Microsoft’s TikTok: But why?

The marriage of Microsoft and TikTok seems so bizarre that I couldn’t help but be reminded of another such bizarre Union – late actress Anna Nicole Smith and her billionaire octogenarian husband, J Howard Marshall. But weirdness aside, Microsoft’s possible take over of TikTok’s operations in the US, New Zealand, Canada, and Australia, brought up one question that continues to nag me: Why Microsoft?

• Why not someone like Disney which has dreams of being part of the digital revolution? Disney has the audience. It has sprawling global operations. It has the ability to walk the middle of the road where it can appease the autocratic governments and make the democratic countries satisfied. It also has a brand that has many sub-brands that cross many demographic categories. Disney wanted to buy Twitter. TikTok makes more of a strategic fit.
• Why not Comcast?
• Why not Apple? It has money. It has the desire to blunt Facebook and Google, even if it hasn’t said or done so explicitly! Or is it because they are a bunch of hard asses when it comes to privacy and may not play ball with the US government when it needs to access data of some TikTok-er?
• Hence my question, why Microsoft?

I ask these questions but can’t help myself and not think about the event of last week?

• Why was Microsoft not part of the showdown between BigTech and Washington DC? What makes them better than the other four? Why do they get to be excused from on-air humiliation while others get spanked for their monopolies?

And that does make me wonder? Does Microsoft have some sort of a quid-pro-quo in place with the US Government that makes them the most preferred nation when it comes to buying this company?

Of course, it is just that Microsoft smells a good deal. Sure, but so should others. On paper, it might make sense for Microsoft to buy them.

On the plus side: it has the ability to rebuild the software and service to comply with the US needs. Just as it rebuilt Skype as a SIP-based platform, away from the unbreakable distributed peer-to-peer platform that was a preferred tool of those with dubious intentions. It certainly has the cloud infrastructure and team to rebuild the platform.

But the question is why? What is the benefit for them as a business? Given Microsoft’s self-stated goals to focus on cloud, data, intelligence, and serving large customers, the whole TikTok deal makes me wonder: Why are they doing this?

One somewhat far-fetched explanation that I could come up with was that since it would already own Minecraft and TikTok, Microsoft could buy another company, say someone like Epic Games, and merge them all into a single entity. In doing so it would become a business with access to the new users of the Internet — the Gen Z and beyond. It could then all be bundled together and spun-out as a stand-alone company that is a mega tenant for Microsoft Cloud.

My theoretical projections aside, I can’t get rid of the nagging question: why did President Trump pick Microsoft. And why is Microsoft playing ball? Nowhere in the blog post does Microsoft address the question of why it will buy the company and spend shareholder capital on an expensive asset.

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11.40 am, August 3, 2020: And in late-breaking news that makes everything even more bizarre are the comments from the US president:

“Here’s the deal, I don’t mind whether it’s Microsoft or somebody else—a big company, a secure company, a very American company buy it. I did say that ‘If you buy it…a very substantial portion of that price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen.’ Right now they don’t have any rights unless we give it to them.

US President in The Wall Street Journal.

Techcrunch has the full transcript. If you ask me, this deal is dead. I regret even publishing this piece – the whole thing has left me supremely disgusted.

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PS: Worth reading is this memo from Kevin Mayer, CEO of Tiktok about what the company is willing to do in order to stay in business in the US, including giving access to its algorithms.

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