TikTok Picks Oracle As US Partner

Popular social media app TikTok rejected Microsoft's bid to acquire its US operations. Instead, TikTok will announce that Oracle Corp. will be its “preferred US Partner.” Everybody thought Microsoft was the frontrunner in the bid for TikTok's US operations. When it announced a partnership with Walmart to bolster its bid, it felt certain they would win.

RELATED: Why an American Tech Company Should Buy TikTok

However, Microsoft released a statement saying: ByteDance (TikTok's owner) let us know today that they will not be selling US operations to Microsoft. We are confident our proposal would have been good for TikTok's users while protecting national security interests. To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement. We look forward to seeing how the service evolves in these important areas.”

Microsoft reportedly was not asked to make revisions to their original bid. Allegedly, Chinese government officials opposed the deal that Microsoft submitted. This gave Oracle the needed leverage to win negotiations. 

Like the other bidders, Oracle desired what the app has: data. By winning the deal, Oracle can now access customer data that can help improve their products. They can now compete in the lucrative social media space, with a 2 billion user base that rivals Facebook. Details of the deal have yet to surface. During last Thursday's quarterly earnings call, CEO Safra Catz told analysts that Oracle will not answer TikTok-related questions. He said: I want to make sure you understand we will be making no comments regarding press reports about TikTok. So there's no need to ask.”

What Happened Before

Last July, President Trump turned his ire on TikTok and another Chinese app, WeChat. Intelligence officers feared that Chinese-made apps may present a security risk when used. This is why government agencies and businesses forbid workers to download the apps on work phones. Trump then issued an executive order for TikTok to sell its US operations to an American company. Otherwise, it will face a ban on US soil. The President gave the app until September 20 to announce a sale.

Trump also opined that US companies buy the entirety of TikTok instead of parts. Recalling a meeting with Microsoft CEO Satya Nadella, he said “I think buying 30% is complicated… I suggested that he can go head, he can try.” He also suggested that the buyer pay the US Treasury as part of the deal.

TikTok did not take the order sitting down. On August 24, the company filed suit, alleging that the EO may not have any basis. In its complaint, TikTok said the order “is not rooted in bona fide national security concerns.”

Microsoft's Bid

Microsoft immediately bid for TikTok's US, Canadian, Australian, and New Zealand operations. If they won the bid, Microsoft would have used TikTok's huge user base to secure a bigger piece of social media. Also, the company gets to get its hands on a very lucrative digital ad business.

Later in the bid, Microsoft announced it was partnering with Walmart for the deal. In a statement, Walmart said the deal is a “clear benefit to creators and users” in the social media market. “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 as well as grow our third-party marketplace and advertising businesses. We are confident that a Walmart and Microsoft partnership would meet both expectations of US TikTok users while satisfying the concerns of US government regulators.”

What Happens Next

The expected announcement of the sale to Oracle will be likely muted. Parties will not announce an outright sale, but rather say it's a formation of a partnership.

Once the agreement gets set, the government will need to look into the deal. The White House and the Committee on Foreign Investment will examine the terms of the deal. If it meets their security concerns, they will approve the sale.

Trump can then declare this as a triumph for Americans. He allows a fun app to continue while neutralizing a perceived security threat.  At the same time, an American company can enjoy the gains.

Watch this as Bloomberg reports that with TikTok rejecting Microsoft’s bid to acquire its US operations, it’s Oracle who will get to win:

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Do you agree with the TikTok deal to turn over US operations to an American company? Will it help at all? Let us know what you think by commenting below.