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
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