Following the passage of a measure by President Joe Biden that could result in TikTok’s ban in the United States, ByteDance, the Chinese firm that owns TikTok, is considering selling the well-known app.
A potential acquisition of TikTok would need more than simply regulatory approval and the ability to manage a social media business. They would also require technological ability to rebuild TikTok’s powerful content recommendation algorithm, which ByteDance intends to remove from the app after its sale.
According to Wedbush analyst Dan Ives, this action might reduce TikTok’s US operations’ worth 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 said in a statement.
ADWEEK consulted with a variety of stakeholders, including investors, bankers, analysts, and consultants, to identify possible TikTok acquirers and those who may choose to abstain.
Sanja Partalo, co-founder and general partner of S4S Ventures, believes that antitrust concerns will dissuade Meta and Google from joining.
“Moreover, they stand to benefit if TikTok ceases operations in the United States or is acquired by an inexperienced in scaling social media platforms, perhaps botching the implementation. Thus, remaining passive could be a wise option,” Partalo said.
Verizon and AT&T are telecommunications titans. According to Andrew Buckman, Azerion’s vice president of marketing and investor relations, Verizon and AT&T are the prime prospects to acquire TikTok if ByteDance decides to offload its U.S. segment.
TikTok’s large user base, particularly the 45% of Gen Z, presents an appealing opportunity for these businesses, who frequently struggle to connect with this demographic.
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“This generation is not inclined towards traditional media like cable TV, radio, or newspapers, and predominantly relies on TikTok for information,” he said.
He noted that the acquisition will give these companies privileged access to significant user data as well as the opportunity to expand their consumer base.
However, maintaining TikTok without its algorithm may prove difficult, and telecommunications firms may lack the necessary knowledge to rebuild it, according to Buckman.
Microsoft
Microsoft, which came close to acquiring TikTok in 2020, may re-enter the contest, Partalo suggested.
According to Javier Rodriguez Horta, global marketing strategy practice lead at CvE, the acquisition might solidify Microsoft’s position in the social media environment by expanding its product and service portfolio and improving its consumer offers.
“Microsoft’s advertising and gaming divisions could synergize well with TikTok’s business model and audience,” Partalo went on to say.
The IT behemoth is also bolstered by its recent success in acquiring Activision Blizzard, and Rodriguez Horta does not see regulatory difficulties as a major impediment for Microsoft at the moment.
“Had antitrust been a genuine barrier, Microsoft’s legal team wouldn’t have pursued the deal in 2020,” Rodriguez Horta said in a statement.
Others say that Microsoft’s focus on AI initiatives, including a $13 billion investment in OpenAI, reduces the urgency of acquiring TikTok.
“TikTok doesn’t align with their strategic direction,” said Marc Goldberg, CEO of Stages Collective.
Oracle
Oracle appears as a realistic candidate, as TikTok’s primary cloud provider in the United States.
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According to a joint announcement, Oracle and Walmart gained provisional US permission in September 2020 for a 20% share in a new corporation called TikTok Global. Nonetheless, the contract, which was approved by the Trump administration, was canceled after the presidential transition in early 2021.
“Considering past interest and strategic alignment, Oracle appears to be a suitable match,” he said.
David Ellison, the son of Oracle co-founder Larry Ellison and a reputed candidate for Paramount Global’s acquisition, may also contemplate an offer for TikTok.
“Should his current endeavor fail, he has the financial backing to pursue TikTok,” said a banker involved in a TikTok-related deal who preferred anonymity.
According to Darren Lopes, co-founder of 10PM Curfew, Amazon’s powerful capabilities make it possible to execute a deal, and the lack of a social network eliminates monopoly or antitrust difficulties.
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The acquisition could be helpful for Amazon, especially because TikTok recently launched a competitor 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,” he said. “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 skill in developing sophisticated recommendation algorithms, which has driven revenue growth, places them well to potentially replicate TikTok’s methodology. Amazon is well-equipped for such an initiative, according to Goldberg of Stages Collective, given its financial clout—nearly $575 billion in revenue in 2018.
Private Investors
Former Treasury Secretary Steven Mnuchin is expected to join a private equity-backed consortium that will bid for TikTok, he told CNBC in March.
Additionally, Anschutz Entertainment Group (AEG), led by billionaire Philip Anschutz, has the financial resources to consider acquiring TikTok.
However, TikTok’s essence is encased in its fundamental content recommendation system, which captivates its user base.
“Without this algorithm, any prospective acquisition will face an asset with a large user base and a significant, quickly expanding advertising market share. However, without the algorithm, these assets may lose their value,” Partalo stated.
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