What would Microsoft do with TikTok? Hit social video app goes against recent trend for tech giant

Microsoft CEO Satya Nadella has been leading the company back to its roots in business software and services, plus cloud computing. (GeekWire Photo Illustration)

Welcome to the Social! 

That was the motto for the online community that Microsoft aspired to create around its Zune music player nearly 15 years ago. But the device and its companion social portal were destined to become just one of the tech giant’s failed attempts to launch or build consumer social networks, devices and apps.

Anybody remember Kin? How about Windows Phone?

OK, so this isn’t entirely fair. It completely overlooks the Microsoft Xbox ecosystem of hardware, software and subscription services — one of the most durable consumer electronics brands on the planet. Not to mention consumer and home versions of Windows and Office, and of course the entire Microsoft Surface family of computers and devices.

But the clear trend at Microsoft under CEO Satya Nadella has been to focus on the company’s enterprise roots, cutting short its fanciful forays into consumer technology. Witness the recent decision to discontinue the Mixer game streaming service and the company’s decision this week to pull the plug on its Cortana voice assistant apps for iOS and Android.

All of this makes the reports that Microsoft is in negotiations to buy the U.S. operations of TikTok, the breakout social video app, a head-scratcher on multiple levels. The reports come as President Trump threatens to ban TikTok in the U.S., citing suspicions that the company’s China-based parent, ByteDance, is sharing user data with the Chinese government.

It’s not that Microsoft shies away from big bets in social networking. The biggest deal in company history, the $26 billion acquisition of LinkedIn, was a social network, after all. But that was all about business and professional users, with clear connections back to many of Microsoft’s core products.

That said, as noted by some longtime Microsoft followers, there could be potential connections between TikTok and Xbox and other consumer initiatives at Microsoft.

“But before you (like me) immediately dismiss these TikTok rumors as sheer lunacy, it’s worth thinking this through,” writes Mary Jo Foley, the longtime Microsoft beat reporter. “Even though Microsoft is all about business software and services, there are a couple of parts of the company focused on trying to make Microsoft more appealing to a younger audience.”

The recent surge in Microsoft’s Surface and games business could embolden the company to make another bet on a big consumer acquisition.

With hundreds of millions of active users, TikTok could give Microsoft access to a large group who otherwise might not be exposed to its products on a daily basis.

And there’s also the possibility that Microsoft is simply being opportunistic. The pressure from the Trump administration creates a unique opportunity to pick up a well-known app at a possible discount from its normal valuation. With Facebook, Google, Apple and Amazon under intense antitrust scrutiny, due in part to past acquisitions, Microsoft is one of the few companies with the means and the potential regulatory freedom to make such a deal.

At the very least, it seems to behoove Microsoft to explore the possibility. For the record, the company has so far declined to comment.

“An aggressive acquisition (or strategic investment) of TikTok would be Microsoft throwing its hat in the ring and trying to compete with other tech giants such as Facebook in a new avenue of growth for the next decade for its consumer business,” said Dan Ives, an analyst at Wedbush, as quoted by the Wall Street Journal.

No matter which direction it goes, this will be a fascinating story to watch unfold, full of business and political intrigue — and it could happen quickly. Axios reports Saturday morning that Trump “has a deal on his desk” to clear the way for Microsoft to buy TikTok’s U.S. operations.

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