Why enterprise tech giants like Microsoft and Oracle want in on the TikTok sale

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Late last week, Oracle reportedly put together a bid to acquire TikTok operations across the US, Canada, Australia, and New Zealand, according to TheWrap. As part of the transaction, Oracle would give TikTok's parent company ByteDance $10 billion in stock and half of the profit generated by TikTok in perpetuity.

The White House (and to a lesser extent ByteDance) will likely weigh Oracle's bid against a joint effort by Microsoft and Walmart to acquire TikTok. A deal worth $10–20 billion is expected to go through in the coming days, according to CNBC. ByteDance will only begrudgingly accept an offer, as President Donald Trump is forcing its hand in the matter — President Trump, who believes TikTok represents a national security threat given its ties to China, issued an executive order in early August that set a 45-day deadline for TikTok to be either acquired or kicked out of the US. 

As enterprise technology companies, Oracle and Microsoft may seem like unlikely candidates to take over TikTok, a social media platform most popular among Gen Zers — but here's how their existing enterprise operations could factor in to the acquisition attempt:

  • TikTok is a treasure trove of data, which can be used to train AI systems. The social media platform has amassed a base of at least 100 million users in the US, according to Fast Company, and the average TikTok user opens the app 8 times a day. TikTok can therefore provide a rich, continuous feed of data, both in terms of uploaded video content and user activity. Microsoft, for instance, could use video data from TikTok to train its computer vision AI that it sells to retailers and governments. Likewise, Oracle could tap into TikTok's behavioral data to refine its targeted advertising product.
  • TikTok would realize greater operational efficiency, since both Microsoft and Oracle could utilize in-house cloud services. Cloud services are undoubtedly one of TikTok's biggest operational expenses — in May 2019, for instance, TikTok entered a 3-year, $800-million agreement to purchase cloud services from Google, according to The Information. This cost could be significantly reduced if either Microsoft or Oracle purchases TikTok, since each could host cloud operations in-house. Microsoft captured a 20% share of the global cloud infrastructure services market in Q2 2020, second only to Amazon, according to Canalys. And while Oracle doesn't compete as directly in the cloud infrastructure business, its cloud services and licenses business accounted for 87% of the company's $39 billion in revenue for the 2020 fiscal year (ended May 31, 2020).

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