Microsoft is the frontrunner to buy the US division of social-media site TikTok, says Mark Sweeney in The Guardian. President Donald Trump triggered the sale by issuing an executive order forcing the current owners, China’s ByteDance, to dispose of the subsidiary or see it shut down in the US by mid-September. However, the “jury is out” on whether it marks a “unique opportunity” to become a “global social-media giant overnight”, or a $50bn “geopolitically-fuelled business blunder”. This is because, while TikTok’s revenues are expected to increase from $1bn this year to $6bn by the end of 2021, there are concerns about the value of owning only part of a global business.
TikTok is a business that is “radically different” from Microsoft, says Salvador Rodriguez on CNBC. While the deal could help Microsoft diversify its revenue by bringing in advertising money to complement the income it derives from selling enterprise software, the downside would be having to deal with all the “problematic content” that is typically posted by users of social-media sites. Content that could cause headaches includes “misinformation, hoaxes, conspiracy theories, violence... and pornography”. Tackling such problems would require “large investments of capital and technical prowess”.
Walking into a trade war?
There’s also the question of geopolitics, says Tom Warren on The Verge. The forced nature of the sale means that Microsoft is at risk of becoming “part of a larger trade war between the US and China”. At the same time, President Trump has even suggested that the US Treasury “will need some type of cut from any acquisition”. No wonder that even Bill Gates, co-founder of Microsoft and its technical adviser, “seems as confused as the rest of us” and wonders if this could turn out to be a “poisoned chalice”.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Microsoft will need to “tread carefully” in order to avoid the impression that it is “taking advantage of a forced sale”, says Yuan Yang and Richard Waters in the Financial Times. Still, pre-existing links between ByteDance and Microsoft would seem to reduce the scope for conflict as a result of the deal. What’s more, even if the tie-up ruffles a few feathers in Beijing, it won’t be the end of the world. Rampant software piracy means that China only accounts for less than 2% of Microsoft’s global revenue.
Yet there may be other companies better suited to taking over TikTok, says The Daily Telegraph. Twitter, which has also expressed an interest, “could be a better fit” given that it has a “proactive music and video strategy” and is likely to come under “much less scrutiny” than Microsoft in terms of antitrust and competition issues. Venture capitalist firm Sequoia Capital is another suitor, given that its pedigree is “second to none” having been an early investor in Apple, PayPal and Google. What’s more, it already owns 10% of TikTok’s parent, ByteDance.
-
Is it time to ride the recovery in emerging markets?Interview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
Could the Enterprise Investment Scheme cut your tax bill?The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
'Ride the recovery in emerging markets': Gustavo Medeiros of Ashmore Group tells MoneyWeek
Interview What's the outlook for emerging markets? Gustavo Medeiros, head of research at Ashmore Group, gives his analysis and reviews progress in developing economies
-
What is the Enterprise Investment Scheme and should you have one?
The Enterprise Investment Scheme is tax-efficient and potentially lucrative. Taking a chance on the scheme could trim your family’s IHT bill, says David Prosser
-
The alcohol industry is suffering as consumers sober up – is it still worth investing in the sector?Changing consumer tastes are rocking the alcohol industry, but the best players are adapting their strategies. Buy them while their shares are still cheap
-
A strange calm in creditCorporate bond markets remain remarkably relaxed, with yields that offer little compensation for risks
-
The City's big bet on green finance fails to pay outOpinion Insurers and banks are backing away from “green finance”, and there is not much sign of the green boom we were promised. That’s a problem for the City
-
Six top investment trusts for smaller stocksLiquidity constraints mean investment trusts are best placed to seize the juiciest opportunities
-
Why is English football thriving – and can it last?What has gone so right for English football? The national team has found its feet; the Premier League is swimming in money and profits are soaring
-
Could colour diamonds add a sparkle to your portfolio?Diamonds of various shades never go out of fashion, says Chris Carter
