After President Joe Biden signed a bill that could ban TikTok in the U.S., its Chinese owner ByteDance is considering selling the popular platform.
But a TikTok suitor would need more than both regulatory approval and the stomach to operate a social media company. It would also need the technical chops to rebuild its powerful content recommendation algorithm, which ByteDance plans to strip from the platform when it sells it.
This would lower the value of its U.S. business from $100 billion to $40 billion, according to Wedbush analyst Dan Ives.
The value of TikTok would dramatically change without the algorithms and makes the ultimate divestiture of TikTok a very complex endeavor with many potential financial bidders waiting anxiously for this process to kick off, Ives told ADWEEK.
ADWEEK spoke with investors, bankers, analysts and consultants who identified potential companies to buy TikTokand those who may choose to remain on the sidelines.
Antitrust scrutiny likely would keep Meta and Google on the sidelines, said Sanja Partalo, co-founder and general partner at S4S Ventures.
They also have the most to gain if TikTok shut down in the U.S or is acquired by an entity that has little experience scaling a social media platform and fumbles the execution. Sitting on the sidelines may be the strategic choice.
The telcos Verizon and AT&T could be the frontrunners to buy TikTok, should ByteDance choose to sell its U.S operations, according to Andrew Buckman, vice president of marketing and investor relations at Azerion.
TikToks massive user base, particularly its 45% of Gen Z demographic, presents a compelling opportunity for these wireless giants, who typically grapple with reaching and engaging with this audience.
This generation doesnt watch cable TV, listen to radio, or read newspaper, and gets its information from TikTok, said Buckman.
Acquiring TikTok would give these companies an advantage with access to massive user data and expanding its customer base, he said.
Still, TikTok without its algorithm is not an easy lift, and telcos might not have the expertise to rebuild it, Buckman said.
Microsoft nearly acquired TikTok in 2020, and it could re-enter the playing field, said Partalo.
Acquiring TikTok could provide Microsoft with a significant foothold in the social media space, complementing its existing portfolio of products and services and expanding its consumer-facing offerings, said Javier Rodriguez Horta, global marketing strategy practice lead at marketing consulting firm CvE.
They have an advertising business, a gaming business, both having synergies with TikToks business model and user base, Partalo added.
The tech giant is also riding the wave of a massive win, having successfully acquired Activision Blizzard last year, and Rodriguez Horta does not believe regulatory interference is a major threat to Microsoft right now.
If [antitrust] was a real roadblock, Microsofts legal team would have not wasted time in 2020, Rodriguez Horta said.
Others suggest that Microsofts focus on AI ventures, including its substantial investment of $13 billion in OpenAI, makes acquiring TikTok less of a priority.
TikTok doesnt play into its playbook, said Marc Goldberg, CEO of the consulting firm Stages Collective.
Oracle is a logical contender, because it is the primary cloud vendor for TikToks U.S. business.
In September 2020, Oracle and Walmart also secured tentative U.S. approval for a joint 20% acquisition of a new business named TikTok Global, the companies said in a joint statement. However, the Trump-sanctioned deal fell through after the change in presidential administration in early 2021.
In our view, given past interest and strategically, [it] would make a logical fit, said Ives.
Oracle co-founder Larry Ellisons son David Ellison, who is reportedly among the contenders to acquire Paramount Global, might also make a play.
If that falls through, he has the backing to buy TikTok, said a banker who is leading a deal that involves TikTok, speaking on condition of anonymity.
Amazon has the firepower to get the deal done, and it doesnt own a social network of its own. This means it wont trigger monopoly or antitrust issues, said Darren Lopes, co-founder of 10PM Curfew, social-first publisher that owns and operates more than 60 lifestyle channels.
An acquisition might also be advantageous to Amazon, as TikTok recently launched a competitive online marketplace Shop.
Amazon already has the server infrastructure to support all the TikTok videos and incentive to stop their ecommerce growth and roll it up into their own initiatives, said Lopes. Moreover, TikTok has been a massive driver with their Amazon Finds videos, but now with TikTok Shop, it has driven away revenue and traffic from Amazon.
Meanwhile, Amazons history of creating sophisticated recommendation algorithm that has fueled its revenue positions the company well to potentially rebuild TikToks algorithm. With its financial prowessgenerating nearly $575 billion in revenue last yearAmazon has the capacity to execute such a venture, said Stages Collectives Goldberg.
Backed by private equity and consortiums, former Treasury secretary Steven Mnuchin is expected to put together a groupthat bids for TikTok, Mnuchin told CNBC in March.
Meanwhile, Anschutz Entertainment Group (AEG), led by Philip Anschutz of the Anschutz family and boasting a net worth of $15.3 billion, according to Forbes, also owns assets like Ticketmaster. According to the banker sources, AEG has the financial capability to pursue the acquisition of TikTok.
Still, the essence of TikTok lies in its core content recommendation algorithm and its uncanny ability to keep its users glued to their screens.
Without that, any potential buyer is looking at [an] asset thathas a massively scaled user base, and large and fast-growing share of advertising spendtoday. Buttomorrow, may not have either, said Partalo.
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