Wal­mart and Mi­crosoft to join forces in TikTok race

Shock move for US arm of Chi­nese-owned videoshar­ing app will en­able the pair to take on Ama­zon

The Daily Telegraph - Business - - Front Page - By James Tit­comb in San Francisco

WAL­MART has formed a shock al­liance with Mi­crosoft in the race to buy video-shar­ing app TikTok, as the pair at­tempt to forge an on­line em­pire which can ri­val Ama­zon.

The US su­per­mar­ket be­he­moth con­firmed last night that it had joined Mi­crosoft’s bid for TikTok’s US op­er­a­tions, which the Trump ad­min­is­tra­tion is forc­ing its Chi­nese own­ers to sell by the mid­dle of next month.

Shares in Wal­mart spiked al­most 6pc higher af­ter the firm de­clared its hand.

The gro­cer is Ama­zon’s big­gest re­tail ri­val and Mi­crosoft its most se­ri­ous com­peti­tor in cloud com­put­ing. Buy­ing Tiktok would give the duo con­trol of a so­cial me­dia phe­nom­e­non with around 100m US users – al­low­ing them to har­ness an au­di­ence that has the po­ten­tial to tur­bocharge sales.

Com­pet­ing bids from Mi­crosoft and a group led by US soft­ware com­pany Or­a­cle are be­lieved to have been put to TikTok’s owner ByteDance and the US Trea­sury, which is or­ches­trat­ing the deal. Any sale is set to be val­ued at at least $20bn (£15bn).

Amer­i­can busi­ness­man Kevin Mayer quit as TikTok’s chief yes­ter­day af­ter less than three months in charge, paving the way for a sale to be agreed within days. Mr Mayer, who ar­rived from Dis­ney in June, said he is step­ping down be­cause he will no longer be run­ning a global busi­ness once TikTok’s US op­er­a­tions have been carved off.

A TikTok deal is likely to in­clude the com­pany’s busi­nesses in the US, New Zealand, Aus­tralia and Canada. Its op­er­a­tions in the UK, Europe and elsewhere will still be owned by ByteDance, which is plan­ning to set up an in­ter­na­tional head­quar­ters in London.

Wal­mart is Amer­ica’s big­gest re­tailer by rev­enues. It has strug­gled to match Ama­zon’s growth in in­ter­net shop­ping but is mak­ing a re­newed push into on­line re­tail, has­tened by the pan­demic.

While not an ob­vi­ous stew­ard of TikTok, whose key au­di­ence is smart­phone-wield­ing teenagers and young adults, the com­pany is be­lieved to see the app as a po­ten­tial spring­board for growth in its dig­i­tal shop­ping arm.

TikTok has made only ten­ta­tive steps into ecom­merce but its Chi­nese sis­ter brand Douyin is a ma­jor player in on­line shop­ping and al­lows users to con­nect with on­line stores.

A Wal­mart spokesman said: “The way TikTok has in­te­grated ecom­merce and ad­ver­tis­ing ca­pa­bil­i­ties in other mar­kets is a clear ben­e­fit to cre­ators and users in those mar­kets.

“We be­lieve a po­ten­tial re­la­tion­ship with TikTok US in part­ner­ship with Mi­crosoft could add this key func­tion­al­ity and pro­vide Wal­mart with an im­por­tant way for us to reach and serve om­nichan­nel cus­tomers.”

Team­ing up with Mi­crosoft, which is lead­ing the bid, would form a coali­tion of the big­gest ri­vals to Ama­zon’s two main busi­nesses. Wal­mart is pre­par­ing to launch a sub­scrip­tion ser­vice to ri­val Ama­zon Prime, while Mi­crosoft and Ama­zon com­pete fiercely over cloud com­put­ing. Last month Mi­crosoft and Wal­mart an­nounced a five-year part­ner­ship that will al­low the su­per­mar­ket chain to use Mi­crosoft’s cloud and ar­ti­fi­cial in­tel­li­gence ser­vices.

Ama­zon’s share price has surged nearly 80pc this year as the pan­demic forced shop­pers on­line. It is now worth $1.7 tril­lion. Don­ald Trump, who has called TikTok a na­tional se­cu­rity threat due to its Chi­nese own­er­ship, has given ByteDance un­til Sept 15 to sell its US op­er­a­tions or face a ban.

It has not been a bril­liant year for Kevin Mayer. The out­go­ing TikTok chief ex­ec­u­tive has ev­ery right to feel ag­grieved that his role at one of the world’s most ex­cit­ing tech com­pa­nies mor­phed into a po­lit­i­cal night­mare.

TikTok has been cat­a­pulted into the spot­light of the on­go­ing tit-for-tat be­tween China and Wash­ing­ton af­ter Don­ald Trump, the US pres­i­dent, signed an ex­ec­u­tive or­der to ban the app over pri­vacy con­cerns.

Mayer took the role af­ter be­ing passed over as the suc­ces­sor to Bob Iger, Dis­ney’s long-term chief ex­ec­u­tive who stepped down in Fe­bru­ary.

To add to the in­jus­tice, Mayer has had to watch his pet pro­ject Dis­ney+ get off to a roar­ing start. He was in charge of Dis­ney’s di­rect-to-con­sumer di­vi­sion be­fore an­nounc­ing his de­par­ture in May. Dis­ney+ now has more than 60m sub­scribers – a to­tal that took Net­flix a decade to reach.

“In re­cent weeks, as the po­lit­i­cal en­vi­ron­ment has sharply changed, I have done sig­nif­i­cant re­flec­tion on what the corporate struc­tural changes will re­quire, and what it means for the global role I signed up for,” Mayer said in an email to staff first re­ported by the Fi­nan­cial Times.

“Against this back­drop, and as we ex­pect to reach a res­o­lu­tion very soon, it is with a heavy heart that I wanted to let you all know that I have de­cided to leave the com­pany.”

Even TikTok it­self ac­cepted that Mayer’s role is not the one he was promised: “We ap­pre­ci­ate that the po­lit­i­cal dy­nam­ics of the last few months have sig­nif­i­cantly changed what the scope of Kevin’s role would be go­ing for­ward.”

He will be re­placed by TikTok’s US coun­try man­ager Vanessa Pap­pas, who left a high-pro­file role at YouTube to join the Chi­nese start-up last year. The 41-year-old Aus­tralian will now be tasked with get­ting a deal over the line to sell TikTok’s US op­er­a­tions, ei­ther to Mi­crosoft and Wal-Mart or US soft­ware firm Or­a­cle.

Pap­pas spent eight years at YouTube, cul­mi­nat­ing in a stint as global head of cre­ative in­sights. Among her tasks at the video stream­ing gi­ant was to de­velop a “play­book” for how to build an au­di­ence.

Pap­pas says that part of her de­ci­sion to move to TikTok was the plat­form’s cre­ators, who had fo­cused more on putting their au­then­tic selves for­ward as op­posed to the more fab­ri­cated per­for­mances typ­i­cally found on so­cial me­dia.

“There wasn’t re­ally an­other plat­form to do that in such a mo­bile­first and real-time way,” she told Marie Claire this month.

In­deed, Pap­pas has also been bullish in the face of in­tim­i­da­tion from Trump. She has been the face of TikTok’s corporate op­er­a­tions in in­ter­views and on so­cial me­dia, next to the rel­a­tive new­comer Mayer. The ex­ec­u­tive is be­lieved to have a pri­vate TikTok pro­file, al­though does not post videos her­self.

Ear­lier this month she said TikTok was “not plan­ning on go­ing any­where”, adding: “When it comes to safety and se­cu­rity, we’re build­ing the safest app, be­cause we know it’s the right thing to do. We’re here for the long run – con­tinue to share your voice here and let’s stand for TikTok.”

Pap­pas will un­doubt­edly be a key fig­ure in the com­pany’s on­go­ing le­gal bat­tle with the White House. TikTok sued the Trump ad­min­is­tra­tion this week over its “ex­treme ac­tion” that has forced par­ent ByteDance to sell its Amer­i­can op­er­a­tions.

TikTok is al­leg­ing the US gov­ern­ment ig­nored its “ex­ten­sive ef­forts” to ad­dress its con­cerns around na­tional se­cu­rity. The com­pany claims Trump’s or­der was not based on “bonafide na­tional se­cu­rity con­cerns”. The pres­i­dent’s con­cerns cen­tre around the abil­ity of China’s Com­mu­nist Party to com­pel ByteDance to hand over data on its US users.

Trump’s ex­ec­u­tive or­der has brought com­pa­nies like Mi­crosoft and Or­a­cle to the ta­ble in pur­suit of a block­buster deal for the run­away hit app.

Such new own­ers, and in­deed new struc­ture, will have been a con­cern for Mayer, who may have found him­self run­ning a busi­ness just a frac­tion of the one he signed up for. TikTok has around 100m users in the US, com­pared with 700m world­wide. Any US busi­ness that was split off would also likely be sub­ject to painful re­stric­tions and a long, dif­fi­cult de­merger.

“Mayer was re­cruited as global chief ex­ec­u­tive for TikTok, which in­cluded China,” says Richard Windsor, founder of re­search firm Ra­dioFreeMo­bile. “Now that will no longer be pos­si­ble and with a new owner his role would be greatly di­min­ished. He’s off to find some­thing else and I would not rule out a re­turn to Dis­ney.”

Whether Mayer would seek to go back to the House of Mouse re­mains un­clear. But its chief ex­ec­u­tive Bob Chapek, the man who nabbed the top job ahead of him, spoke glow­ingly of him on his de­par­ture, say­ing Mayer had an “ex­tra­or­di­nary im­pact” on the com­pany and had done a “mas­ter­ful job” with Dis­ney+.

In­deed, even af­ter his de­par­ture, Mayer stated his fond­ness for the com­pany he spent two decades work­ing for.

For TikTok, a deal to sell its US busi­ness seems the most likely out­come. Or­a­cle is work­ing with some of the app’s in­vestors, in­clud­ing Se­quoia Cap­i­tal and Gen­eral At­lantic on an agree­ment that would in­clude TikTok’s Aus­tralian, New Zealand and Cana­dian busi­ness, as well as its US op­er­a­tions. Val­u­a­tions on TikTok’s US unit start at $20bn (£15bn) and go all the way up to $50bn.

Given TikTok’s le­gal ac­tion against the US pres­i­dent and Pap­pas’ pre­vi­ous com­ments, bend­ing to Trump’s wishes may not be the com­pany’s last hur­rah.

TikTok’s US coun­try man­ager Vanessa Pap­pas will step into the top job

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