It might be wise for Walmart to remember the fate of Myspace

News Corp’s attempt to be hip serves as a warning to retail giant in its race for Tiktok, writes

Who is the perfect buyer for the US operations of Tiktok, the fastest-growing social media app to come along in years? A rival social network would certainly make sense. Maybe an entertainment industry giant looking for young viewers for its films and TV shows? Perhaps a smartphone brand seeking a killer app for its devices.

Yet the increasingly likely scenario that Tiktok is purchased by a consortium of investors including Walmart, the 58-year-old chain of American supermarkets, perhaps not the most obvious outcome for Tiktok’s mixture of viral dance videos and comedy skits. Walmart has emerged as a leading partner in a consortium with Microsoft to purchase Tiktok’s American operations in a $30bn (£22bn) deal following months of intense scrutiny by the US government over the business’s close links to its Chinese parent company.

Walmart hopes that the deal will give it easy access to a popular app which it could fill with cut-price adverts, pulling in a younger generation of shoppers.

There’s already a template for this kind of relationship. Tiktok’s sister app, Douyin, has become a major player in Chinese e-commerce. Some analysts have expressed support for Walmart’s underlying strategy. “The lines are blurring between traditional shopping, digital shopping, and social media,” wrote UBS analyst Michael Lasser. “Walmart needs more exposure to this trend.” Walmart shares climbed 5pc on the news.

But it is an uncertain venture that doesn’t guarantee Walmart will be able to hook in teenagers. And it certainly won’t help Walmart catch up with Amazon. Douyin may have become a major e-commerce player in

China, but similar success in the West is a pipe dream at best. Asian internet users are used to shopping within sprawling apps that include videos, messaging and also e-commerce. Picking up inspiration for your next grocery shop inside Tiktok may be a bridge too far.

Walmart’s previous technology acquisitions do not inspire confidence, either. Some investors remain unconvinced over its purchase of a majority stake in Indian online retailer Flipkart. Earlier this year it shut down e-tailer Jet.com, bought for $3bn in 2016. Now, Walmart’s bid to purchase Tiktok has already prompted sceptical reactions in the technology world.

Yuval Ben-itzhak, the chief executive of social media marketing business Socialbakers, said: “Tiktok is better suited to operate independently.” The concern here is that being part of Microsoft and Walmart risks Tiktok’s real asset: its community of millions of users. There is no point having access to its clever recommendation algorithms and video editing technology if there are not any users left to make viral videos.

Walmart’s corporate, soulless statement about its negotiations to purchase Tiktok is an initial warning sign. The statement, describing the deal as “an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses”, so surreal that Dom Hofmann, co-founders of Tiktok predecessor Vine, simply tweeted it out verbatim to highlight its absurdity.

Another app developer replied with a screenshot of a 2005 article about News Corp’s infamous $580m deal to buy Myspace at the peak of the social network’s growth. Walmart executives could do well to read some postmortems of that acquisition. If Walmart and Microsoft are set on owning Tiktok, the battle for Walmart will be trying to hook Tiktok users on e-commerce without scaring them away. It’s a daunting task which will see the supermarket chain tread a careful line between being a hands-off owner and hoping to justify its multibillion-dollar purchase.

James Cook