Why Microsoft needs to acquire TikTok

Recently TikTok has once again become the center of public attention, but Trump, who insisted on banning TikTok before, unexpectedly stated:

“Regardless of whether Microsoft or other companies complete the transaction with TikTok, most of the money must be handed to the U.S. Department of the Treasury, because we made this transaction possible.”

After Bytedance agreed to completely divest TikTok’s US business, it attracted the attention of many buyers, and so far, Microsoft seems to be the most likely one.

So, why Microsoft?

Compared to Microsoft, Facebook, or other mobile internet giants may be more interested in acquiring TikTok. After TikTok has gained popularity in the global market, Facebook and its products have been more affected.

But due to price and antitrust reasons, Facebook failed to even enter the buyer’s list. Of course, TikTok seems not willing to sell its business to its competitors.

During the pandemic, Bytedance’s valuation once reached US$140 billion. The market value of TikTok, which is the main force overseas, will naturally not be too low.

Earlier, it was reported that the valuation of TikTok’s North American business has reached US$50 billion (50 times the estimated revenue of US$ 1 billion in 2020). This has surpassed Baidu, which was once one of the three internet giants in China

This acquisition price is comparable to sky-high prices that not most technology companies can afford.

As one of the largest listed companies in the world, Microsoft had revenues of US$143 billion and a profit of US$44.28 billion last year. Microsoft also has US$136 billion in cash and liquid assets. Facebook’s revenue in the second quarter of this year was $18.7 billion, and its net profit was only $5.2 billion.

Facebook deep in an antitrust investigation

In the past few years, the four technology giants, Apple, Amazon, Facebook, and Google, have been subject to antitrust investigations on a global scale to some extent, and they have also caused dissatisfaction from the government in the United States.

Facebook CEO Zuckerberg and the CEOs of three other technology giants participated in the US Congressional antitrust hearing held on the 30th of last month, which also made Facebook miss the acquisition opportunity.

In contrast, Microsoft has full experience in dealing with the topic of monopoly. It is much lower-key than other technology companies and has never been involved in the whirlpool of public opinion in recent years.

In addition, Microsoft also has strong political capital, making it easier to pass antitrust review and approval by the Committee on Foreign Investment in the United States (CFIUS). At the same time, Microsoft has also maintained a good relationship with China.

In summary, Microsoft has become the best candidate to acquire TikTok.

Microsoft’s ambitions

Although Microsoft seems to be a little weak in the field of mobile Internet, it was once the giant of communications and social software.

Microsoft is one of the few well-known computer software companies in the last century that has successfully transitioned to the internet. They also have been trying to follow the pace of technological development.

But from the past few decades, in addition to the commercial software market, Microsoft seems to have been not going well in other areas.

Under the innovation and revolution of the internet, Microsoft has successively missed opportunities in search engines, social media, mobile devices, e-commerce, and streaming media. The acquisitions of Nokia’s mobile phone business, Yammer, and Skype have successively failed.

According to a report by market research agency eMarketer, TikTok’s user scale in the US market has increased by 97.5% in 2019, and the number of US users is expected to reach 45.4 million in 2020. 42% of TikTok users in the United States are between 18-24 years old, and 27% of users are between 13-17 years old. This is the group that the “old-fashioned” Microsoft most hopes to be able to win. They are the future.

For Microsoft, TikTok’s attributes and user groups can also perfectly make up for its shortcomings. And create more space and possibilities for Microsoft’s business (such as Bing and Xbox)

the latest news from CNBC said Microsoft and ByteDance are trying to reach an agreement within three weeks, although there are still many uncertainties. If Microsoft’s acquisition is successful, it may have a chance to embrace its second spring in the social field.