On July 14th, 2019, I wrote the following in two parts on a LinkedIn post:
The future of TikTok is dependent upon two things: The relationship between China and the USA, and the value of TikTok as an acquisition target. I estimate that prior to the Presidential election in 2020, TikTok will have no choice but to seek a buyer if they wish to remain active in the United States. At this time I write this, I believe the following companies are most likely to acquire TikTok:
- Microsoft
- Walmart
SAP, Oracle, IBM and the Public Investment Fund of Saudi Arabia, may all have an interest in TikTok, but I don’t believe either of these companies are a good fit for TikTok.
Berkshire Hathaway may have an interest in TikTok but due to the sensitive nature of the U.S. and China, Warren Buffet may choose to stay out of the bidding.
Disney should acquire TikTok but I don’t believe they have the team or imagination to see the value of TikTok as an entertainment and media platform.
Amazon could acquire TikTok but I don’t anticipate Amazon will want to be involved in such a high-profile acquisition. I believe Amazon would prefer to acquire a retailer with JC Penney, Kohl’s, or Target at the top of the list. Instead of acquiring Kohl’s, Amazon may choose to partner with Kohl’s by opening hybrid Amazon Go stores inside each Kohl’s. (Note to Kohl’s: If you don’t partner with Amazon on groceries, you should contact ALDI and Lidl about opening stores inside every Kohl’s; Lidl is a better fit. Groceries are strategic to Kohl’s whether you realize it or not).
The challenge for any company that wants to acquire TikTok will be assessing the value of the company’s operations in the USA and other countries.
I struggle to estimate what a potential acquisition price for TikTok will be, but based on the company’s performance to date, and estimated future growth and monetization potential, I estimate at a minimum, the cost to acquire TikTok’s U.S. operations will be between $22B to $25B. However, by 2020, it is conceivable that TikTok’s U.S. operations may be valued at $50B or more. If the company interested in acquiring TikTok also wants to acquire operations in other countries, the value of acquisition could exceed $60B if not higher.
This brings up an interesting possibility – in order to acquire TikTok, multiple companies may have to partner.
Turning to the list above, I don’t believe Facebook is prepared to invest such a large amount of capital in TikTok. Facebook should have already acquired TikTok; big mistake, Facebook.
I’m not convinced of Oracle. SAP, IBM or the Saudi Public Investment Fund, being able to pull off an acquisition of TikTok. If either of these companies does acquire TikTok, I believe the future of TikTok is limited unless they hire very imaginative and innovative executives capable of maximizing TikTok’s potential.
This leaves Google, Microsoft and Walmart. Google and Microsoft won’t partner. Google and Walmart have a limited partnership but they’ve never been able to do anything special together, so I don’t foresee Google being able to acquire TikTok.
Microsoft could acquire TikTok but I don’t believe such an acquisition makes sense. What will Microsoft do with TikTok? How will Microsoft monetize TikTok? How will Microsoft expand TikTok’s retail potential? Microsoft needs Walmart’s expertise in retail and logistics, and also Walmart’s customer base.
Therefore, the only logical partnership is Microsoft and Walmart. (I personally believe Microsoft and Walmart partnering on an acquisition makes the most sense). This raises another interesting question: If Walmart acquires TikTok with Microsoft, what will be the future of TikTok?
I am writing this article on August 30, 2020. It appears that TikTok is being forced to seek a buyer due to the dwindling relationship between the U.S. and China. The companies I listed in the original LinkedIn post are among the contenders except for Facebook, SAP and IBM. Oracle is considered a potential bidder of TikTok. I have not been able to confirm if Berkshire Hathaway has expressed any interest. Google has been silent.
At the time I write this, a Microsoft/Walmart partnership appears to be the most plausible outcome but until an acquisition is announced, I can’t be sure.
What is the Future of TikTok?
The same question that I asked in July 2019, is still relevant – What is the future of TikTok? Listed below is what I have believed since 2019 regarding TikTok:
- Scale TikTok by massively increasing the number of sellers to grow a third-party marketplace for Walmart
- Leverage the platform for brands to advertise and sell their products
- Create a mini-Shopify feature including digital storefronts and retail
- Increase live streaming capability for retail and brands with no limit to how long the streaming will run
- Monetize short form videos by signing partnerships with celebrities and brands; for example, a 60 second Ford Bronco video
- Increase digital advertising revenue by offering an alternative platform to Google, Amazon and Facebook
- Integrate TikTok and LinkedIn
- Create ‘mini-program’ capability
- Increase the number of games that can be played on TikTok; there is tremendous potential to grow gaming revenue on TikTok
- Create a separate business unit – TikTok Media – that focuses on news and entertainment; I am convinced TikTok can become one of the largest media and entertainment companies in existence
- Create a ‘MovieYou’ feature to simplify the creation of limited-run movies and series; sort of a mini-Fx
- Change the process for how to pay influencers on TikTok; give influencers the ability to recommend products with a ‘Buy Now’ button
- Integrate voice recognition for tasks on command including shopping
- Integrate a payment platform into TikTok; not convinced Microsoft Pay is best option but it may have to do
- Create a better messaging capability; TikTok should strive to be a better verison of WeChat
- Integrate ride hailing into TikTok
- Integrate online grocery and food ordering with delivery options
- Create a Microsoft – focused video library to learn Microsft Office shortcuts
- Create a financial planning and banking feature
- Create an online pharmacy with refill capability; online medical care, insurance and pharmacy needs can all be managed through TikTok
I can write for hours regarding what I believe the potential is for TikTok and Microsoft. My advice to Microsoft and Walmart is maximize the ability of consumers to perform tasks and be entertained without having to leave the TikTok app.
However, all is not well if Walmart/Microsoft acquire TikTok. For example, will Walmart want their name attached to a platform with so many young girls and women dancing in bikinis? The picture of the girls in bikinis that I used in this article is of two of TikTok’s most popular stars, sisters Dixie and Charli D’Amelio. The girls are popular because of their looks and penchant for dancing around in bikinis. The girls are also popular because they’re very talented.
Will Walmart want their name attached to a platform that makes it easy for users to post videos on politics, social issues, conspiracy theories, and quack medical science? In essence, if Walmart/Microsoft acquire TikTok, will they sanitize TikTok or create a version of TikTok that will only display adult content for those over 18?
TikTok is an Infant
I describe the growth potential of TikTok as being limited only by the imagination of whatever company acquires TikTok. In my opinion, TikTok is still an infant.
I have outlined several ways in which TikTok can be monetized. What I want to stress is this – Microsoft/Walmart can scale TikTok into an app that allows users to opt in or out of specific capabilities. Teens should be given the ability to set up TikTok to fit their needs, and adults should be able to leverage capabilities that best fit their needs. TikTok can be scaled without destroying TikTok. The challenge, of course, is making changes to TikTok while maintaining the relevance of the app.
Therein lies the biggest challenge for Microsoft/Walmart – can they acquire TikTok, maximize the value of the app, and keep TikTok relevant?
Microsoft/Walmart must also be aware of the ease in which another company can create their own version of TikTok, only better. Facebook, Google, and Amazon, to name a few, are already planning their strategy in anticipation of Microsoft/Walmart acquiring TikTok. Regardless, I believe Microsoft/Walmart acquiring TikTok is an excellent move.
In regards to what the future holds as it relates to technology and the disruption of retail, The Wild Card that no one is talking about is Tesla. Yes, that Tesla.
The idea that the future of Tesla is only manufacturing cars is wrong. The future of Tesla is data, mastery of neural networks and the world’s most advanced supercomputers. I believe Tesla will create an entirely different way for how humans interact through technology and by doing so, will revolutionize communication and retail.
Think it won’t happen? Think again.
Note to Microsoft CEO Satya Nadella, and Walmart CEO Doug McMillon – make Elon Musk your best friend. You’re welcome.
