Why Would Anyone Think That Microsoft Buying TikTok Is A Good Idea?

Microsoft and TikTok really? image

Rumors are wildly swirling that Microsoft will purchase the social video platform TikTok within the next 45 days or so, and as a result, you’ll find dozens of articles touting what a great fit it would be, at least for Microsoft. To this I say, “What cool aid are you drinking?” Forgetting the complex legal, political, and security issues wrapped up in such a deal that already make it daunting, let’s look at all the ways this could go wrong. See if you don’t agree with me at the end.

TikTok’s Audience May Have Peaked

Sure, the TikTok app has been downloaded 2 billion times worldwide, but the deal that Microsoft is supposedly looking at is for the United States, Canada, Australia and New Zealand. There are supposedly 100 million users in the U.S., but that means there’s not that much room to grow. Plus, with only limited territories to operate in, this may be an asset that may never carry its financial weight, even if that part of the company is heavily discounted.

Competition Is About To Ramp Up

Up until now, TikTok has pretty much had a free ride in terms of being the only platform of its type that’s gained traction. That’s about to change big time with the introduction of Instagram Reels, which is attempting to duplicate TikTok’s capabilities. What Reels has going for it is the fact that almost any creator on TikTok sends their followers to their Instagram for more information. With Reels they can keep everything on the same platform. Instagram is even reaching out to TikTok influencers with big money deals to encourage the jump, which could mean a migration of users regardless of the platform’s current situation.

Then there’s Triller, another short-form video platform gunning for the same audience. The company has experienced exponential growth just in the last month, being downloaded more than 250 million times and reaching #1 on the App Store in 50 countries. Much of this growth comes from India, where TikTok was recently banned. Plus Triller just raised a big round of financing said to be between $200 and $400 million that gives it the funds to expand.

Increased competition is another reason why TikTok’s user base has probably peaked.

No Expertise In Social Media

Microsoft is great at making software and devices for business. It’s a leader in game creation and players, but even though there’s some expertise in dealing with the same age group as the majority of TikTok users (12 to 24), that doesn’t necessarily translate to running a social network. In other words, there’s a big gap between creation and curation.

Is the company ready for the headaches of content monitoring? Can it deal with a fickle audience with a short attention span that might abandon the platform at any time for the latest shiny new service? Is it even interested in attending to an unsettled advertising market (which is the way TikTok earns revenue) still reeling from the Covid crisis?

The Data Migration Issue

Should the purchase actually happen, untangling TikTok from its parent ByteDance appears to be complex. It means interfacing engineers who have the deepest expertise in the platform on mainland China, but even more importantly, checking to ensure that there are no backdoors into the software that could be used later to bypass security. That check could take months in itself, which would probably signal the death nell for the service as users flee to an alternative. If it is indeed true that the Chinese government is siphoning off the user data of TikTok users, imagine what a bonanza it could be to potentially be able to grab some Microsoft data too.

Then comes the issue of the algorithm, which is the platform’s secret sauce. The brilliance of its artificial intelligence is to quickly determine what you like then give you lots of it. That could mean content that comes from other parts of the ByeDance world, meaning from TikTok globally but also from a different ByteDance app like Douyin, which is the Chinese equivalent of TikTok. Would the algorithm lose its potency if it was only limited to four countries and perhaps a quarter to a third of the content?

The Geopolitics Of It All

Microsoft is walking a fine line here. Would the Chinese government feel the need for retribution because one of its largest companies was forced to divest some of its assets? What would that mean for Microsoft sales in China? Is it worth the risk to upset a huge market for the opportunity to enter into a significantly smaller one?

I could go on about the short 45 day time frame of the deal, the giant culture clash between the staid Microsoft crowd and the party-time of social media, and more, but you get the picture.

What Do TikTok Users Get Out Of This?

So if Microsoft does buy at least a portion of TikTok, what do TikTok users get out it? Ah, less than nothing, except an incentive to leave the platform. There’s a possible disruption to the service, probably no new features or upgrades until a full migration is complete, and most likely a different, more corporate feel to the platform, just off the top of my head. Maybe there‚Äôs a possibility of gamification of the videos, but no one knows what that is and if and when it could be implemented.

The Upside

There are potential upsides to this purchase for Microsoft though. Perhaps the company wants TikTok’s IP, in which case it could just kill off the service along with its headaches as soon as the deal closes. Perhaps it can be a good marketing outlet for its games, since 70% of TikTok’s user base falls within the same age group as avid gamers. You have to wonder about that one though, since the last thing a gamer is going to spend his or her time on is learning the latest dance move that TikTok is so known for. Likewise, someone spending a lot of time on TikTok is most likely not gaming.

All that being said, I just can’t see how this deal can make sense for anyone, except maybe the White House. Microsoft loses, TikTok loses, and its users lose. What’s the point?

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