Oracle Beats Microsoft, Makes Deal For TikTok

Matty-Sways

Oracle won the bidding war for the U.S. operations of the video-sharing app TikTok, beating Microsoft for the social app

Oracle will be announced as TikTok’s “trusted tech partner” in the U.S. The deal completed between Oracle and TikTok parent ByteDance will likely not to be structured as an outright sale. Now the White House and the Committee on Foreign Investment in the U.S. must approve the deal. (Its believed to satisfy the concerns around data security that have been previously raised by the U.S. government.)

Treasury Secretary Steven Mnuchin confirmed that his office received a bid proposal from Oracle for TikTok’s operations...

“We will be reviewing that at the CFIUS committee this week and then will be making a recommendation to the president and reviewing it with him,” Mr. Mnuchin said on CNBC. “From our standpoint, we’ll need to make sure that the code is, one, secure, Americans’ data is secure, that the phones are secure and we’ll be looking to have discussions with Oracle over the next few days with our technical teams.”

This deal made on the backdrop of the Chinese government issuing new export restrictions late last month on the kind of artificial intelligence technology TikTok uses. The app connects its users to variety of short videos made by other users. The algorithms behind this stream of videos served to users are seen as TikTok’s secret sauce . It is unclear if the structure of Oracle’s deal includes the transfer of the algorithms. Two people familiar with the Oracle deal reported that it was probably more appropriate to call it a partnership, rather than an acquisition, suggesting that there wasn’t an exchange of significant assets.

TikTok is a treasure trove of data on young and mostly female users, an area with online purchasing power. TikTok has soared to around 100 million monthly users in the U.S., from about 11 million in early 2018, and they are considered among the most lucrative in the app’s global user base of about 689 million, though the app still loses money.

The big winners were some of ByteDance’s existing investors, including U.S. investment firms Sequoia Capital and General Atlantic, that will get stakes in the venture as part of the deal.

President Trump has taken a firm stance with China and repeatedly said he would shut down TikTok in the U.S. if it isn’t sold to an American company by Sept. 15. Microsoft and Walmart who previously teamed up to make a bid, said on Sunday that it was notified earlier in the day of the decision by ByteDance.

“We are confident our proposal would have been good for TikTok’s users, while protecting national security interests,” the statement said. “To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement.”

Surprisingly, late on Sunday, Walmart suggested might now join the Oracle group, saying it is continuing “discussions with ByteDance leadership and other interested parties.”

Those against Oracle winning the bid suggested Oracle’s interest in TikTok is primarily driven by kickstarting its fledgling cloud-computing business, which remains far behind market leaders Amazon and Microsoft. Microsoft’s plans were more ambitious than Oracle, said one person.

Oracle was not thought to be a front-runner in the race for TikTok. Microsoft is a bigger player in business computing but also owns the LinkedIn social-media site and the Xbox videogame business. It also has about $136 billion of cash, some three times what Oracle has on hand.

President Trump in mid-August voiced support for a potential Oracle bid. “Well I think Oracle is a great company and I think its owner is a tremendous guy, a tremendous person. I think that Oracle would be certainly somebody that could handle it,” the president said when asked about Oracle’s potential interest.

Oracle co-founder Larry Ellison earlier this year threw a fundraiser at his house for the president. Chief Executive Safra Catz also worked on the executive committee for the Trump transition team in 2016.

The Trump administration has pushed for a sale for months, based on security concerns on the data it collects from Americans streaming videos to pass to China’s authoritarian government. TikTok has said it hasn’t been asked to share data with the Chinese government and wouldn’t do so if asked. They even hired an American CEO.

The White House's influence in this deal should go down in the annals of American deal making as the Trump Brand will now forever be attached to the influence this deal will have on all parties involved.

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