Following the enactment of a bill by President Joe Biden that could lead to TikTok’s prohibition in the U.S., ByteDance, the Chinese company that owns TikTok, is contemplating the sale of the renowned app.
A prospective buyer of TikTok would require more than just regulatory consent and the fortitude to manage a social media enterprise. They would also need the technical expertise to reconstruct TikTok’s potent content recommendation algorithm, which ByteDance intends to remove from the app upon its sale.
According to Wedbush analyst Dan Ives, this action could devalue TikTok’s U.S. operations from an estimated $100 billion to $40 billion.
“The absence of the algorithms would significantly alter TikTok’s valuation and render the divestiture process highly intricate, with numerous financial contenders eagerly awaiting its commencement,” Ives conveyed to ADWEEK.
ADWEEK engaged with various stakeholders, including investors, bankers, analysts, and consultants, to pinpoint potential acquirers of TikTok and those who might opt to abstain.
Sanja Partalo, co-founder and general partner at S4S Ventures, suggested that antitrust concerns would likely deter Meta and Google from participating.
“Moreover, they stand to benefit if TikTok ceases operations in the U.S. or is acquired by a novice in scaling social media platforms, potentially botching the execution. Thus, remaining passive could be a strategic move,” Partalo remarked.
Verizon and AT&T
Telecommunication giants Verizon and AT&T are considered leading candidates to acquire TikTok if ByteDance decides to divest its U.S. segment, as per Andrew Buckman, vice president of marketing and investor relations at Azerion.
TikTok’s vast user base, especially the 45% comprising Gen Z, offers an enticing prospect for these companies, which often struggle to connect with this demographic.
“This generation is not inclined towards traditional media like cable TV, radio, or newspapers, and predominantly relies on TikTok for information,” Buckman stated.
The acquisition would grant these firms privileged access to extensive user data and the potential to broaden their customer base, he added.
However, the challenge of operating TikTok sans its algorithm might prove daunting, and telecommunications companies may lack the requisite expertise to rebuild it, according to Buckman.
Microsoft
Microsoft, which nearly secured TikTok in 2020, might re-enter the fray, Partalo suggested.
The acquisition could anchor Microsoft firmly in the social media landscape, augmenting its array of products and services and enhancing its consumer offerings, noted Javier Rodriguez Horta, global marketing strategy practice lead at CvE.
“Microsoft’s advertising and gaming divisions could synergize well with TikTok’s business model and audience,” Partalo further elaborated.
The tech behemoth is also buoyed by its recent triumph in acquiring Activision Blizzard, and Rodriguez Horta does not perceive regulatory hurdles as a significant impediment for Microsoft at present.
“Had antitrust been a genuine barrier, Microsoft’s legal team wouldn’t have pursued the deal in 2020,” Rodriguez Horta asserted.
Others, however, argue that Microsoft’s concentration on AI initiatives, including a substantial $13 billion investment in OpenAI, diminishes the urgency of acquiring TikTok.
“TikTok doesn’t align with their strategic direction,” Marc Goldberg, CEO of Stages Collective, opined.
Oracle
Oracle emerges as a plausible contender, being TikTok’s chief cloud provider in the U.S.
In September 2020, Oracle and Walmart received provisional U.S. approval for a joint 20% stake in a new entity named TikTok Global, as per a joint statement. Nonetheless, the deal, sanctioned by the Trump administration, was aborted following the presidential transition in early 2021.
“Considering past interest and strategic alignment, Oracle appears to be a suitable match,” Ives observed.
David Ellison, son of Oracle co-founder Larry Ellison and a reported aspirant for Paramount Global’s acquisition, might also consider a bid for TikTok.
“Should his current endeavor not materialize, he possesses the financial backing to pursue TikTok,” disclosed a banker involved in a TikTok-related deal, preferring anonymity.
Amazon
Amazon, with its robust capabilities, could feasibly finalize a deal, and its lack of a social network precludes monopoly or antitrust complications, according to Darren Lopes, co-founder of 10PM Curfew.
The acquisition could be beneficial for Amazon, particularly as TikTok has recently introduced a rival online marketplace, Shop.
“Amazon’s existing server infrastructure could easily support TikTok’s video content, and the acquisition could counter TikTok’s e-commerce expansion,” Lopes explained. “Furthermore, TikTok’s ‘Amazon Finds’ videos have been a significant traffic driver, but TikTok Shop now diverts revenue and traffic away from Amazon.”
Amazon’s expertise in developing sophisticated recommendation algorithms, which have propelled its revenue, positions it well to potentially recreate TikTok’s algorithm. With its financial clout—nearly $575 billion in revenue last year—Amazon is well-equipped for such an undertaking, Goldberg from Stages Collective affirmed.
Private Investors
Steven Mnuchin, former Treasury secretary, is anticipated to lead a private equity-backed consortium to bid for TikTok, he revealed to CNBC in March.
Additionally, Anschutz Entertainment Group (AEG), helmed by billionaire Philip Anschutz, possesses the financial strength to consider acquiring TikTok.
Yet, TikTok’s essence is encapsulated in its core content recommendation algorithm, which captivates its audience.
“Absent this algorithm, any prospective acquirer faces an asset with a vast user base and a significant, rapidly growing advertising market share. However, without the algorithm, these assets may not retain their value,” Partalo concluded.
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