Oracle now leads TikTok takeover race

As the September deadline of TikTok looms, it seems its US operations will remain. A consortium led by software giant Oracle was named on Sunday as the preferred partner by TikTok owner ByteDance.

“Oracle [has] won the bidding for the US operations of the video-sharing app TikTok, a person familiar with the matter said. […] Oracle is set to be announced as TikTok’s “trusted tech partner” in the U.S., and the deal is likely not to be structured as an outright sale, the person said,” The Wall Street Journal reports.

Earlier that day, Microsoft blogged that it was out of the race.

“ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft. We are confident our proposal would have been good for TikTok’s users, while protecting national security interests.”

Microsoft said it wanted to improve the platform’s security measures, address user privacy, and fight disinformation.

“We look forward to seeing how the service evolves in these important areas.”

Microsoft’s statement seemed to point out issues that the Oracle-led bid would be less suited to address.

But ByteDance crushed Microsoft’s plans for the future of the fast-growing video app.

China has restricted the sale of technological advancements to foreign companies. A report in the South China Morning Post said that the Chinese Government’s new regulations will not allow TikTok’s algorithm to be part of the deal.

“[ByteDance] will not hand out source code to any US buyer, but the technology team of TikTok in the US can develop a new algorithm,” according to a source. The source, who did not want to be identified, said ByteDance had notified US authorities and potential bidders of the decision,” the SCMP reported.

TikTok’s future under Oracle

If true, Oracle and its consortium partners will only pay for the TikTok brand name and access to its 100 million+ monthly active users in the US.

Some suggest that TikTok will die without its machine learning system. Others say developing a similar system on top of its user base will not be complex.

Oracle has not yet managed any social platforms. And its investment firm partners in their TikTok bid will focus on revenue. You would expect the firm to monetize the platform quickly to maximize profits.

The rapid rise of TikTok rode on ByteDance’s years of experience in creating social networks in China. Its Chinese-only version Douyin was a huge success before TikTok launched in the US.

Douyin launched in 2016 two years before ByteDance bought and rebranded Musical.ly to TikTok in August 2018.

In those two years, ByteDance learned what worked, what resonated, and formulated its algorithms using the millions of people already engaging within Musical.ly.

TikTok had a massive jump start. The system may appear rudimentary. And the firm may seem to be just another company with a good algorithm. But a lot of work was put in to develop TikTok’s systems.

Still, TikTok is not too big to fail.

Its precursor Vine had more than 200 million active users at peak. Yet it failed because its owner Twitter did not have a reasonable way to monetize its platform and keep its top creators from migrating to YouTube and Instagram.

TikTok has acknowledged this trend with its Creator Fund program. It plans to pay a billion dollars in the next three years to its top creators.

The technical details of the deal with Oracle and its partners are not yet available. And no one knows how it will all play out. The potential drawbacks may end up derailing the app. 

Author: Francis Rey

Francis is a voracious reader and prolific writer. He has been writing about social media and technology for more than 10 years. During off hours, he relishes moments with his wife and daughter.

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