Microsoft nears big bet on TikTok
Microsoft Corporation’s potential acquisition of short-video app TikTok carries myriad risks, thrusting it into the politically fraught social media business and Sino-US conflict amid increased scrutiny of big-tech companies.
But the deal could help Microsoft build on its $27bn (R466bn) purchase of LinkedIn to become a bigger player in internet advertising, now dominated by Facebook Inc and Alphabet Inc’s Google.
Microsoft said on Sunday it aimed to complete a deal by September 15 for TikTok’s US, Canada, Australia and New Zealand operations.
It is likely to have an edge in pricing negotiations as the US is effectively forcing TikTok’s Chinese parent, Bytedance, to sell by threatening to ban the app as a security risk.
TikTok has taken teenagers around the world by storm and emerged as a significant competitor to Facebook and Google’s YouTube.
But, like its rivals, TikTok faces substantial new costs for content moderation as the spread of misinformation and allegations of political bias roil social media. Increased oversight costs accounted for much of the 10 percentage-point drop in gross profit margins for Facebook and Alphabet over the last three and a half years, Refinitiv data showed.
“Does Microsoft really want to own an app that breeds conspiracy theories in tweens?” said Hank Green, YouTube star and CEO of educational media company Complexly. He said TikTok removed content to maintain “a certain feel”, and could face public challenges over such decisions more often under a bigger name such as Microsoft.
At $1.55 trillion (R27 trillion), Microsoft is the world’s secondlargest company by market capitalisation after Apple Inc but has in recent years faced less criticism than peers over antitrust, data protection and China projects. Microsoft has done several big deals since Satya Nadella became CEO in 2014, with acquisitions including world-building game Minecraft and job-search social network LinkedIn.
They have fared better than those under predecessor Steve Ballmer, whose failed deals included Nokia Oyj’s phone business. The LinkedIn acquisition in 2016, for 50% above its share price, was Nadella’s biggest and riskiest.
Microsoft shares fell 3% when it was announced with analysts expressing concern about slowing revenue growth.
Some concerns may have been overblown. Microsoft has avoided antitrust and privacy scrutiny with a cautious approach to connecting LinkedIn to other products, such as Outlook, and analysts have largely viewed the deal as a success in terms of synergies. — Reuters