Microsoft (MSFT) is on the cusp of becoming the best tech company in America and that is the reward they get for staying out of the data privacy quagmire that the other tech titans find themselves in.
A TikTok acquisition would offer a major platform to rival Facebook and Google-owned YouTube and will revamp its image with young people.
TikTok itself will grow into a $300 billion company in the next 5-7 years just by itself.
This purchase is a massive blow to Facebook (FB) and Google’s (GOOGL) prospects as their once-fortified duopoly morphs into a 4-way race between Microsoft, Amazon (AMZN), Google, and Facebook (FB).
This would make up for all the prior missteps with Nokia’s handset business and Skype.
This could be described as the "crown jewel" snapped up at a discount.
This is essentially an asset with 100 million users, massive momentum, engagement, advertising revenue, and something they could cross-sell into the broader Microsoft base.
The treasure trove of data is what makes this deal a can’t-miss proposition.
Think about Microsoft in building software and hardware projects, and not just Xbox. For the first time, it would have proprietary data on a level that they can understand consumer behavior and not just with their enterprise customers.
Data privacy is Microsoft’s biggest selling point to the Trump administration which is concerned about TikTok’s ties to the Chinese government.
TikTok, which is currently owned by a Chinese company, has come under scrutiny and investigation in the U.S. over allegations it is supplying user data to Beijing, a charge that company officials have denied, but have no way to prove that they don’t bend to the whims of the Chinese Communist Party.
This episode follows on the heels of the U.S. effectively banning Chinese telecom giant Huawei in the U.S.
TikTok represents the dual threat of destroying America's edge in technological dominance.
TikTok has become the fastest-growth social platform in history and its inception as a Chinese technology threatens the U.S. reputation.
What specific data is TikTok able to aggregate from U.S. users?
Personal location, app usage, behavioral trends, thematic trends, and economic indicators.
This personal data could be used to take advantage of the American population through military or economic means.
India was first to ban TikTok and didn’t allow a sale of the Indian data to a local firm. They didn’t want money flowing back into Chinese hands.
China is notorious for the mishandling of data and most of the data is resold infinitely inside of mainland China.
How will Microsoft earn dollars from TikTok?
Digital ads.
TikTok would boost Microsoft’s share of the U.S. digital display ad market.
This year, eMarketer predicts Microsoft to hold just 1.5% of that market, slightly ahead of Snapchat but well behind Facebook’s 42% and Google’s 10.4%.
That is about to change.
Just how popular is TikTok?
TikTok is a disruptive force in social media and video.
In the second quarter, TikTok had 30% penetration of U.S. respondents 18 and older in a survey of 2,500 U.S. consumers.
Among respondents 18 to 24, TikTok's popularity is even greater, at about 42%, versus 65% for Facebook, 78% for Instagram and 63% for Snapchat.
Along with this, Microsoft finally gets the “cool factor” they have been missing for generations.
What are the chances of Microsoft buying TikTok?
I would put it at 85%-90%.
ByteDance needs to seal a deal or they leave the table with zilch and at the same time kicked out of America.
The company, a massive social media player in China, is valued at about $100 billion, half of which is due to TikTok.
The deadline gives Microsoft the added effect of increased negotiating leverage and it will be interesting to see what concessions they get from TikTok.
No other major tech company has been given the green light to make the deal and Microsoft has plenty of cash available to make this deal happen.
The deal could be especially beneficial for Microsoft because the TikTok business in the U.S. is valued in the $40-billion range but could eventually reach $300 billion if they nurture it properly.
I would be shocked if Microsoft flubs this golden opportunity to add a trophy asset to put in their trophy cabinet.
CEO Satya Nadella is too shrewd to let this once-in-a-lifetime chance to cement Microsoft as the top dog go to waste.
I was highly bullish on Microsoft before this news, and I can easily say now that this is not only the best American tech company but the best company overall in the world.
