3 reasons why it makes sense for Microsoft to take over TikTok in the U.S.

Source: Daniel Rubino / Windows Primal

Update #four: 8/3/2020: President Trump said on Monday "he does not mind if Microsoft Corp buys the Chinese-owned brusque-video app TikTok," so long equally the deal is done past September 15th. This remark clears the path for the buy to go through without controversy.

Update #3 8/2/2020: Microsoft has now officially confirmed it is exploring the purchase of Tiktok, and talks have now resumed following discussions with the Trump administration.

2020 has been a bizarre twelvemonth, which is just augmented by yesterday's late-breaking news that Microsoft was in talks to larn the pop video social network TikTok.

A lot has happened since that news dropped, including threats of an outright ban of the app in the U.South. However, recent developments suggest Microsoft is still the leading contender to take over U.S. operations should TikTok parent visitor ByteDance divest.

While Microsoft seems a peculiar selection for a hip Vine-esque service, hither is why information technology makes sense.

TikTok and the U.Due south.: How we got here

Source: TikTok

TikTok rose to prominence in 2022, a year in which the company brought in a staggering $20 billion in advertizing revenue, an increase of 180 percent twelvemonth-over-year. That'south all from a huge 40 million daily-active-users (DAU) count, which is massive for any social network.

Google, Facebook, and Amazon all bring regulatory concerns to a TikTok takeover.

ByteDance owns TikTok (known as Douyin in Mainland china) but is only one of many apps the company makes. Despite concerns that ByteDance has connections to the Chinese authorities (Chinese Communist Party, or CCP), the company is a private applied science firm, with a reported seventy percent of its investors coming from the U.S.. The company is valued at roughly $fifty billion as of July 29, 2022.

Concerns over security and TikTok take been reported in the press for months. However, to appointment, there has not been any definitive assay demonstrating security violations of the Google Play or Apple App Store policies.

In January, the U.S. military effectively banned the app on authorities-issued devices. Ane very detailed analysis of TikTok past Derek Banks, a security analyst and penetration tester for Black Hills Information Security, concludes:

At this point in the assay, though, if I were performing a risk analysis for allowing the app on company devices, I think at that place would be enough data to decide against it. But what nigh banning TikTok from the general public? My opinion is that without breaking the encryption, it would be hard for me to say. My guess is that it was decrypted past someone and that information was being nerveless was viewed as an invasion of privacy.

Personally, I think information technology's prophylactic to assume as a user for whatsoever popular app, that personal data from your phone is being sent to any of these companies. Does it matter where the company is headquartered? Perhaps for some, possibly not for near others. At the end of the mean solar day, I call up that the majority of people have no real thought how much their privacy is compromised by apps on their mobile devices, but that is a chat for another solar day and another web log mail.

Whether TikTok is siphoning private data or is just a lightheaded Vine-clone that those under 30 enjoy is hard to say. The Trump administration was famously "trolled" by TikTok users recently where those involved over-ordered tickets to President Trump's Tulsa rally. The effect was an embarrassing under-attendance of supporters. Unfortunately, information technology is hard to carve up personal politics from State concerns these days.

Tiktok App Bylp Bylp Source: Windows Central

On Friday, July 31, President Trump stated to the press pool on Air Forcefulness One that he plans to flat-out ban TikTok in the U.Due south.. This statement came hours after Microsoft was reportedly in talks to take over U.S. operations. On August 1, Reuters said that the owners of TikTok are prepared to divest U.Due south. operations ceding control to a U.S. company, namely Microsoft:

Nether ByteDance's new proposal, Microsoft, which also owns professional social media network LinkedIn, will be in accuse of protecting all of TikTok'due south U.Due south. user information, the sources said. The plan allows for a U.S. company other than Microsoft to have over TikTok in the U.s., the sources added.

Microsoft did not respond to a request for annotate from Reuters.

Interestingly, Microsoft'south "in" with TikTok may come from Erich Andersen, TikTok's global general counsel. Andersen was with Microsoft for nearly 20 years, recently serving equally Corporate Vice President and Chief IP Counsel to the Redmond giant.

As to why Microsoft makes sense to take over operations, at that place are a few ...

i. Microsoft brings security, trust, no antitrust luggage

Satya Nadella on stage at Microsoft Ignite 2022 Source: Daniel Rubino/Windows Primal

This week, numerous companies, including Apple, Google, Amazon, and Facebook, were on Capitol Hill defending their use of engineering science, marketplace dominance, and fairness in contest.

Notably absent from the hearings? Microsoft.

Facebook is salivating to buy TikTok going so far as to create a "clone" of the app called Reels. Information technology'due south a familiar position for Facebook, who has been accused multiple times of trying to buy a company while besides threatening to copy its tech and destroy them (see Instagram).

But Facebook is facing a lot of regulatory and political scrutiny. It already owns social giants Instagram and WhatsApp. Adding TikTok to that mix would create a massive and politically unpopular social media juggernaut.

Microsoft has a improve reputation for consumer privacy than Google or Facebook these days.

The same can be said about Google and Amazon, though to a lesser degree. Apple seems the well-nigh pristine from this controversy, save for its questionable App Store policies. Yet, the visitor doesn't seem to take the internal construction to take over a massive social network suddenly. In that location'south also the question if Apple would treat the TikTok Android app as fairly equally the one for iOS.

Microsoft, on the other hand, really rates highly with consumers on privacy, with Microsoft "soaring" by one contained measure. The same cannot be said about Google, Facebook, or Amazon. Image matters.

The U.Due south. government also trusts Microsoft. You lot don't need to look any farther than JEDI (Joint Enterprise Defense Infrastructure) and DEOS (Defence force Enterprise Role Solutions), both massive contracts the let the U.Southward. defense machine run on Redmond's software.

Were TikTok to divest U.Due south. operations to Microsoft, there would be no regulatory hiccups, bedlam, or protests. Such a smoothen sailing acquisition makes investors and governments happy. Indeed, this reputation seems to be a driving factor as Reuters even reported "Microsoft… will be in charge of protecting all of TikTok's U.S. user data."

2. Boon for Microsoft ad revenue

Source: Daniel Rubino/Windows Fundamental

Google is the male monarch of ads on the web. It is besides the target of a new antitrust investigation by 50 U.Due south. attorneys full general announced late in 2022. Giving it more piece of the ad pie is probably not a popular idea right now.

Microsoft also has an advertising business (tied to search), but it has been apartment for the final few years, every bit Bing slowly chugs forth with single-digit increases yr to twelvemonth.

TikTok pulled in $20 billion in 2022 from ad revenue. ByteDance projected $1 billion in advertising revenue from India this twelvemonth, where the app was only banned, near of it from TikTok.

Even if Microsoft is only running U.Due south. operations for TikTok, the windfall for ad revenue, attain, and data would exist massive.

three. Microsoft Azure cloud and skills

Next to Google and Amazon, Microsoft is one of the most prominent deject players with its rocketing Azure business.

Microsoft has the infrastructure to run TikTok's data securely and efficiently. The visitor already runs LinkedIn (who'south revenue grew x per centum last quarter), GitHub, and Minecraft with colossal success.

Microsoft is well-positioned to take the reigns of running TikTok both from a technical and capital letter perspective.

Takeaway: Of course, this is Microsoft …

Mixer Meme Source: Matt Brown / Windows Fundamental

To say Microsoft has a mixed history of successfully running new acquisitions is an understatement. It was just in July the visitor shutdown its Mixer game streaming service, a business concern that seemed ripe for growth and expansion when Microsoft acquired Beem but four years ago.

The U.s. government trusts Microsoft, who is seen more as a neutral player these days compared to the alternatives.

Other failed acquisitions include Nokia, most famously. One could debate Skype has been meandering for years, not to mention failures similar Danger, Tellme Networks, aQuantive, Navision, and others similar GroupMe, Hotmail, PlaceWare, etc.

Simply Microsoft besides had massive success with LinkedIn, Minecraft, and GitHub, aka all mail service-Ballmer decisions under the reign of current Microsoft CEO Satya Nadella. Minecraft, which was questioned initially, now has 200 1000000-unit sales and 126 million monthly active users.

Should Microsoft acquire U.Southward. operations of TikTok, it should exercise what it does best: handle the backend and logistical work, while letting ex-Disney executive (and now TikTok CEO) Kevin Maye run things. Microsoft seems simply to flub acquisitions when it tries to swallow and integrate the company, not when information technology lets them operate as a standalone like GitHub, Mojang (Minecraft), and to a lesser extent, LinkedIn.

But the instance for Microsoft running TikTok is clear. The company has the all-time reputation, is trusted for security; information technology has in the infrastructure, and doesn't attract controversy. How this all plays out in the coming days will be a fascinating chapter to this wild year.

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