Microsoft is in talks to acquire TikTok.
Strategically, this doesn’t make a lot of sense for Microsoft, which has been steadfastly focused on enterprise software under Chief Executive Officer Satya Nadella and has seen its market valuation balloon to more than $1.5 trillion because of it.
But Microsoft should absolutely try to acquire TikTok. Any company with the means to do it should.
Why? Because TikTok is supremely positioned to explode from a valuation standpoint. It is just now beginning to monetize its huge audience with advertisements, and curated, targeted, clever short-form video ads are perfect for a younger audience that skips or pays to ignore traditional TV commercials. ByteDance would be selling just as TikTok is about to take off.
Unfortunately for the Chinese-based company, U.S. president Donald Trump is expected to order ByteDance to divest the U.S. part of the business for security reasons.
“While we do not comment on rumors or speculation, we are confident in the long-term success of TikTok,” TikTok said in a statement on Friday. “Hundreds of millions of people come to TikTok for entertainment and connection, including our community of creators and artists who are building livelihoods from the platform. We’re motivated by their passion and creativity, and committed to protecting their privacy and safety as we continue working to bring joy to families and meaningful careers to those who create on our platform.”
Sometimes, if an asset is cheap enough, the synergies don’t matter.
The counterargument is Microsoft could screw up TikTok. It does have some history botching consumer-facing acquisitions, such as Skype and Mixer. But simply bringing in TikTok and letting it do its thing isn’t overly complicated.
It’s unclear how much TikTok’s U.S. operations would cost, but Reuters reported TikTok investors value the entire business at $50 billion. Given Facebook today is worth about $725 billion, there’s evidence that popular global social networks that can monetize advertising have some major growth possibilities.
Microsoft does have some consumer-facing products, such as Minecraft and XBox. But most importantly, it wasn’t one of the big four technology companies -- Apple, Amazon, Facebook and Google -- that just this week testified before Congress about having too much power. Perhaps it should have been. For the last few years, it’s been right alongside Apple as one of the most valuable companies on the planet.
But if Microsoft sees a window to help the U.S. government score a victory over China, antitrust considerations likely won’t come into play. Nadella may be focused on businesses, but he probably knows a good deal when he sees one.
What, however, will this mean for the Tik Tok users across the rest of the word, and particularly Africa? It will be interesting to see.