A Final Look Back on Microsoft and TikTok (Premium)

With the TikTok soap opera finally behind us, I’d like to provide another view on Microsoft’s disastrous attempt to ally with the U.S. government and wrest control of a Chinese-owned company away from its corporate parents.

As I wrote in Damned if You Do (Premium), Microsoft’s oversight of TikTok’s non-Chinese business operations would have been problematic and could very likely have ended in failure. The software giant has no particular expertise with consumer services, and it continuing to run TikTok as an independent firm would have delivered the same lackluster results as does LinkedIn today, albeit at double the acquisition costs.

But the bigger issue, of course, was the moral one: “The problem with Microsoft acquiring TikTok is that simply doing so will promote the xenophobic policies of the current U.S. administration and will amount to the theft of a huge chunk of a Chinese company by an American tech giant,” I wrote. “This is exactly the kind of behavior that we, as Americans, are told to expect of the Chinese: That the government will meddle with a supposedly independent corporation … TikTok does not want to be sold, and it does not want to be broken up. It is only considering this outcome to stay in business in the wake of a potential U.S. ban.”

Put simply, my problem with a potential Microsoft acquisition was that the software giant would cede its moral authority after several years as a good corporate citizen under Satya Nadella, a company that values diversity, openness, and fairness.

I still believe that, and that Microsoft’s efforts were a crazy mistake. And yet I’m intrigued by Microsoft’s short statement about it being passed over for the acquisition and what it suggests about its intent.

ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft.

Microsoft was known to have accelerated its bid to, over time, include all of TikTok’s non-Chinese businesses. This tidbit indicates that ByteDance was only willing (under duress) to sell TikTok’s U.S.-based assets because that’s the one country in which it is/was facing a ban. And we now know that winning Oracle bid was both for the U.S. only and for more of a “partnership” than an acquisition. So from ByteDance’s perspective, Microsoft wanted too much.

We are confident our proposal would have been good for TikTok’s users, while protecting national security interests.

The national security implications of TikTok are at least partially conjectural. The United States has charged that ByteDance/TikTok, as a Chinese company, is “answerable to Chinese intelligence agencies,” and that whichever company controls TikTok’s source code would use it to target individual users with partisan political content or censor content that China doesn’t like.

ByteDance and TikTok have both denied that they help the Chinese government, as has every Chinese firm that’s ever been attacked with this kind of FUD. But that’s the concern, and it’s fair to point out that TikTok has engaged in pro-China censorship, in particular for sensitive topics like Hong Kong and Tiananmen Square.

But Microsoft’s goal was to get TikTok’s source code on its own servers in the United States and ensure that nothing suspicious could ever happen. So whether you believe in the U.S.’s fears about China or not, moving TikTok entirely to Microsoft in the U.S. would certainly solve that problem.

That’s interesting, and it’s a more positive spin on Microsoft aligning with a U.S. government that, at this time, is beyond irrational.

To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement. We look forward to seeing how the service evolves in these important areas.

It’s pretty clear to me that Microsoft would have been the best steward for TikTok as a service assuming, as we must, that we simply accept the unreal condition in which the U.S. is demanding a sale to a U.S. company in order to prevent its ban. It’s unclear what Oracle can/will do or whether it will meet the needs of the government, but that’s Oracle’s problem now.

Given all this, here’s my conflicting view on Microsoft and its bid on TikTok: It is possible that the software giant was willing to take a hit to its reputation in order to simply do the right thing in these trying times. And I don’t mean that from a purely charitable standpoint: Obviously, Microsoft could have benefitted from moving this popular service to Azure and from staking another claim for its shaky consumer bona fides. But Microsoft didn’t create the situation that led to TikTok possibly being sold. It only stepped in when that was a distinct possibility.

In other words, we might perhaps view Microsoft’s TikTok bid as something that would have best served the public interest given the circumstances. I don’t like it. But can respect it.

Regardless, I’m glad Microsoft lost the TikTok bid: This acquisition would have been a distraction, and the year-plus it would have needed to move TikTok to Azure could have been just enough time for the service to collapse in the U.S. anyway. I just don’t see TikTok as a long-time play. And I don’t see it as being good for Microsoft.