The news spread of social media giant Twitter buying TikTok spread like wild fire. The company is discussing with TikTok’s Chinese owner ByteDance to purchase its US operations.
However, whether the social media giant can afford to buy TikTok from its Chinese owners. And can complete a deal within the 45-day window, is still not clear according to Wall Street Journal. TikTok’s US operation estimates at billions of dollars but analysts think a possible Twitter deal would face less regulatory scrutiny than Microsoft’s.
Reuters also reported that the popular microblogging site has spoken to TikTok’s parent company ByteDance about a probable sale. ByteDance has 43 days to agree to sell the U.S. operations of its massive video creation and sharing app before Donald Trump’s recent executive order banning its use in the U.S. However, Twitter declined to comment on the report.
Problems of twitter buying tiktok
The problem for Twitter is money. Without overwhelmingly burdening the banks, Twitter is not worth nearly as much as Microsoft. The favorite to acquire the US operations of TikTok at the moment. If Twitter wants to outbid Microsoft it needs to get huge support from financial partners before the Sept. 15 deadline.
One thing to note is that the executive order and potential sale are by no means set in stone. TikTok is planning on taking the White House to court over it.
The private equity firm Silver Lake is one potential partner that may help Twitter seal the deal. Financial aspects aside, Twitter acquiring TikTok would make sense in the same way that it made sense for Twitter to buy Vine. TikTok videos are often embed into tweets and a regular user probably sees several TikToks in the feed every day.
Of course, we still remember, Twitter buying Vine and then unceremoniously killing it a few years later. Vine’s founder later publicly regrets the deal. If someone does buy the American wing of TikTok, let’s hope the eventual outcome is a little better.
Why is Twitter buying TikTok?
In fact, the “if you can’t beat ’em, buy ’em” point is a legitimate business strategy, and Twitter surely needs some new strategies. The accounts with the top followers are Barack Obama, Justin Bieber, Katy Perry and Rihanna. Only one of those is younger than 30, and none are specifically hit in the younger than 25 crowd.
TikTok would be the perfect product to extend Twitter’s reach toward younger population. It is a perfect approach for broadening not only its fan base but the advertisers that want to reach them. It will also offer agencies and ad buyers a stronger alternative to Facebook Inc. and Alphabet. Which right now do a better job of marketing to a wider demographic set. Tae Kim noted recently that a surge in Twitter usage is unlikely to result in long term solutions to its key problem: monetization. An integration with TikTok could create a cross selling power shell of the likes entertaining Facebook and Alphabet Inc.
It would be easy to dismiss the idea because Twitter is too small, with a market worth of just $29 billion. Comparing with valuations for TikTok that extend up to $50 billion.
Partnership or Takeover???
At the moment no one has much detail to go on, but the reported talks have more focused on a partnership type arrangement, as opposed to a takeover. The short-form video is already in Twitter’s database aka Vine and improved integration of TikTok sharing on Twitter might work. But TikTok also has moderation issues and also some censorship concerns. The challenges TikTok faces moving forward are not the key areas of strength for Jack Dorsey and Co.
In essence, it’s fair to say that a potential Twitter takeover of, or tie up with TikTok is a long shot, not an immediate hit. You are not watching a new feed of TikTok content alongside your Twitter feed anytime soon.
Reports have also suggested that investment firm Sequoia Capital is also looking at ways in which it might be able to wrest the US operations of TikTok from the company, in order to keep the app alive.
As per WSJ:
“Sequoia’s global managing partner, in recent weeks has been pressing contacts in the [Trump] administration, including Treasury Secretary Steven Mnuchin and senior White House adviser Jared Kushner, to craft a solution that would enable TikTok to keep operating in the U.S., according to people familiar with those discussions.”
Microsoft has also shown interest in buying the operations of TikTok in North America, Australia, and New Zealand. Trump says he would support Microsoft’s efforts to buy TikTok’s US operations if the government gets a “substantial portion” of the proceeds. Also he sets a deadline of 15 September for the deal to be completed or the ban will go ahead.