TikTok's parent company ByteDance is facing increased pressure to cut ties with the viral video app, as President Donald Trump has threatened to ban TikTok unless ByteDance divests.
Microsoft is in talks to buy TikTok's operations in the US, Canada, Australia, and New Zealand, and says it expects to reach a conclusion by September 15th. Of course, TikTok could also find another buyer.
If the talks fall through by that date, Trump has said he would ban the app.
If the companies make a deal, the acquisition will be complicated, but Microsoft is less likely to face roadblocks from the Trump administration and antitrust regulators in the process.
Here's what we know about why Microsoft is the most likely buyer, what happens to TikTok if it goes through, and other questions you may have about the deal-in-progress.
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The word is out: Microsoft is exploring a deal to viral video app TikTok's operations in several countries including the US as its Chinese parent company ByteDance faces increasing pressure from the Trump administration.
News broke Friday President Donald Trump was planning to order ByteDance to divest its stake. Soon after, reports emerged Microsoft was an interested suitor, followed by confirmation from the company itself. Now, ByteDance and Microsoft will have until September 15 to reach a deal — at which point Trump says he will take action to ban the app in the US entirely (though it's not clear how, exactly, he'd do that).
The deal raises a lot of questions, not all of which have readily-apparent answers.
Here's what we know about the deal so far:
Why is Microsoft the most likely buyer?
First and foremost, while Microsoft is widely considered the leading candidate to buy TikTok, and the only one that has publicly stated its interest, nothing has yet been set in stone and another company could still come in and snap it up. Rumors of other interested parties include Google, Facebook, and Apple — the last of which has since denied such reports.
It's still unclear how the talks between Microsoft and TikTok began, but there are several serendipitous factors at play that could give the tech titan an edge in these talks.
Only a handful of companies could afford to acquire TikTok in the first place. The app as a whole is said to be worth between $30 billion and $50 billion. However, Microsoft is apparently only bidding for a portion of TikTok's business — specifically, its operations in US, Canada, Australia, and New Zealand.
Given that the TikTok deal is only for a relatively narrow slice of the business, Microsoft — or any other buyer — is likely to pay less than those figures, especially since ByteDance is also likely feeling the heat from Trump to sell by the September 15 deadline. While the US is one of TikTok's biggest markets, users in the four countries in question only comprised 10.3% of TikTok downloads in the last 30 days, according to data provided to Business Insider by app analytics firm Sensor Tower.
In fact, CNBC reported Wednesday the TikTok deal could be worth between $10 billion and $30 billion. CBNC also reported Microsoft has agreed to bring TikTok's code to the US from China within a year, an engineering feat that would be out of reach for most other companies.
And of the deep-pocketed tech giants, Microsoft is perhaps the least likely to face any political consequences or regulatory blowback on the deal, given how it's largely managed to stay above the fray when it comes to disputes between Big Tech and the Trump administration.
To that point, Microsoft, the second-most valuable tech company in the world was notably absent last week when CEOs of Apple, Amazon, Facebook, and Google testified before Congress about how their market dominance and business practices might harm competition. That lack of scrutiny might mean Microsoft could get the deal done with minimal antitrust roadblocks to overcome.
Meanwhile, there are important links between Microsoft and TikTok. ByteDance founder Yiming Zhang did a brief stint at Microsoft, but perhaps more significant is that TikTok's Global General Counsel Erich Andersen, who just joined the company this year, is a 25-year Microsoft veteran who worked closely under the company's president and chief legal officer, Brad Smith.
What Microsoft plans to do with TikTok is still the source of speculation, especially given CEO Satya Nadella's historic focus on cloud computing and productivity. However, analysts recently told Business Insider the acquisition could be an opportunistic play for Microsoft to bolster its consumer business and gain favor among younger generations.
What exactly would Microsoft get for its money?
In a statement about its discussions with ByteDance, Microsoft said a "preliminary proposal" for the deal would see the company buy TikTok's operations in the US, Canada, Australia, and New Zealand. Microsoft would own and operate TikTok in those countries, although the company said it may invite other American investors to acquire minority stakes in its portion of the business.
But a complete divorce between ByteDance and TikTok would likely also apply to its employees and internal operations, presenting a complex challenge for the buyer.
According to The Information, ByteDance engineers based in China are responsible for the underlying software and infrastructure across the company's more than two dozen apps, including TikTok. The few US-based engineers TikTok has hired report to senior executives in China, as do some managers working on TikTok's US ad business.
Whoever buys up TikTok will be tasked not only with bridging those technological gaps, but with filling the gaps that could open up in TikTok's workforce. It could take TikTok at least to half a year to hire the hundreds of employees they need to replace, the Information estimates.
In any case, the terms of the deal will be subject to approval from CFIUS and Trump.
What is CFIUS, and why is it investigating TikTok in the first place?
Lawmakers have long raised concerns over the connection between ByteDance and China, and whether the Chinese government can access user data or influence content moderation. A formal national security review of the app was launched in November 2019 by the Committee on Foreign Investment in the United States — better known as CFIUS (pronounced "siff-ee-yuss).
CFIUS, an interagency body under the government's executive arm, is tasked with investigating the transactions of American companies that involve foreign businesses for potential national security risks. The US Department of the Treasury earlier this year published new regulations intended to strengthen the committee's ability to address national security concerns.
The relevant CFIUS review focuses on ByteDance's 2017 acquisition of Musical.ly, a popular US-based social network that preceded TikTok and was later merged into TikTok in the US. The US government argues it has jurisdiction over the deal because ByteDance didn't get approval from CFIUS at the time of the Musical.ly acquisition.
There are some notable instances where Chinese companies sold their stakes in US companies following a CFIUS investigation. Earlier this year, Chinese company Kunlun sold LGBTQ dating app Grindr for $608.5 million after CFIUS said its ownership of the company was a security risk. In 2019, CFIUS required online health startup PatientsLikeMe to find another buyer for the majority stake it sold to a Chinese company called iCarbonX.
Microsoft and ByteDance informed the committee they plan to explore a deal involving Microsoft's purchase of TikTok's operations in the US, Canada, Australia, and New Zealand. Microsoft said it may invite other American investors to acquire a minority stake in TikTok.
What happens if CFIUS approves a TikTok acquisition?
Trump has given ByteDance a deadline of September 15 to hammer out a deal in which TikTok's US operations are sold — whether that buyer is Microsoft or somebody else. If a deal isn't reached by that date, Trump has said that he will act to ban the TikTok app entirely in the United States (though it isn't clear how he would accomplish that).
If ByteDance reaches a deal, it will go through another CFIUS review and, concurrently, a Justice Department antitrust review. That review is expected to be a quick process, unless a direct TikTok competitor like Facebook, Google, or Snap are involved, according to experts consulted by Business Insider.
But even if CFIUS approves a TikTok acquisition, it's unclear how Trump will respond. Trump initially disproved of such a sale, and insisted on pushing for a complete ban of the app in the US. However, Trump's stance has apparently since softened: He told reporters Monday he would approve of such a deal to acquire TikTok's US operations.
What happens if TikTok's sale falls apart?
Trump hasn't completely let go of choosing the nuclear option by enacting an outright ban of TikTok in the US. Trump told reporters Monday he would give ByteDance until September 15 to hammer out a deal with a US buyer — or he would ban TikTok in the country entirely.
If discussions with Microsoft were to fall through, however, it's unlikely TikTok would struggle to find another interested buyer. Despite the political firestorm around it, TikTok is one of the hottest and most influential platforms in the social sphere, with a reported 100 million monthly users in the US.
However, any other buyer would likely be not as well-equipped as Microsoft to face the Trump administration's concerns over the deal. A group of ByteDance's US investors expressed early interest in buying a majority stake in TikTok, but those talks are said to have fallen apart over concerns that such a takeover "wouldn't pass muster with the Trump administration."
Can Trump ban TikTok in the US?
A US-wide ban on a smartphone app would be an unprecedented move. Despite Trump's repeated claims he's pursuing an outright ban, it remains unclear what power or authority he has to do so, experts told Business Insider.
"He can't outright 'ban' TikTok itself," Kyle Langvardt, a law professor at the University of Detroit, told Business Insider. "But he can interfere so heavily with TikTok's business that an American TikTok clone will replace it."
Additionally, TikTok's classification as "software" could mean the platform is covered by the First Amendment, making a ban a violation of American's freedom of speech.
"Banning" an app is a complex process: Even if the US government could get TikTok removed from Google and Apple's smartphone app stores, there are millions of users who already have the app on their phone.
The Verge's Adi Robertson reports a more intense nationwide ban would have to happen at the "network level" by blocking communication between TikTok servers and US users. This is the same method the Chinese government uses to block popular platforms, like Facebook and Google, behind its "Great Firewall" of internet censorship.
All of that combined would make a full ban of TikTok a tall order.
Are you a Microsoft employee with insight to share? Contact reporter Ashley Stewart via encrypted messaging app Signal (+1-425-344-8242) or email ([email protected]
Are you a TikTok or ByteDance employee? Contact reporter Paige Leskin at [email protected]
using a non-work device. Open DMs on Twitter @paigeleskin.SEE ALSO: Inside the rise of TikTok, the viral video-sharing app that Trump is trying to order its Chinese parent to sell
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