US retail giant Walmart announced on Thursday it had teamed with Microsoft in a bid to buy Chinese-owned short-form video app TikTok.
The app is under fire since Trump announced a deadline of 45 days for Microsoft to clinch the deal with TikTok
President Donald Trump only agreed to allow Microsoft Corp (MSFT.O) to negotiate the acquisition of popular short-video app TikTok if it could secure a deal in 45 days.
The move depicts a turnaround for Trump and urged Microsoft to declare its interest in the blockbuster social media pact that could further enrage U.S.-China concerns. Trump said he was planning to ban TikTok amid concerns that its Chinese ownership represents a national security risk because of the personal data it handles.
The acquisition of TikTok, which boasts 100 million U.S. users, offers Microsoft a rare opportunity to become a major competitor to social media giants such as Facebook Inc (FB.O) and Snap Inc (SNAP.N). Professional social media network LinkedIn is also owned by Microsoft.
TikTok said they will challenge the US President’s executive order.
On Saturday, the video-making application had said that they will go to court over the allegations that the Trump administration had made against them of being a national security threat.
On the 6th of August, the president of the United States signed an executive order against the Chinese application providing it 45 days to finalize a deal with a US-based company and divert off the Chinese investment from ByteDance.
In a statement from TikTok, reported by firstpost.com they said, “Even though we strongly disagree with the Administration’s concerns, for nearly a year we have sought to engage in good faith to provide a constructive solution. What we encountered instead was a lack of due process as the Administration paid no attention to facts and tried to insert itself into negotiations between private businesses.”
They also added that neither the company nor its users were treated fairly by the United States administration and made it known that they have no choice but to reach out to the judicial system of the country to attain a fair judgment.
Walmart can use TikTok to breathe life into it’s dying e-commerce arm
TikTok could “provide Walmart with an important way to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses.
Why? E-commerce is crucial to Walmart’s growth strategy and in its fight against competitors Amazon. With the coronavirus pandemic driving more consumers to buy online, Walmart, using its store fleet as fulfillment centers for in-store or curbside pickup and grocery delivery, recently reported that Walmart U.S. comparable sales had risen by 9.3%. Sales at its namesake e-commerce site almost doubled.
Having more third-party sellers and advertisers through TikTok could help Walmart turn its money-losing e-commerce business profitable.
Indeed, as Amazon’s shipping and other costs have ballooned, its growing third-party seller services, advertising and cloud business are seen as profit drivers to help fund the company’s initiatives.
With the help of TikTok, Walmart can connect Gen z shoppers with their retail and online stores
In a clear sign of its advertising ambition, Walmart has created Walmart Media Group, which the company describes as “an in-house advertising offering, to work with brands to influence shoppers.” Advertising, together with the likes of fuel and financial services, represent less than 1% of Walmart U.S.’s total sales, the company said in its annual report. Walmart can build links with advertisers and third-party sellers by harnessing the reach of a rapidly growing social media platform and third-party sellers.
Walmart’s TikTok account, which has grown to more than 290,000 followers with 1.8 million likes since the retailer posted its first video in September, mostly showcases fashion, toys and DIY takes on non-grocery items. One video shows a young employee customizing a $20 black denim jacket with iron-on patches, all sold at its stores.
In another potential sign of how TikTok could help Walmart attract sellers, TikTok in July unveiled new advertising tools to help small and mid-size businesses use its TikTok For Business to grow their brand. On Wednesday, TikTok users for the first time could buy a limited fashion collection during a live stream on its platform.
How buying TikTok could transform Microsoft
TikTok is adding users at a clip that far outpaces most social media platforms. However, with only 11% of U.S. adults using the app, according to Fortune‘s poll, it is still very behind its competition. The platforms with the most users are Facebook (65%) and Facebook-owned Instagram (35%). However, TikTok’s internal numbers show a much higher usage rate, and some of that discrepancy could be explained by the fact that much of its user base is under the age of 18 so would not be reached in Fortune‘s polling.
But for Microsoft, if TikTok were paired with LinkedIn, which has 20% of U.S. adults using the platform, the company would have the footing to compete in the world of social media against top dog Facebook. Microsoft purchased LinkedIn in 2016 for $26.2 billion.
Adding TikTok would make Microsoft a major player in the digital ad business, which currently has 70% of market share going to Google, Facebook, and Amazon, according to eMarketer.