Microsoft expresses its interest in acquiring TikTok; Facebook launches competition; data-practice concerns continue and now Trump wants a share; but what does this mean for the future of digital trade?
TikTok, the social media app owned by the Bejing-based company Byte Dance has consistently remained in the press over the past year for its data-sharing practices, which President Trump has expressed concern for. On Thursday 6th August, President Trump issued two executive orders under national security provisions that would ban two major Chinese apps from the American market; the orders state that in 45 days, Americans will be prohibited from carrying out any transactions with TikTok and WeChat. This would effectively bar the companies from doing business with US companies such as Apple, thus becoming unavailable on the AppStore. But why are the apps data-sharing practices concerning?
The root of the concern stems from TikTok’s data collection policy and its links with the Communist Party of China. The app’s policy allows for it to collect data for its users, and this includes the information users give them such as their name and date of birth. The policy also reserves the right to harvest information from any other platform where users share its videos on, such as Instagram and Facebook, including its user’s contact list. Furthermore, the policy allows TikTok to collect information from other sources, which refers to videos on the app where information of others is shared. Despite the risk of being blacklisted due to these practices on the 15th September 2020, the world’s largest software company, Microsoft, wants to takeover TikTok – but why?
Despite, TikTok’s data-sharing practices, the app was downloaded over 623 million times during the first six months of 2020, and its biggest markets were India, Brazil and the United States. This may explain why the American multinational technology company, Microsoft, expressed interest in acquiring TikTok. These acquisition talks are currently in their preliminary talking stage, and as of yet, it is still unclear whether Microsoft would be successful in taking over the app. Microsoft initially only expressed interest in acquiring TikTok’s US market, but now want more of TikTok’s global market presence.
Arguably, Microsoft is one of the few companies in the position to make such substantial acquisition and due to its American heritage, has gained President Trump’s approval, stating that the government wouldn’t ban the TikTok if any American company would acquire it before the 15th of September 2020. According to President Trump, if Microsoft is successful in acquiring TikTok, it should pay a “very substantial proportion” of the acquisition to the US treasury because they “are making it possible for this deal to happen.” However, how likely is it that Microsoft will acquire TikTok? What benefits will it bring to Microsoft? And will it be successful given that Facebook launched a rival app last week?
Microsoft has deep-rooted connections with the Byte Dance, as Microsoft was one of the first multinational companies to invest and expand in China, and many of TikTok’s employees are ex-Microsoft employees. Therefore, these connections may aid the acquisition deal and speed up the process so that they can acquire TikTok before the 15th of September 2020. Additionally, if successful, the acquisition would place Microsoft in a powerful competitive position with Facebook and Google’s YouTube which currently dominates social media sites and would also help Microsoft solidify its stance with the younger demographic. This would make up for Microsoft’s other losses as they have noticed a decrease in video game usage from younger audiences with the company Xbox, which Microsoft also owns. The acquisition is not risk-free, however, as Facebook’s recent launch of Instagram reels has created significant competition for Microsoft’s potential acquisition as Facebook is paying TikTok stars to switch to Instagram reels, which can lead to financial losses for Microsoft in the future. Furthermore, many TikTok stars are voluntarily moving to Instagram reels merely due to security as the situation with TikTok is still unclear.
If the acquisition deal is successful, it could significantly change the way companies trade digitally. Microsoft would ensure that all private data of its American users will be transferred to and remain in the US, including any data currently stored or backed up outside of the country being deleted and transferred to US data centres instead. This means that greater responsibility could be imposed on companies that wish to merge or acquire foreign companies that are facing data protection disputes. Furthermore, if successful and the Trump administration charges Microsoft a substantial fee for permitting the deal to go ahead, this could create a precedent for future private companies. Usually, in democratic governments, it is rare for a national authority to claim this from a public company, let alone a private one. So, what will this mean for the future digital trade and how will this be regulated if President Trump gets his way? Will Facebook knock out TikTok’s success? Or will Microsoft become the new major player in the social media industry? Or, most pressingly, will time run out on 15th of September for TikTok? The answers to these questions will shape how digital trade is impacted globally for years to come.