Strategy divergence appears at Microsoft with TikTok acquisition talks

Microsoft has confirmed it is currently in discussions with ByteDance to acquire TikTok operations in the US, Canada, New Zealand and Australia.

It might seem like somewhat of an unusual move, but Microsoft will attempt to purchase the under fire social media application from ByteDance. Financials have not been aired at this point of the discussions, however the strategy might have a few people scratching their heads as to how this fits into Microsoft’s cloud mission.

“The discussions with ByteDance will build upon a notification made by Microsoft and ByteDance to the Committee on Foreign Investment in the United States (CFIUS),” Microsoft said in a blog entry.

“The two companies have provided notice of their intent to explore a preliminary proposal that would involve a purchase of the TikTok service in the United States, Canada, Australia, and New Zealand and would result in Microsoft owning and operating TikTok in these markets.”

President Donald Trump has seemingly been attempting to convince CEO Satya Nadella to ditch the attempted acquisition, though the transaction is continuing as planned. Whether this is an indication the US Government might throw bureaucratic hurdles in the way remains to be seen, but it could be seen as a win for the President.

On Friday aboard Air Force One, the President commented he would potentially ban TikTok in the US. Influencers and fans took to social media channels to protest the comments, though this might have been a move from Trump to encourage divestment talks. Having such a powerful social media tool in US ownership would certainly appeal to this administration.

While this is an interesting turn of events, it is far from a done deal. Approvals would have to be sought, which is no guarantee in a world where technology is becoming increasingly politicised, and of course, a price needs to be agreed. The announcement is still somewhat of a strange one, however.

Microsoft has been transforming itself into a cloud company which enables the next big thing, as opposed to attempting to create revolutionary ideas. Under Nadella, the company has invested billions in transforming itself to become a data centre powerhouse to underpin success of others in the digital era.

Moving forward, the team had been prioritising edge compute capabilities with acquisitions such as Metaswitch and Affirmed Networks, while also building out the cloud gaming platform in the Xbox division. The Surface product line keeps its interests alive in the consumer world, though it recently offloading its gaming video platform Mixer. It seemed poised to let other internet giants battle for advertising dollars, but the acquisition of TikTok suggests otherwise.

TikTok is a very different business from Microsoft’s traditional hunting grounds. It would have to challenge the dominance of Google and Facebook for advertising revenues, cultivating a business model which is very alien to the team. There could be billions to be made through the purchase of TikTok, but it doesn’t exactly fit into the current Microsoft strategy.