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Right now, you’ve probably heard that Microsoft has shown that it’s in talks to potentially win operations in the U.S. From the viral video app TikTok, the most recent progression of a drama that began in June when the Republican Party began launching the concept of prohibition. .
It is not known how much Microsoft would pay if the acquisition materialized. But TikTok as a total recently valued at $50 billion, so it is very likely that Microsoft will pay more than the $26.2 billion it paid for LinkedIn in 2016, its biggest acquisition to date.
Let me get straight to the point: this is a really strange resolution for Microsoft, given that TikTok is, at best, productive connected to the strategy that has made the company a success over the last six years of CEO Satya Nadella’s leadership.
This is not necessarily a bad thing, given the magnitude of the forward-looking reward. The Wall Street Journal reports that China-based ByteDance and the current owner of TikTok believes the app has a chance to become a social media giant that could one day challenge Facebook directly. And the political uproar around ByteDance and TikTok may mean that this is Microsoft’s only ability to enter this market.
If Microsoft can’t do it, not only will it have spent all that money on nothing, but it also risks opposing it. If Microsoft was wrong to take TikTok, it would alienate the 80 million daily active American users of the social network, many, if not most, teenagers, and lose a whole generation of consumers.
To some extent, Nadella has earned the advantages of doubt: its flagship acquisitions (LinkedIn, codeshare service GitHub and author of “Minecraft” Mojang) have been a huge success so far under the aegis of Microsoft, all operating as largely independent subsidiaries.
“Nadella has necessarily had the golden touch from the CEO and it’s difficult to contest the bets MSFT has placed over the more than five years,” Wedbush Securities analyst Dan Ives wrote in a note to customers Monday morning.
So it’s unlikely that Microsoft will bother to contact President Donald Trump about a TikTok acquisition if he didn’t know exactly what he was getting into. Presumably Nadella has at least some concept of how to get TikTok’s good fortune while making sure she recovers the amount she would spend to earn TikTok.
However, under Nadella, Microsoft has doubled cloud computing and productivity, placing a massive emphasis on the Microsoft Azure cloud and the Office 365 productivity suite. This strategy has paid off: Microsoft’s inventory rose 33% this year to succeed in a market capitalization of $1.6 trillion.
And despite Microsoft’s good fortune in the business world, Nadella’s reign has noticed that the company makes significant withdrawals from the customer sphere. More recently, Microsoft turned off lighting fixtures on Mixer, its rival on Amazon’s Twitch live streaming service (which began with the acquisition of a startup called Beam), and closed its retail stores. Before that, he killed Groove Music Pass, a competitor to Spotify.
But the biggest example came here in 2015, Nadella canceled the disastrous acquisition of smartphone manufacturer Nokia in 2013, with a $7.3 billion depreciation on a deal that had charged Microsoft $7.6 billion, an unexpected reflection, given that Microsoft Windows phones were never going to work. catch up on iPhone and Android. In 2017, Microsoft removed Windows 10 Mobile, probably the newest edition of Windows for smartphones.
The largest purely customer logo left by Microsoft is Xbox. And while TikTok may have some kind of link potential, perhaps through the integration of the xbox console with a percentage of video clips from short games, Mixer’s flaw is still new enough for the company to worry about pushing this facet too much.
All this to say that Microsoft is spending billions of dollars to serve consumers, a segment of the market that has largely ignored most of the company’s non-gambling openings.
Again, that’s not necessarily a bad thing. TikTok’s immense popularity may be just a hot bridgehead for Microsoft to enter conventional social media, even if it would necessarily start from scratch. Ives writes that “if the Xbox and the games were successful, MSFT with this agreement would make a competitive bet on its customer strategy with a major bet on social media.”
Another clue to think about here is that Nadella has already hinted that she sees Microsoft’s lasting relevance as a priority. In 2017, Nadella told Wall Street analysts that he was proud that after more than 4 decades of activity, Microsoft still makes normal appearances on Techmeme, a popular Silicon Valley news aggregator.
In addition, there is a very clever possibility that Microsoft will emerge from the agreement hailed by TikTok’s AMERICAN users as a hero, saving him from The Risk of Prohibition by President Donald Trump. This smart will can simply allay fears that Microsoft’s control will replace (or ruin) what users already like about it.
In my opinion, however, there are 3 main dangers for Microsoft, either similar to its institutional inexperience with social programs like TikTok.
The first is the kind of reputational threat that occurs every time a giant company buys a beloved property. From the acquisition of Disney “Star Wars” to Yahoo’s acquisition of Tumblr, such acquisitions create a greater sense of control, as enthusiasts are incredibly attentive to replacement symptoms under the new leadership. And there are few applications with enthusiasts as committed as TikTok.
If the purpose is to make Microsoft more applicable to consumers, getting TikTok would do the opposite, affecting all users in the company for a long time.
The strongly related threat comes down to one word: Facebook.
“If TikTok is the next style of Instagram (what we think we are), then if MSFT accepts this asset, a golden opportunity will be lost,” Ives writes. “However, if TikTok becomes the next Snapchat and has a multitude of monetization and user expansion issues in the future, then this acquisition can damage the valuation over time given the big Facebook festival and others.”
So while Microsoft has the chance here to become a serious player in social media, the market is volatile and business models are complicated. With Facebook entering the game with Instagram Reels and others preparing their own attacks on TikTok’s activities, Microsoft can register for tougher-than-expected combat.
Finally, and the least predictable, is the antitrust factor. While Microsoft has so far moved away from regulatory oversight, adding a notable absence in last week’s Big Tech antitrust hearing, the acquisition of TikTok may drag the company into the Trump administration’s sights amid escalating tensions in China. This can cause headaches that far outweigh the benefits of TikTok.
The back here is no, TikTok doesn’t fit everything Microsoft already does. But maybe that’s exactly why Microsoft is so interested in the first place, giving the company the ability to push a social media giant from scratch and identify its real customer business outside the game.
However, there are few corporations like TikTok, and none in recent reminiscence that carry as much baggage or opposite the same festival or scrutiny from every corner.
For each and every one of the challenges Nadella has faced and conquered, it will be one of the difficult, and indeed the riskiest, highest. Removing it will increase the security of your legacy as CEO, achieving something else at Microsoft that could have been unthinkable in the not-too-distant past. However, with so much cash on the table, failure would have real consequences.