fight, Oracle, and Walmart, I have a feeling this is more of a play towards getting into the Chinese governments good graces. I’d be interested to see if after paying a premium to buy Tik Tok, if the purchaser starts getting a higher share of China business.
If that is true, which I strongly suspect it is, or at least is a big part of this, then once again a thoughtless US action ends up giving China more leverage.
If Microsoft cared about that then why did they get rid of Mixer?
They still might, but it looks a lot less likely now.
Skype used to be the standard for video calls. These days I'm using FaceTime or Messenger.
What Microsoft did to Skype's UI/UX was nothing short of brtual dismemberment, which left me teaching my grandma to use FaceTime instead.
For shame.
Microsoft wants to be seen up against apple, google Oracle wants to be seen up against AWS Walmart wants to be seen up against amazon e-commerce
From a shareholder management of company funds perspective, I think it's a stupid decision, but as executives within these companies looking to make a name for themselves, people advocate for stupid flashy acquisitions and imagine seamless synergies with ecommerce and advertising existing product lines.
In most cases, according to studies, large acquisitions seem to harm the company long-term.
Microsoft has had various attempts at different social media, services, and more. They had a music streaming service, the shut down Twitch competitor. A few different social media sites like a photo and gif sharing site.
Microsoft seems like one of the best fits for TikTok when you consider the amount of money it will cost too.
In the absence of any buyers that actually add value, and the fact that TikTok has no BATNA, this means it will almost certainly be sold below value.
Therefore, unlike most corporate acquisitions, this can be viewed as a pure "profit play", rather than relying on complicated synergies, economies of scale, fending off competition, etc. to justify the purchase.
In this light, the parent company doesn't really have to have anything in common with TikTok. It mostly comes down to which companies have a) the cash to purchase it, b) management that is smart enough not to mess it up, and c) the best use of the company's cash if the price is low enough.
In the end it will probably be purely a financial play, rather than the product/strategy play most acquisitions are. So the acquiring company just needs to be good at the basics of tech management. They just hire or keep on TikTok management that is good at the social media stuff.
Its China version Douyin also uses a mix of Aliyun and their own infrastructure, so ByteDance likely have plenty of experience operating in multi/hybrid cloud environment.
I also suspect that Google Cloud's learning resource in Chinese is fewer than AWS/Azure.
Yes, that's true. But it's not like there are a lot of learning resources in Chinese for AWS/Azure, either. At least compared to Aliyun (Alibaba Cloud). So likely it doesn't matter.
Oracle... Similar to Microsoft but reversed - they probably want the Ads/Data first
Walmart... ¯\_(ツ)_/¯
Why spend 50B to buy it then? After owning them they'll be the ones paying for hosting costs.
IMO they want it for the same reason as Minecraft, a cultural phenomenon and access to its massive youth user base & their best chance to rival Facebook/IG.
For a minute (or forever, whatever suits you), operate on the assumption that Trump is an idiot, who doesn't actually understand the modern business landscape, let alone the modern tech business landscape. He believes Boeing is one of the greatest companies in the world [1], the DoD has a huge contract with Microsoft, the federal government is also rife with Oracle contracts, these "traditional" companies are the ones that our government interacts with on a daily basis.
On the flip side, they just had an antitrust hearing with Big Tech (and while Microsoft was there, they didn't get nearly the heat that Apple, Google, and Facebook did; I wonder why). In fact, many of these companies, and others in SV, have publicly disavowed the administration; some had representatives on high profile advisory panels at the beginning of the administration, but many have left.
Who is left talking to Washington? The old guard companies, who have big contracts, big traditional names, personal contacts scattered around the federal government.
I don't believe this has anything to do with cohesion with these companies existing business models. Look at your confusion about who's coming forward, and then recognize that if the world doesn't make sense, something else is going on that you're missing. Oracle doesn't want to integrate TikTok with Oracle Cloud: They want to use their contacts in the government to acquire it at a serious discount, then bleed it dry to remake the investment. Microsoft feels like the only exception I've seen: While it still doesn't make sense for them, they at-least dabble in social networking, they'd probably run it into the ground, but it wouldn't be malicious.
[1] https://www.cnn.com/2020/03/17/business/boeing-bailout-trump...
In July they bought out at least one SPV for a crazy valuation to consolidate holdings, probably imagining that things would continue to rise. I think they'll be lucky to get 1/4 of the cash they spent on that back, though they've probably still 10X'd the cash they put in much earlier.
TikTok are suing the US Administration so they're not forced to sell their US operations [1].
From what I can see TikTok have only had a recent 3B funding round on Softbank (after becoming popular at 75B valuation) and could only find 1x 100M funding round for musical.ly (at 500M valuation). Considering the expected sale price for the US part of their business is circa 50B, even SoftBank are likely to get many times return on their investment. Early investors must be due for an insane return.
Walmart hasn't gotten much bigger in the past few years. They've lost position in terms of scale & power versus other large companies and Amazon has been taking a lot of retail market share. Walmart has also lost a big chunk of their profitability, their business has become less profitable (a business that was already operating on tiny margins). They've only been growing their sales a few percent per year the past five years. Their operating income is below where it was four years ago.
On an inflation adjusted basis, Walmart is lucky if they've been standing still the past decade. Their peak was circa ~2000-2010. It's unlikely they'll ever exceed the position of dominance they held at that time.
I'm not sure how Walmart - a $524 billion sales global juggernaut - eating a comparatively tiny social media company, reminds of the AOL Time Warner merger? The AOL merger was a merger of near-peers in terms of valuation, AOL at the time was booming and massively profitable. TikTok isn't profitable, and they're barely a rounding error compared to Walmart in sales.
AOL was somewhat in the publishing & media platform business, they were both in the ad business, and both AOL and Time Warner were in the connectivity business.
Walmart's business has nothing in common with TikTok, there's no sound synergy at all (even theoretical). About the only distant reach, would be the idea of trying to appeal to younger consumers, to use (abuse) TikTok for that purpose. It would of course end disastrously for WMT shareholders, Walmart would take a giant write-down eventually.
There's nothing new about it of course. GM bought Hughes and EDS for example. Giant companies do this type of thing historically.
Plus they constantly have to deal with Zuckerberg, Google, Bezos, Apple etc trying to get between them and the customer.
I also didn't understand how USA forced TikTok to sell the company it owned.
The story of how the US can force them to sell is long, but it boils down to some powers granted to the President that allow the office to freeze assets of foreign people or groups if they're determined to be a threat to the American economy or national security. It's useful in that it allows the US to freeze assets for e.g. terrorist organizations, but also as we can see, can be abused somewhat.
So TikTok the company needs to choose between the loss of revenue, and a buyout price (presumably affected by the sale under duress). Quite naughty policy, you could say, though probably insignificant compared to what China does to western companies.
It's certainly not espionage. And we're not brain draining away top talent with above-market, state-funded pay (anticompetitive, but nice to the workers that get offers -- something maybe we should do).
While we're not being nearly as imposing as China has with US companies, we need to be careful. Tesla, Starbucks, Apple, and a whole host of other American companies are making quite a lot of money in China. If we escalate, we might expect the same treatment.
I think the safer play is to decentralize the supply chain by re-outsourcing to Vietnam, India, Mexico, and Africa in the near term, then re-onshore with automation in the long term.
We should also try to duplicate the whole One Belt thing. It'd give us allies, influence, and hedge our risks.
If the Chinese want equal access to US markets they need to cooperate too.
https://www.msn.com/en-us/news/world/tiktok-china-state-medi...
According to Lee Kai-Fu who launched Google in China: "Chinese laws are clear about what foreign companies can do to operate in China. In TikTok's case, though, the company was left no choice but to consider a forced sale."
China doesn't not allow western companies to operate. Google proactively made the choice to exit China (it also somewhat didn't. Google ads has a sizable market share in China as does Facebook). I'm not arguing that they should have elected to follow Chinese laws but the actions the Chinese government took with western companies was not to either tell them to stop existing in the Chinese market or abdicate their ownership to a domestic company.
These were also the same laws domestic companies follow.
Conversely, I don't see the executive actions being applied to TikTok applied uniformly to the US market.
Why not just launch a competitor and pay content creators to post there, all of these companies(including other FAANG group as well) have deep pockets and engineering talent.
I think there may also be a sense of broad injustice that makes people more loyal to the offering. The President's actions have laid bare the reality that this is just a smash and grab on behalf of US interests, and not based in any actual national security concern, painting him and the US government as dishonest and corrupt.
There are claims we did similar things in the Middle East, interfering under false pretenses to get oil, and it turns out in 2020 that approach is unpopular to the general public, even if it is 'in the US interest'.
The way he is going about this is definitely thuggish, he would have probably earned more fans by not forcing a sale and instead using alternatives to stifle it.
i.e. I'm disagreeing with the GP that the app has no moat. The app idea is a simple one but the execution isn't that trivial to copy.
>But the proposed deal is being complicated by a split between ByteDance CEO Zhang Yiming and General Atlantic and Sequoia Capital, two U.S.-based ByteDance investors with long ties to the Trump administration and Republican causes who both would like to see the sale happen. They approached Ellison to buy TikTok and have reached out to the White House to close the deal, according to two individuals with knowledge of the matter.
>However, Zhang is resisting any sale, the two individuals said, and did not inform his investors before suing the White House on Monday to block any sale. The insiders said Zhang is being advised by Silicon Valley billionaire Yuri Milner, another early investor in Zhang’s company.
Apparently Zhang thinks he can still save his company. Maybe the $45 billion will help change his mind.
https://www.thewrap.com/oracle-nears-20-billion-tiktok-deal-...
We hear a lot about the social/cultural aspects of fascism, but we don't talk as much about the economics of fascism. Think about all this talk about acquiring TikTok in the context of this definition:
> Fascism is an economic system in which the government controls the private entities that own the factors of production… A central planning authority directs company leaders to work in the national interest.
https://www.thebalance.com/fascism-definition-examples-pros-...
But sometimes isn't it the other way around with Fascism? ie corporate or money interests have great influence over the government and influence it so as to increase the power of the corporate influencer? It seems more like with fascism it's hard to tell the difference between the government and the moneyed interests (be they corporations, companies, extremely wealthy individuals, etc.) because they're so intertwined.
I do think the key here is that the government doesn't have to cave to moneyed interests, but a fascist leader does (either because they're weak, complicit or some other reason).
from Merriam Webster dictionary:
Definition of fascism
1 often capitalized : a political philosophy, movement, or regime (such as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition
2 : a tendency toward or actual exercise of strong autocratic or dictatorial control
https://en.wikipedia.org/wiki/Economics_of_fascism
> Fascist governments exercised control over private property, but they did not nationalize it. Scholars also noted that big business developed an increasingly close partnership with the Italian Fascist and German fascist governments. Business leaders supported the government's political and military goals. In exchange, the government pursued economic policies that maximized the profits of its business allies.
> While other Western capitalist countries strove for increased state ownership of industry during the same period, Nazi Germany transferred public ownership and public services into the private sector.
Seems consistent with the point he's trying to make.
you can contort words to mean anything by stretching definitions or being vague enough but i don’t think that’s a useful definition