TikTok Acquisition: Not A Cake Walk for Microsoft

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After President Trump announced an order banning US companies’ transactions with Chinese businesses, which is set to come into effect 45 days from the day it was passed, it became evident that the coming few weeks were going to be painfully hectic for all tech companies dealings with China.

With the recent spotlight, TikTok has been in, after multiple threats of a possible US ban materializing into something concrete with this order, certain challenges have come up, particularly for Microsoft, who is now confirmed to be considering buying TikTok’s global operations.

Some of these challenges are general tech-related obstacles, but they are deeply tied into the 45-day limit Trump’s order has imposed on companies, giving everyone time until September 15th to sort out their affairs.

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TikTok Acquisition: A Tough Road Ahead

In Microsoft’s case in particular, if the deal doesn’t come through in the stipulated time period, TikTok could quite possibly be banned in the US once and for all, along with many other Chinese origin apps that are bound to bear the brunt of this new order.

Other significant challenges, along with being time-bound compulsions, are also massive tech-related hurdles.

First and foremost, people have become extremely wary about the kind of personal data TikTok collects and how it is used. At the same time, personalized data collection is the backbone of TikTok’s near-perfect recommendation algorithm, which gives users highly customized recommendations. If Microsoft does acquire the company, making changes in the data collection process will be bound to happen. The company, thus, would be faced with the dilemma of which data to collect or eliminate to retain this feature.

Another challenge that is related to the first one is ad personalization. Although a somewhat uncharted territory for Microsoft, it has been one the company has been trying to break into, along with its attempts at establishing a presence in social media tech. With this challenge, once again, Microsoft will be faced with the dilemma of the kind of user data to collect. But in addition to this concern, it will also have to come up with a secure system to share this data with advertisement partners, to instill a sense of trust among users.

Additionally, for a period after the acquisition, Microsoft will have to use ByteDance’s source code for TikTok. The core features of the app operate on this source code, which it shares with TikTok’s Chinese counterpart, Douyin. To prevent taking the app off the market completely for a while, Microsoft will have to adjust the programming while the app will still be in use. This would also mean that the company won’t be able to instantly migrate all the relevant components of the app to their own database, i.e. one outside China.

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In a similar vein, transfer of user data in the possession of ByteDance to Microsoft will have to be a manual process, to a significant extent. This would mean that the infrastructure (mainly hard disks) used by the former parent company will have to be manually moved to a Microsoft station in the US.

These challenges will arise along with the 45-day limit Trump’s order has imposed, causing the process to become even more stressful and intensive for those involved.

These hurdles could completely change the acquisition roadmap both, Microsoft and Trump, are expecting to follow. Experts believe that these challenges, for Microsoft, could take as much as 1 year to resolve. It will have a direct impact on the acquisition deadline set by Trump.

The Silver Lining

Certain changes TikTok recently made might come in handy during this entire process.

TikTok recently appointed Kevin Mayer, an American based in LA, as their new CEO. If he still retains the position, he will be able to provide due help to new teams working in the US.

It was also reported that TikTok hired 150 new engineers in America to decentralize the app’s maintenance and shift it away from Mainland China.

The Pitfalls

Microsoft has had a long history with failed ventures, a lot of which have been acquisitions. With TikTok’s estimated valuation for the current acquisition being cited as $50 billion at least, it is evident that a lot of money is going into this. Along with the aforementioned challenges, and Microsoft’s mixed track record with ventures outside of utility and business-related services, a failure would mean a massive loss. Former CEO Bill Gates called the deal a “poisoned chalice” in an interview with Wired.

If, however, TikTok under Microsoft’s thumb does end up retaining or exceeding its current success, the parent company might encounter the kind of criticisms and antitrust allegations other social media giants like Facebook, Instagram, and Twitter encounter due to their use of targeted advertisement and user data. Microsoft, then, will have to be very careful about the use of data and take extra steps to ensure their privacy policy stands out.

Lastly, content monitoring will now fall into Microsoft’s hands, now making it their job to restrict or remove content that fails to adhere to content policies. This will, once again, be a new avenue for the company to explore.

Microsoft is currently negotiating an extended window to carry out the deal, and the rumoured valuation is $40 billion, at least.

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