TikTok’s suitors: Among Microsoft, Walmart, Oracle and Reliance, who makes the best match?

Just about a year back, when afaqs! did a cover story on TikTok, it seemed like the short video platform was nearing the end of its problems in India. It seemed like the major concern for the ByteDance-owned video juggernaut would now be to create sustainable revenue streams, and to retain and grow its mother lode of users.

A year on, ByteDance is desperately looking for a godmother for its flagship app. Back in June, the Indian government banned TikTok, along with 58 other Chinese mobile applications, following the border conflict with China. The Ministry of Information Technology mentioned that the step was taken for “defence of India, security of state and public order.”

TikTok is also in trouble in the US, another major and promising global market. In early August, US President Donald Trump signed an executive order forcing TikTok to sell its US operations, or suspend business within the country.

Like India’s ban, Trump’s order also comes amid growing discord in US-China relations. It cites “national security, foreign policy, and economy of the United States” as the reasons. The order also mandates that the sale should take place within 45 days (or mid-September) from its issue date and TikTok’s American user data to be transferred to US servers. Reportedly, ByteDance is exploring legal response to Trump’s order.

Now, in terms of buyers, four major business entities have expressed interest in TikTok – Indian business conglomerate Reliance (RIL), US retail major Walmart, and tech giants Oracle and Microsoft.

Given TikTok’s deep reach, rich consumer data, adtech promise and a heavy UGC (user generated content) loadout, it’s anyone’s guess why everyone (who can afford) wants a piece of it. A recent Sensor Tower (app intelligence company) report says that the video app was downloaded over two billion times globally, with 611 million downloads in India alone.

But, who makes the best fit?

The situation isn’t that simple. RIL only wants TikTok’s India business for itself. According to Gautam Mehra, chief data officer - South Asia, and CEO of Programmatic, Dentsu Aegis Network (DAN), none of the suitor companies have a track record of building social networks. Mehra says that the future probabilities about how the app will actually work are quite complex.

"Social networks can’t be broken up geography-wise. We had the Chinese and non-Chinese versions of TikTok, but both were significantly different. This would be the first time when one platform is split up in an India version, US version, or a Europe version. Now, the interoperability of users across geographies has to be maintained. How will a new feature in the US version affect the Indian users? Again, if there is a central repository of users, who owns that? Or is it more like TikTok providing marketing or distribution rights? Whoever comes on board will have to navigate this first.”

Microsoft and Oracle both don’t have presence in consumer facing products and, hence, advertising opportunities. Microsoft does slightly better than Oracle because of LinkedIn and Windows operating systems/Office suites, both of which are again corporate-oriented, not UGC-focused.

Oracle provides adtech services, but doesn’t own a medium. Microsoft’s biggest setback in creating a mass platform was probably the failure of its Windows Mobile platforms.

Faisal Kawoosa, founder and chief analyst, techARC (technology analytics, research firm), points out that while Oracle has historically been in the B2B domain. TikTok needs someone with a good understanding of the consumer space.

“Microsoft again is a strong tech player, but its online journey has not been so strong. It has done exceptionally well in the offline digital domain. Only Reliance and Walmart fit into the granular consumer first requirements. Now within these, Walmart has little experience in the technology domain. This makes Reliance the strongest candidate,” Kawoosa adds.

DAN’s Mehra also agrees that of all, Oracle would make the oddest fit and would have to match its organisation, internal orientation, how it sells, etc.

He points out that apart from the US business, a major focus would eventually be on India. India is the only major mainland other than China in the fragmented APAC region. It provides access to a large population alongside limited regulatory hurdles.

Mehra agrees that Walmart’s social commerce interests in TikTok also make sense, as influencer marketing, although nascent, is growing rapidly.

“TikTok hadn’t oriented itself towards commerce and was figuring out its advertising business. Ad rates in India are very low. Commerce is definitely more profit-oriented than ads. Like, say, Jio is using its data to sell bundled services, instead of ads and, hence, a commerce-based business is more viable for an India-specific investment.”

Suprio Guha Thakurta, partner, Accelero (a consumer growth advisory), is placing his bets on Microsoft. “Not many people know that Microsoft has been in talks much earlier for a small stake in TikTok. This was to wrest the cloud contract from Google, which would have made TikTok Azure’s (Microsoft’s cloud offering) biggest client. As talks progressed, Microsoft started seeing other benefits as this would give it consumer behaviour data (which it sorely lacks, unlike its massive enterprise knowledge).”

Guha Thakurta points out that Microsoft is also particularly good at allowing its acquired entities to operate independently, like LinkedIn and Minecraft (video game acquired by Microsoft in 2014). “This may have suited Zhang Yiming (CEO of ByteDance). It’s interesting to note that Zhang is a former Microsoft executive. Which is how the talks started in the first case.”

However, Mehra is of the opinion that TikTok would also fit well in Reliance Jio’s portfolio of entertainment oriented digital products. “Reliance has the resources and follows a multiple arrow strategy. Jio owns JioSaavn, Jio TV and Voot, too. TikTok has an upfront high user base and engaged audience. It makes good sense to have a good stake in TikTok, rather than building something from scratch."

Regarding Mehra’s doubts of how a geographic and data/user ownership bifurcation of a single app actually work, Sanchit Vir Gogia, chief analyst, founder and CEO, Greyhound Research, has a probable solution.

Gogia points out that TikTok has investments from US based investment firms General Atlantic and KKR & Co., both of which have invested in Reliance’s Jio platforms. Again, Instagram Reels, TikTok’s just launched rival in India, is owned by Facebook, which has also invested in Jio.

Gogia says, “Microsoft, General Atlantic, KKR & Co., Jio and a few other PE investors can acquire all of TikTok from ByteDance, and continue to operate it as one single entity. This way, investors protect the company and their investment.”