Microsoft to Move Forward with a Deal to Buy TikTok

Microsoft Corp. will move forward with a deal to buy social media app TikTok in the U.S. This news comes on the heels of  President Trump floating the idea of banning the app in the U.S.

Currently owned by the Chinese company ByteDance, TikTok’s data collection practices have caused concerns in the U.S. government’s national security community.

On July 31, President Trump announced to reporters that his administration was looking into the possibility of banning TikTok through an executive order or emergency economic powers.

President Trump’s threat to ban the app follows security concerns with the app raised by his administration. Secretary of State Michael Pompeo said that the app poses a national security threat by “feeding data directly to the Chinese Communist Party.”

The President also suggested that a ban on the app could be potential retaliation against China for the Coronavirus pandemic.

American company Microsoft confirmed on August 2 that they were in talks with ByteDance to acquire TikTok in the U.S. The deal provides a potential solution to the concerns expressed by the U.S. government.

The Hill reports that President Trump is putting the potential ban on hold on the condition that Microsoft and ByteDance can reach a deal within 45 days. Microsoft says that they intend to complete talks with ByteDance by September 15.

“These discussions are preliminary and there can be no assurance that a transaction which involves Microsoft will proceed,” according to the company.

Both Microsoft and ByteDance have provided a notice of intent to the Treasury Department’s Committee on Foreign Investment in the United States to explore a deal that would give Microsoft ownership of TikTok in the United States, Canada, Australia, and New Zealand. The Committee on Foreign Investment in the United States scrutinizes foreign deals for potential security risks.

If the deal were to go through, Microsoft would ensure that the data of American TikTok users are transferred to, and would remain, in the U.S. The company also said they would build on the user experience while adding privacy and security protections.

“Microsoft appreciates the U.S. Government’s and President Trump’s personal involvement as it continues to develop strong security protections for the country,” the company said in a statement on their website.

The news of the deal has drawn mixed reviews from members of the Trump administration. Treasury Secretary Steven Mnuchin supported the potential agreement, toting the value in an American company getting access to sophisticated TikTok algorithms that decide which videos users see. While others, such as Vice President Mike Pence, have voiced concerns.

The acquisition of TikTok by Microsoft would also be a significant step for the company. TikTok is the breakout social media app of the decade, and acquiring it would be a valuable move for Microsoft.

Microsoft has primarily focused on corporate customers under CEO Satya Nadella’s tenure. The acquisition of TikTok would add a new, much younger customer pool.

However, if the deal goes through, it may strain the relationship between Microsoft and Facebook. Facebook views ByteDance as one of its competitors.

ByteDance purchased Musical.ly back in 2016 when the company expanded to the U.S., and they absorbed it into their own app TikTok. According to Buzzfeed, Facebook had also sought to acquire Musical.ly.

Previously, Microsoft and Facebook partnered together in 2007 when Microsoft invested $240 million into Facebook.

The deal is significant for both Microsoft and ByteDance but also has far-reaching U.S. political implications. The complexity of the acquisition is likely to yield many new developments in the coming weeks; however, Microsoft said in their statement about the deal that they do not intend to provide any further updates until the company has a definitive outcome.

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