Report: Microsoft Talks with TikTok Turned Into “Soap Opera”

Posted on August 26, 2020 by Paul Thurrott in Social, Microsoft with 20 Comments

According to a report, Microsoft originally only wanted to make an investment in TikTok and not a controversial acquisition. But then things got messy.

The New York Times cites dozens of sources in a report this morning that Microsoft began investment discussions with TikTok and ByteDance, its China-based parent company, in July. The software giant understood the growing tensions between Washington and China, and that managing a social media company would be an endless and thankless task. So it was simply hoping to obtain a small stake in the company with the goal of appeasing U.S. politicians and moving TikTok onto its Azure cloud computing platform.

Then, things went south. The president ordered TikTok to sell its U.S. assets or stop operating in this country. And so ByteDance began to reluctantly discuss selling parts of TikTok with various international firms while pursuing a legal defense of the company. In addition to Microsoft, the companies Netflix, Oracle, and Twitter all expressed interest in parts of TikTok, while tech giants Facebook, Google, and Amazon are under too much antitrust scrutiny to even bother. But Microsoft, with a market valuation of $1.6 trillion, remains the most viable option.

The value of TikTok fluctuates between $20 billion and $50 billion depending on which assets are included, it could be worth as much as $80 billion if Microsoft wins the bidding, the paper claims. Complicating matters, each party is trying to get the best possible deal, naturally, and that could drive up the price as well.

According to the report, Microsoft executives were not interested in a big deal for TikTok, just a minority investment. But as the talks progressed, a potential deal got bigger and bigger, with Microsoft coming to believe that it could also benefit from harvesting TikTok’s social media data and advertising. Eventually, the two firms began discussing Microsoft acquiring all of TikTok’s U.S. assets.

But then the White House intervened, demanding that Microsoft take most of TikTok’s worldwide assets, leaving ByteDance as the minority owner of the rest. Then the unpredictable president simply announced that he would “ban” TikTok with an executive order, in opposition to his own advisors, and incongruously demanded that the U.S. government should benefit financially from any transaction.

Representatives from TikTok and Microsoft were “shocked” by these unstable announcements. But Microsoft publicly pledged to subject the TikTok acquisition “to a complete security review and providing proper economic benefits to the United States, including the United States Treasury,” instantly ceding whatever moral authority it had gained under CEO Satya Nadella.

The report also claims that Oracle emerged recently as a new suitor only because ByteDance wants the best possible deal if it’s forced to sell TikTok, and not just a single bidder. But the arrival of competition for TikTik may actually scare off Microsoft, the publication says.

We can only hope for such an outcome.

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Comments (20)

20 responses to “Report: Microsoft Talks with TikTok Turned Into “Soap Opera””

  1. Jim Lewis

    Thanks for telling it like it is and speaking frankly about all this craziness, both here and on Windows Weekly!

  2. gardner

    People actually thought Luke and Laura belonged together.

    This appears more like an arranged marriage.

  3. chaad_losan

    Donald wants his cut like always.

  4. glenn8878

    Didn't you know that's how negotiations work?

    "I never get too attached to one deal or one approach...I keep a lot of balls in the air, because most deals fall out, no matter how promising they seem at first."

    "The worst thing you can possibly do in a deal is seem desperate to make it. That makes the other guy smell blood, and then you're dead."

    Since banning it is the worse possible outcome, selling the entire enterprise to Microsoft seems reasonable.

  5. codymesh

    would it be unfair to say America as a whole is kind of a soap opera right now?

  6. jensengregory

    I guess this is what happens when someone tries to run a government like a mob boss runs his operation. If TikTok is indeed a front for a Chinese government conspiracy, I would assume its next move will be to make a decision based on whatever will make Trump and his cronies look as foolish as possible — something I can't say I'm entirely against at this point anyway.

  7. waethorn

    Whoever buys this, both they and their customers are losers.

  8. toukale

    LOL, the president just wants to make sure the government gets its finders fee. Tik Tok did not magically put up the for sale sign without some arm twisting. Lol, can't make this thing up, this is better than anything I could have drawn up.

  9. JH_Radio

    Paul, your error made me laugh...

    But the arrival of competition for TikTik may actually scare off Microsoft, 

  10. madthinus

    What a mess. 80 billion is how many Nokia's? multiplied by 1000 = potential size of the mistake this will be.

  11. sherlockholmes

    Im looking forward to TikTok Weekly today!

  12. Chris_Kez

    Paul, love the headline photo; if Luke and Laura are Microsoft and TikTok, I think you missed an opportunity not getting Trump in there in the person of villainess Helena Cassadine (played by Elizabeth Taylor) who curses the young couple at their wedding, leading to years of tragedy.

  13. jimchamplin

    I’d let Oracle have it. Between the threat to ban to force them to sell and the scummy requirement to pay an illegal key cost, I’d just stop returning calls from ByteDance and DC at a critical moment to ensure the whole thing blows up in the administration’s face. Leave those clowns to pick up the pieces.

  14. anoldamigauser

    Microsoft's original plans were rational. Now that the stable genius is involved, they should run, not walk, away from this deal. Let Larry Ellison step into this heaping pile. If Oracle gets the product, I cannot imagine users are going to stick with it.

  15. Pbike908

    I can see where it makes sense for a Microsoft to purchase a minority position to host it on Azure, I don't see how it makes much sense for Microsoft to buy the whole thing. However, I am not a gamer so I don't really understand the social media component to gaming.