The clock is now ticking for TikTok to secure a new owner. President Joe Biden has signed a law that could potentially ban TikTok in the United States unless its Chinese parent company, ByteDance, sells the app. TikTok is planning to contest the law in court, but if unsuccessful, the company will need to quickly find a buyer.
Who would the US government approve as the next owner of a social media platform with 170 million US users, which is becoming a strong competitor to social media giants like Facebook's Meta.
The possibility of TikTok being sold could spark a frenzy of interest, attracting a range of parties including tech companies, retailers, private equity firms, and investment bankers.
It is worth noting that China's commerce ministry has stated their strong opposition to any forced sale of TikTok, adding to the challenges for potential buyers.
Although there is no clear frontrunner among potential bidders at the moment, legal experts and business analysts suggest that certain candidates appear to be more promising than others.
Don’t expect a Meta or Google to swoop in
Any effort by an established tech giant with a large social media presence would immediately trigger antitrust red flags, according to analysts.
Meta is currently facing a lawsuit from the Federal Trade Commission, which claims that its acquisition of WhatsApp and Instagram broke US antitrust laws. The FTC is working to split up the company.
People walk past the headquarters of ByteDance, the parent company of video sharing app TikTok, in Beijing on September 16, 2020.
People walk past the headquarters of ByteDance, the parent company of video sharing app TikTok, in Beijing on September 16, 2020.
Greg Baker/AFP/Getty Images
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Google is currently facing antitrust lawsuits from the Justice Department in relation to its search and advertising technology businesses, not its ownership of YouTube. Despite this, experts believe that Google is under such intense scrutiny that it would not be a suitable candidate to acquire TikTok.
According to Gene Kimmelman, a former Justice Department antitrust official, major tech companies like Amazon, Microsoft, Google, or Meta would likely raise significant antitrust concerns if they were to purchase TikTok. On the other hand, companies like Intel, Cisco, Oracle, Verizon, or AT&T may not face as big of a problem in terms of antitrust scrutiny.
Jasmine Enberg, a principal analyst at Emarketer, brought attention to an interesting point: Only the biggest tech companies might be able to afford buying TikTok. However, these same companies could face the most regulatory scrutiny.
According to Enberg, "Any potential buyer needs to have a lot of money and be prepared for challenges." She added, "Although many companies would love to have TikTok's special algorithm, most of those with the financial means wouldn't be able to pass antitrust regulations."
Past suitors who were interested in Microsoft may have a chance to bid again. The tech giant faced a lot of antitrust attention when it tried to purchase Activision Blizzard, a major video game publisher, in a huge merger deal. However, Microsoft was able to resolve a lawsuit from the FTC and satisfy other regulators around the world to successfully complete the acquisition last autumn.
After its recent success, Microsoft may have a new chance to make a deal with TikTok. Even though Microsoft owns LinkedIn, a social network for professionals, it doesn't have a popular app like TikTok.
In 2020, Microsoft was among the few companies interested in buying TikTok when President Donald Trump wanted it to be sold. Walmart was also part of the negotiations and mentioned a potential partnership with Microsoft.
Both companies abandoned their plans when TikTok decided to collaborate with Oracle on Project Texas, which aimed to address US national security worries by storing American user data on Oracle servers.
Now, with uncertainty surrounding TikTok's future, the fate of Project Texas is also up in the air. This presents a new opportunity for those who were once interested in TikTok, as well as for Oracle.
A surprising move was made by former Trump Treasury Secretary Steven Mnuchin last month. He announced that he is assembling a team of investors to purchase TikTok.
Mnuchin's offer for TikTok is not clear, but reports suggest he proposed a deal that could exclude TikTok's powerful content algorithm, which is a key factor in its popularity. This move could help bypass Chinese government restrictions on recommendation algorithms, but it would mean purchasing only TikTok's brand without its most valuable asset.
This unusual proposal has sparked surprise, especially since Mnuchin was involved in the previous attempt by the Trump administration to ban TikTok. Despite this, Mnuchin has mentioned publicly that his past experience has given him a deep understanding of TikTok and its operations, including the user data it collects.
That Mnuchin may now leverage that inside knowledge for his own potential benefit reflects a conflict of interest, some critics say.
People walk past the headquarters of ByteDance, the parent company of video sharing app TikTok, in Beijing on September 16, 2020.
People walk past the headquarters of ByteDance, the parent company of video sharing app TikTok, in Beijing on September 16, 2020.
Greg Baker/AFP/Getty Images
Related article
Banning TikTok would hit China’s tech ambitions and deepen the global digital divide
It would be a shame if Mnuchin used classified information to benefit himself and his Saudi friends, said Oregon Democratic Sen. Ron Wyden in an interview with The Washington Post.
Moreover, acquiring TikTok would make Mnuchin a competitor to Trump, who is the chairman and largest shareholder of the company that operates Truth Social, a social media platform where Trump is the top user.
Kevin O’Leary, the Canadian chairman of the private venture capital firm O’Leary Ventures, is another businessman who has shown interest in acquiring TikTok. Like Mnuchin, O’Leary has also mentioned that a potential acquisition may need to exclude TikTok’s algorithm. He has proposed an initial bid ranging between $20 billion and $30 billion.
Editor's P/S:
The potential sale of TikTok has sparked a flurry of speculation and interest from various parties. While tech giants like Meta and Google face antitrust scrutiny, companies such as Microsoft and Oracle may have a better chance of acquiring the platform. Microsoft's recent successful acquisition of Activision Blizzard and its interest in TikTok in the past make it a potential frontrunner. Oracle, which partnered with TikTok on Project Texas, could also be a contender.
However, the situation is complicated by China's opposition to a forced sale of TikTok. This could pose challenges for potential buyers and could lead to a protracted legal battle. Additionally, the involvement of former Trump administration officials like Steven Mnuchin, who is assembling a team of investors to purchase TikTok, raises ethical concerns about potential conflicts of interest.
