Facebook appears to be uninterested in purchasing rising social media app TikTok, which is currently in discussions with Microsoft.
Good morning, Data Sheet readers. Tech writer Danielle Abril here, filling in for Adam.
Facebook, once a big buyer of social media companies, is apparently steering clear of today’s hot acquisition target: TikTok.
Instead, Microsoft is an unlikely suitor for the U.S. operations of the fast-growing video-sharing platform, owned by Chinese tech firm ByteDance.
Concerned about TikTok’s ties to China, President Trump threatened to shut down the app in the U.S. if it’s not bought by Sept. 15. You could say that the clock is…tick-tocking for TikTok.
Facebook’s absence from any negotiations—at least as far as we know—is a departure from its previous strategy of scooping up companies that could eventually challenge its dominance. Remember Instagram, WhatsApp, and Oculus?
Facebook is unlikely to pursue TikTok for a few key reasons. First, legislators are currently scrutinizing Facebook over its past acquisitions, including Instagram. During last week’s antitrust hearing, members of Congress brought up some damning evidence, such as internal emails, that showed Facebook’s plan to neutralize competitors by buying them out.
Meanwhile, Facebook is also in the middle of an antitrust investigation by the Federal Trade Commission. Obviously, Facebook wants to avoid anything that could fuel further skepticism—like buying a big rival.
What’s more, Facebook typically acquires smaller companies, but TikTok is already sizable, said Jason Helfstein, analyst at investment bank Oppenheimer. Facebook paid $1 billion for Instagram in 2012 and $19 billion for WhatsApp in 2014. But the price of TikTok’s operations in the U.S., Canada, Australia, and New Zealand is expected to be higher than both of those acquisitions combined—close to $50 billion, according to some investors.
For a lot less money, Facebook could copy TikTok. That’s exactly what Facebook did when Snapchat became a threat. In fact, Facebook already plans to introduce a TikTok clone in the U.S., called Instagram Reels, in August. Better late than never, I guess.
So what does it mean for Facebook if Microsoft wins the TikTok sweepstakes? Not much, according Helfstein. TikTok “would have to get 10 times bigger before it would start to become a threat to Facebook from a revenue standpoint,” he said.
But Dan Ives, analyst at investment firm Wedbush Securities, had a starkly different take, suggesting Microsoft’s “war chest” and marketing budget could pose a “major threat” to Facebook. “To me, this would be a nightmare situation, competitively speaking.”
As Helfstein says, “Anything is possible until the ink is dry.”
This edition of Data Sheet was curated by Aric Jenkins.
