Wednesday, October 21, 2020

Technology

TikTok deal a double-edged sword for US tech firms

IANS | August 28, 2020 11:55 AM

NEW DELHI: In an interesting turn of events as far as TikTok in US in concerned, retail giant Walmart (and not its arch rival Amazon) which has no tech or social media product in its kitty has joined Microsoft to bid for the Chinese short-video making app. After the Cloud major Oracle, Walmart came as a second surprise contender in the race.
However, will the TikTok deal be worth during a politically-heated atmosphere, a trade war and an ensuing legal battle?

Its users are shifting away to new platforms as uncertainty looms over the creators' community at large. It has been banned in India (it once had its largest 120 million-strong user base in the country) and claims 100 million users in the US.

Americans turn to TikTok for entertainment, inspiration, and connection and countless creators rely on its platform to express their creativity, reach broad audiences and generate income.

According to reports, TikTok's parent company ByteDance is inching closer towards a pact amid the 90-day deadline set by the US President Donald Trump to sell its US, Canadian, Australian and New Zealand operations in a deal that is likely to be in the "$20 billion to $30 billion range".

However, its future is uncertain at the moment amid a lawsuit that the company has filed against Trump's first executive order (August 6) that prohibited ByteDance from conducting any transaction in the US within 45 days.

Another big blow came to TikTok as its CEO Kevin Mayer, who joined the company from the Walt Disney Company only in May this year, decided to call it quits amid the political turmoil and sales talks.

According to Neil Shah, VP Research at Counterpoint, by the time companies will buy TikTok, it will be interesting to see how dwindling its base would be.

"It will also be interesting to see how much of the IP (intellectual property) TikTok sells to these companies, " he said.

According to experts, the TikTok case demonstrates that any Chinese company may attract the attention of the US government, and the US government has an arsenal of tools that might be used to threaten the success of the business.

Dan Roules, the managing partner of the Shanghai Office of Squire Patton Boggs, told Xinhua: "I see the TikTok situation as a wake-up call for Chinese companies".

"China's government has generally exercised considerable restraint in recent months with respect to the US. But, at some point, the Chinese government may feel impelled to take action or to speak out more forcefully on behalf of Chinese companies in the US, " he said.

Mayer clearly mentioned in an internal letter that in recent weeks, the political environment has sharply changed.

"I have done significant reflection on what the corporate structural changes will require, and what it means for the global role I signed up for. Against this backdrop, and as we expect to reach a resolution very soon, it is with a heavy heart that I wanted to let you all know that I have decided to leave the company."

The TikTok saga is one-of-its-kind and has generated tremendous news value and attention worldwide.

However, whether this is going to be a profitable acquisition for US companies is too early to say.

"It will be the biggest forced scam of the history if the inherent value of the TikTok platform after acquisition is nothing or has been significantly diminished, " Shah said.

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