Inside Microsoft’s Potential Acquisition of TikTok

By Shivaune Field

It’s the app that has been downloaded more than 2-billion times and brought self-isolating families together to dance through the pandemic. Chinese owned-TikTok may soon be brought into the U.S. tech fold, amid concerns that data from the app relating to American consumers are being fed to the Chinese Communist Party.

Microsoft confirmed this week that it is in discussions with TikTok’s parent company ByteDance to explore a potential sale of TikTok’s U.S., Canadian, Australian, and New Zealand businesses. Microsoft stated in a public blog post published on Sunday that it would ensure that “all private data from TikTok’s American users is transferred to and remains in the United States.”

So what is in this acquisition for Microsoft? To start, the TikTok acquisition could add deep consumer insight to the organization. Though highly entrenched in enterprise-products with Windows, Microsoft is also focused on consumers through its Xbox business. 41% of TikTok users are aged between 16 and 24 years of age, and 56% are male. Insight into how that coveted demographic behaves could be a valuable addition to Microsoft’s Xbox business and provide crossover opportunities between the two products. TikTok also uses facial recognition and other A.I. tools that could prove to be helpful to Microsoft, and the platform could be a testing ground for the A.I. products it develops. It has also been suggested that TikTok’s augmented reality could become a mobile gateway for Microsoft’s Hololens.

Is this all of this access to data that has U.S. authorities concerned, however. Answering the privacy concerns about the international storage of data, Microsoft noted that “to the extent that any such data is currently stored or backed-up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred.”

For its part, TikTok emphatically states that user data from local customers is stored in the U.S., and the backup of that data is kept in Singapore. The company says that any moderation of U.S. data is done in California and that it does not operate in China, has no intention of doing so, and is not subject to Chinese laws. To sweeten the Microsoft acquisition opportunity, TikTok this week agreed to hire another 10,000 U.S. employees in addition to the 1,000 staff that are currently hired through its U.S. headquarters in Los Angeles.

TikTok’s job announcement came on the heels of comments by Secretary of State Mike Pompeo and the President, stating that the Trump administration is considering banning TikTok in the U.S. all-together. The company has also come under criticism by Republican and Democratic Senators that have received numerous reports that TikTok has engaged in censorship, and disclosed private information about Americans to the Chinese government. Senators Blumenthal and Hawley sent a joint letter to the Justice Department last week asking for a probe into the company.

President Trump stated on Monday that he is supportive of Microsoft or another tech company acquiring TikTok’s U.S. operations and has given a temporary deadline of September 15 for negotiations to take place. The President also stated that any sale would need to include an amount sent to the U.S. Treasury Department, provided by either the buyer or by TikTok’s parent company ByteDance as the seller.