Home Technology Tech news Why does it make sense for Microsoft to want to buy TikTok

Why does it make sense for Microsoft to want to buy TikTok

Suddenly, TikTok found itself in a whirlwind from which it could leave having another owner – at least as far as its operations in the United States and some other countries are concerned. That’s because the government of the American country closed the siege around the social network of videos and the way out to avoid a block on Uncle Sam’s land seems to be the sale of the branch there to a company there.

In addition to the accusations (so far without evidence) that ByteDance, the world’s most valuable startup and owner of TikTok, passes on US user data to the Chinese Communist Party, it is worth debating the reasons why Microsoft would be interested in acquiring the app. Looking at some numbers and also at the social media scene in the last decade and a half, this movement makes perfect sense.

Sticking the Facebook bubble

If you are a little more connected to the internet and social networks, you must have read names like Friendster, Meerkat, Fotolog, So.cl, Orkut, Google Plus and MySpace on the web. While some of these initiatives have made some noise or been supported by giants like Google and Microsoft, none have even scratched Facebook’s resounding success.

It’s okay that brands like Twitter and Snapchat still resist bravely and even with some efficiency, but Mark Zuckerberg’s social network never met an equal opponent – and when he did, he opened his pocket to bring them under his umbrella. or simply copied the rival without any modesty.

Behold, TikTok arrives. Launched in 2016, the app, which in China is called Douyin, bought rival Musical.ly in 2017 and since then it reigns practically lonely in this market of short videos with voiceovers, montages and effects. Others have emerged in the meantime, but have not achieved the same success as TikTok, which seems to have punctured the bubble of more connected people and has become increasingly familiar to different audiences.

Operation of TikTok in the USA can be acquired by Microsoft (Image: Reproduction)

ByteDance’s service stood out and, even with only four years old, it became one of the most downloaded apps of the entire decade of 2010: there were more than 1.5 billion downloads, behind only Facebook and WhatsApp. Almost half of that amount (738 million) in 2019 alone, according to expert consultancy AppAnnie.

Recent estimates point to around 800 million active users every month on TikTok around the world, making ByteDance the fourth largest on the planet in social networks. Today, she is only behind Facebook (Facebook, Instagram and WhatsApp), Google (YouTube) and Tencent (WeChat and QQ).

Of course, when acquiring the operation of TikTok in the USA – where the network has a number that varies between 65 million and 80 million users – Microsoft would grab only part of this cake, but there is potential for expansion. It is not yet known what the terms of the possible deal would be, of course, but it would probably serve as a basis for MS to expand the initiative around the network to other locations in a few years, for example, intensifying the dispute with Facebook and with ByteDance itself.

The subject is financial

If the question taken to the symbolic part of having a brand and a strong social network is not enough argument, directing the prose to the side of the figures may make it all the more plausible. Today, ByteDance is worth more than US $ 100 billion, being classified as “the most valuable startup on the planet”.

Founded in 2012 by Zhang Yiming, the company had a meteoric rise thanks to TikTok and ended 2019 with revenue of US $ 17 billion, more than double the US $ 7.4 billion made in 2018. Discount all that has been to discount, the company’s annual profit was $ 3 billion – to give you an idea, Uber closed 2019 with losses of around $ 8.5 billion.

Another comparison, perhaps even more valid than that of Uber, is with LinkedIn. Acquired by Microsoft in 2016 for $ 26.2 billion, the corporate social network closed 2019 with global revenue of $ 6.8 billion, less than half the amount raised by the potential new acquisition of MS.

Currently, it is estimated that LinkedIn has 165 million users in the United States, considerably higher than that of TikTok, but the monetization possibilities of the video network seem much more efficient than the premium subscriptions and recruitment and marketing solutions offered by LinkedIn.

The only one in the race

Another very important point to be taken into account is that Microsoft is practically alone in the race for this “goose that lays the golden eggs” that is TikTok. As its main rivals (Google, Apple, Facebook and Amazon) need to explain themselves in the US courts about possible anti-competitive practices, there is no other big name in technology for this dispute.

Now, the company is in the analysis phase, has confirmed that it is really interested in TikTok and should present something more concrete about this in the coming weeks, remembering that Trump gave 45 days for the acquisition to be completed. Otherwise, the destination of TikTok must be the blockade in the USA, as it happened in India and it can happen in Japan.

So regardless of whether the accusations made by Donald’s administration are wrong or not Trump that TikTok spies on US citizens and passes everything on to Beijing, Microsoft seems to have the chance to acquire the golden ticket to the planet’s very successful social media club.

Will it be that in the hands of the owner of Windows the business will continue with the potential to grow more and more? It is difficult to bet otherwise.

Source: Investopedia, Statista, Business of Apps (1, 2)

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