However, TikTok has been in the news negatively quite a number of times this year as security experts uncovered privacy concerns. While this is the case for almost all social media apps, TikTok seems to go further and there's the added concern that TikTok's owner, ByteDance, is sharing data with the Chinese government.
Under China's Internet Security Law, companies are required to share data with the Chinese government. Concerns about privacy and security risks have spurred some governments like India to ban TikTok. Furthermore, some companies like Wells Fargo have required workers to remove TikTok from work phones.
In recent weeks, there's been quite a bit of news about a takeover of TikTok. On August 3, 2020, the US government threatened to ban TikTok in the US unless the service gets acquired by a US-based company. Microsoft seems to be one of the primary movers but recently we learned Oracle is also interested in the United States, Canada, Australia, and New Zealand operations of TikTok.
While Oracle seems a stranger fit than Microsoft, last week we were baffled to hear that Walmart is in the race to acquire TikTok. Anonymous sources told CNBC that Walmart was part of a consortium led by Japan-based SoftBank to acquire TikTok. Interestingly, this consortium also included Google parent company Alphabet. Under the proposed bid, Walmart would acquire a majority stake in TikTok.
However, this deal reportedly failed because the US government wants the lead buyer of TikTok's US business to be a technology company because this fits better with the national-security rationale. As such, Walmart is now aligning itself with Microsoft for a joint bid on TikTok.
It's definitely a weird duo and we're not quite sure about why Walmart suddenly wants to grab a major stake in a social media service. It's almost as strange as Walmart getting involved with something like online casino canada real money but it seems the bricks & mortar retailer is serious about expanding its online presence. People familiar with the matter claim Walmart wanted to become the exclusive e-commerce and payments provider for TikTok. Furthermore, Walmart desires access to the TikTok user data to improve those capabilities.
So why is Walmart suddenly betting billions on a video sharing app for teens? Analyst say the retailer's digital strategy has been very diverse. Walmart bought Indian online retailer Flipkart for $16 billion in 2016. The same year, Walmart also shelved out $3.3 billion for Jet.com. Unfortunately, that venture didn't end well and got shut down earlier this year. Some analysts believe Walmart is interested in TikTok to get rid of its old & boring brand image and to become more of a digital consumer platform. At present, digital sales account for about 5 percent of Walmart's revenue. That doesn't sound like a lot but with a company the scale of Walmart, it means we're talking about $24.5 billion in online revenue in 2019. It's expected that Walmart would use TikTok to push more e-commerce, and also to set up an advertising service in cooperation with Microsoft.
According to CNBC, a deal in the $20 billion to $30 billion range may be reached in the coming days. Unfortunately, a potential deal may just have gotten harder to reach as China has updated its export control rules late this week. Under the new regulation, a deal would require approval from the Chinese government.