ByteDance, TikTok’s parent company, selected Oracle to manage its popular video sharing program’s U.S. business on Sunday. While the computer hardware corporation had previously expressed interest in the social media platform, Microsoft seemed it might become its new owner until this weekend.
The New York Times recently published an article explaining tensions between the United States and China crushed the software firm’s plans.
Why ByteDance Rejected Microsoft’s Bid for TikTok
Last month, the White House threatened to ban TikTok due to concerns about security over user data. Shortly thereafter, Microsoft reportedly engaged ByteDance in discussions regarding a possible takeover of the video-sharing service. The corporation’s plans involved making several changes to the platform to make it more private and secure.
Microsoft intended to seize control of the code that powers the app, which would allow it to block outside data access and quash the spread of misinformation.
However, the Chinese government issued new export controls in late August that disrupted the Windows company’s plans. Beijing’s rules would have blocked the export of artificial intelligence technology (AI) TikTok uses to power its suggestion algorithms. Earlier this month, Reuters reported Beijing found the prospect of ByteDance being forced to sell one of its properties highly objectionable.
With China’s regulatory constraints in place, Microsoft probably would not be able to make its desired changes to the service.
By comparison, ByteDance’s partnership with Oracle will see the technology company assume management of TikTok’s U.S. data. But ownership of the platform and its valuable technology will likely remain unchanged. That means its plans for the video-sharing app could please regulators in America and China.
Ultimately, Microsoft’s bid for TikTok did not align with the geopolitical reality of the current moment.
Why Microsoft Wanted TikTok
On its face, the software giant’s aspiration to break into the social media business did seem a little odd. After all, the company has become a $1.57 trillion behemoth with LinkedIn as its primary social media offering. However, Microsoft likely viewed the acquisition of Tik-Tok as an unconventional but potentially game-changing move
The Reading, Washington-based firm is a leading technology company, but its products mostly cater to businesses. Also, when its Xbox division has had great success engaging consumers, its efforts to build an online community have floundered. In July, Microsoft admitted as much when it shuttered Mixer, its video game streaming service, because of its unpopularity.
But the corporation saw another way forward by bringing TikTok under its umbrella.
The video-sharing platform has over 100 million American subscribers, many of whom belong to the lucrative young female demographic. By acquiring TikTok, Microsoft would have gained access to tools and data that might allow it to generate billions of dollars in advertising revenue annually.
The software company even teamed with Walmart to strengthen its bid for TikTok. But the corporation’s plans and deal-making proved to be futile. Despite its resources, Microsoft could not overcome the objections of a famous company and a global superpower.
Given the state of relations between the United States and China right now, the Oracle-ByteDance deal could still fall apart. But unless it completely reconfigures its pitch, Microsoft will not be the company to pick up the pieces.