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Walmart joins Microsoft in pursuit of deal to acquire TikTok

By Matthew Boyle

Walmart Inc. has teamed up with Microsoft Corp. in a joint bid to acquire TikTok, a surprise move that signals the retail giant’s desire to become a force in technology and media and reach younger shoppers.

Walmart said in an emailed statement that the move could help grow its third-party online marketplace unit along with its nascent advertising arm, two areas that Chief Executive Officer Doug McMillon has said he’d like to expand. The two companies already work together, as Walmart uses Microsoft’s Azure cloud platform across the entire company.

Walmart’s shares jumped as much as 3.6% to $135.47 in New York following news of the joint pursuit of TikTok, the biggest intraday gain since July 7.

Microsoft has been in discussions for weeks to buy TikTok’s business in the U.S., Canada, Australia and New Zealand. Other companies have also emerged as potential bidders, including Oracle Corp. and Twitter Inc. It’s unclear how far those discussions have gone. Microsoft is the only company to publicly confirm acquisition talks.

Walmart’s interest in the popular app shows how serious McMillon is about moving the world’s biggest retailer into the faster-growing arena of media and online content. It has partnered, and bought a stake in, Israeli video-production company Eko, which has developed things like interactive toy catalogs for Walmart.

Vudu Sale

Other moves have failed, though: Walmart sold it video-streaming service Vudu earlier this year, as the business had been leapfrogged by subscription services like Netflix and Hulu.

TikTok, owned by China-based ByteDance Ltd., is fielding interest in its operations in the U.S. and a handful of other countries. President Donald Trump recently ordered ByteDance to sell TikTok’s U.S. assets within 90 days.

In Video: Walmart Inc. has teamed up with Microsoft Corp in a joint bid to acquire TikTok

ByteDance to place TikTok’s global headquarters in US to escape Trump ban

China‘s ByteDance has decided to place the headquarters of its popular video platform app TikTok in the US in order to escape President Donald Trump‘s ban, official media here reported on Wednesday.

As per the plan presented to the US officials by ByteDance, TikTok will remain the majority shareholder of the new US headquartered company, and tech firm Oracle will be a minority shareholder, state-run CGTN TV reported.

Other potential US investors such as the world’s largest retailer Walmart, which had launched a joint bid with Microsoft, would own a minority stake, the report said.

People familiar with the negotiation process emphasised that specific details of the plan may change.

Independent third parties will serve as directors of the new company, and ByteDance will continue to control TikTok and its core algorithms.

In order to allay US concerns about “national security,” TikTok’s data from America will be stored in the US and Oracle will serve as the data service provider, the report said.

“There’s also a commitment to create TikTok Global as a US headquartered company with 20,000 new jobs,” Treasury Secretary Steven Mnuchin said on Monday in an interview with CNBC, adding that Oracle will be the trusted technology partner.

ByteDance on Monday said it will not sell TikTok’s US operations to Microsoft or Oracle, nor will the company give the source code to any U.S. buyers.

On August 6, Trump issued an executive order stating that TikTok’s US business must be sold before September 20, and threatened to block the video app in the US.

TikTok was among the 59 Chinese apps banned by India in June this year saying they were prejudicial to sovereignty, integrity and security of the country. Later India followed up with ban on 118 more Chinese apps.

White House’s Meadows raises doubts about plan for Chinese-run TikTok

WASHINGTON: White House Chief of Staff Mark Meadows said on Thursday that if TikTok remains predominantly Chinese-run under the Oracle Corp deal, that would not meet President Donald Trump’s objectives.

Meadows said the administration is still looking at details of the deal and whether it meets national security thresholds, referring to plans by China‘s ByteDance to keep a majority stake in the U.S. operations of the popular social media platform. The proposal calls for Oracle Corp to become a “trusted technology provider” for TikTok’s U.S. operations.

On the downside, blocking TikTok opens a can of worms for Facebook, Google

By David Fickling

Be careful what you wish for.

You might think that the Trump administration banning Chinese ownership of video-sharing app TikTok in the U.S. on national security grounds would be a win for social-media competitors such as Facebook Inc., Alphabet Inc. and Twitter Inc. Selling Bytedance Inc.’s operations in several major English-speaking markets to Microsoft Corp. raises the hope that TikTok might suffer the sort of benign neglect that’s neutered other Microsoft-owned media assets, such as LinkedIn and Skype. Facebook lost no time in launching a copycat video-sharing service to compete.

The decision opens a Pandora’s Box that digital platforms might one day wish had been kept closed. By citing data privacy and foreign influence to justify its restrictions, the U.S. has thrown a spotlight on issues that Silicon Valley’s social media companies have done well to keep in the shadows as they’ve grown to world-spanning power.

While it’s tempting to label President Donald Trump’s actions around TikTok a “shakedown,” his administration hasn’t been uniquely hostile to foreign investment, despite a barrage of hot rhetoric and high-profile cases around Huawei Technologies Co. and ZTE Corp. Even after a law was passed in 2018 to tighten national security scrutiny by the Committee on Foreign Investment in the U.S., Washington’s takeover-review panel, investigations by last year were being initiated at a rate similar to during President Barack Obama’s second term. Foreign direct investment in the U.S., meanwhile, has continued to tick upward around long-term trend rates.

Media companies have always been regulated more tightly, especially in relation to foreign ownership. Rupert Murdoch had to give up Australian citizenship to buy a group of U.S. television stations in 1985, and little has changed since. When a British-Polish couple spent $8,000 buying a tiny radio station serving the upstate New York town of Tupper Lake in 2018, they needed to apply for a special waiver from the Federal Communications Commission.

In that context, the lax treatment of digital media platforms looks like a loophole that’s never been closed. TikTok hasn’t needed to get a permission note from the FCC to get a lock on the attention of tens of millions of Americans, any more than Facebook has needed to jump media-ownership hoops in other countries to become the prime news source to more than 2.4 billion active users outside the U.S.

Part of the reason for the distinction comes down to a simple issue of enforcement. Broadcasters are treated as special cases because they depend on licenses to the limited public radio spectrum, giving governments leverage that they don’t have over print and digital companies.

Still, behind all media regulation is a recognition of the industry’s importance in forming a country’s public sphere and shaping the direction of political debate. That’s an awkward space for democratic governments, given how it edges close to controls on freedom of speech. Historically, the solution has been to use antitrust powers to prevent any player getting too large an audience, combined with foreign investment and local-content rules to prevent outsize control by overseas owners.

Those regulations were designed for an era that had never conceived of Facebook, though. Thanks to that lack of oversight and decades of lobbying, the Silicon Valley companies that are now the world’s largest media businesses have been more or less exempt from the regulation that their print-and-broadcast peers still deal with.

The extent to which this has been the case is remarkable. Even among authoritarian countries, China is unusual for banning U.S. digital platforms. People in Vietnam, Saudi Arabia and Russia are respectively among the biggest users of Facebook, Twitter and Instagram. That’s been a quiet victory for companies that make billions in revenue outside the U.S. The attack on TikTok has made this status quo far more difficult to maintain.

In Europe, privacy issues have already spawned the General Data Protection Regulation that now puts cookie pop-ups onto every website you visit. The European Union’s antitrust chief, Margrethe Vestager, has repeatedly warned that breaking up tech giants remains on the table, if only as a “last resort.”

It would be better for Silicon Valley’s social media companies if they could hold on a little longer to their fraying image as innocuous providers of cat videos and inspirational quotes, rather than under-regulated behemoths with the power to sway electorates. By putting that issue so firmly on the agenda, the Trump administration hasn’t done them any favors.

Aspiring TikTok buyers pursue four options in effort to revive talks

TikTok‘s prospective buyers are discussing four ways to structure an acquisition from its Chinese owner ByteDance, which include buying its U.S. operations without key software, after Beijing stalled a deal which could be worth $30 billion, sources said.

Other options being considered include asking for Chinese approval to pass TikTok’s algorithm on to the acquirer of the short video app’s U.S. assets, licensing the algorithm from ByteDance, or seeking a transition period from a U.S. national security panel overseeing the deal, three sources said.

ByteDance had been looking to pick a buyer for TikTok assets by this week so it can finalize a deal by mid-September and comply with President Donald Trump‘s order to pest them, after U.S. officials raised concerns over the safety of the personal data of U.S. citizens handled by TikTok.

“TikTok is loved by 100 million Americans because it’s a home for entertainment, self-expression, and connection. We’re committed to continuing to bring joy to families and meaningful careers to those who create on our platform for many years to come,” a TikTok spokeswoman said in a statement.

Beijing last week updated its export control rules to restrict the sale of technology such as the one used by TikTok to recommend videos to users, raising questions over whether it would veto a deal and giving prospective buyers Microsoft and Oracle pause for thought.

ByteDance and the bidders for the TikTok assets are now discussing four ways to structure the deal, the sources, who requested anonymity, told Reuters.

It is not clear which, if any, of the options will be pursued. As days pass, the odds of a deal lengthen as TikTok faces a U.S. ban on Sept. 20 if no sale agreement has been reached. It has challenged this ban in court.

One possibility being discussed is to sell TikTok without the algorithm it uses to make recommendations to users. While this would circumvent China’s export control rules, it would present a significant gamble for Microsoft and Oracle, which would have to quickly come up with a substitute.

Another option is to negotiate a transition period of up to a year with the Committee on Foreign Investment in the United States (CFIUS), which is overseeing the deal talks, the sources said. It is not clear, however, whether China’s new rules would allow this in the time frame required.

A third option is seeking approval from China to pass on TikTok’s algorithm to the buyer of its U.S. assets, the sources said. This would amplify the geopolitical risk, given worsening relations between the world’s two largest economies over trade, cyber security and the spread of the coronavirus.

The fourth scenario involves ByteDance licensing the algorithm to the buyer of the TikTok assets, the sources said. However, this could worry CFIUS, which wants ByteDance to forego any relationship it has with TikTok in the United States.

ByteDance, Microsoft and Oracle declined to comment. The White House, CFIUS and China’s Commerce Department did not immediately respond to requests for comment.

TikTok is functionally and technically similar to ByteDance-owned Douyin, which is available only in China, and shares technical resources with it and other ByteDance-owned properties, sources have previously said.

While the code for the app, which determines the look and feel of TikTok, has been separated from Douyin, algorithms for moderating and recommending content and the management of user profiles are shared.

DANCE TRACKED?
While TikTok is best known for videos of people dancing going viral among teenagers, U.S. officials have expressed concern that user information could be passed to Beijing.

TikTok has said it would not comply with any request to share user data with the Chinese authorities.

ByteDance has been in talks to sell TikTok’s North American, Australian and New Zealand operations since last month. And in a sign of founder and CEO Zhang Yiming’s concern, TikTok engineers were told last week to make contingencies should it need to shut down its U.S. operations.

Walmart Inc said last week it was joining Microsoft in its bid for TikTok’s U.S. assets, hours after the app’s recently named chief executive, Kevin Mayer, said he would step down.

Oracle, whose Chairman Larry Ellison is one of the technology world’s few supporters of Trump, has partnered with some of ByteDance’s investors, including General Atlantic and Sequoia, on its bid for the TikTok assets.

China’s ByteDance says TikTok will be its subsidiary under deal with Donald Trump

NEW YORK/BEIJING: China’s ByteDance said on Monday that TikTok‘s global business will become its subsidiary, even as Oracle Corp and Walmart Inc said over the weekend that they and US investors would own the majority of the video app following a deal with U.S. President Trump‘s administration.

Trump signed an executive order on Aug. 14 giving ByteDance 90 days to sell TikTok, amid concerns that the personal data of as many as 100 million Americans that use the app could be passed on to China’s Communist Party government. On Saturday, he said he supported a deal in principle that would allow TikTok to continue to operate in the United States.

Accounts of the deal differ. ByteDance said on Monday that it will own 80% of TikTok Global, a newly created U.S. company that will own most of the app’s operations worldwide. Oracle and Walmart, which have agreed to take stakes in TikTok Global of 12.5% and 7.5% respectively, had said on Saturday that majority ownership of TikTok would be in American hands.

ByteDance in its statement on Monday said it was a “rumor” that U.S. investors would be TikTok Global’s majority owners and that ByteDance would lose control over TikTok. Oracle declined to comment on ByteDance’s statement, while Walmart did not respond to a request for comment.

Some sources close to the deal have sought to reconcile the discrepancy by pointing out that 41% of ByteDance is owned by U.S. investors, so by counting this indirect ownership TikTok Global would be majority owned by U.S. parties. One of the sources said the deal with Oracle and Walmart values TikTok Global at more than $50 billion.

TikTok also confirmed plans for an initial public offering of TikTok Global. The Beijing-based firm said TikTok Global’s board of directors will include ByteDance founder Zhang Yiming as well as Walmart’s chief executive Doug McMillon and current directors of ByteDance. The company declined to further comment on who else would be among the directors.

Oracle and Walmart said in a joint statement on Saturday that four out of the five board of directors will be Americans.

The current plan for TikTok Global does not involve any transfer of algorithms or technologies, and Oracle will be able to inspect TikTok U.S.’s source code, ByteDance said. This is akin to U.S. companies such as Microsoft Corp sharing their source code with Chinese technology experts, ByteDance added. Oracle and Walmart have said all of TikTok’s technology will be in possession of TikTok Global.

ByteDance also said a $5 billion payment of taxes TikTok Global is reportedly supposed to make to the U.S. Treasury is based on estimated income and other taxes the company will need to pay over the next few years and has nothing to do with the deal reached with Oracle and Walmart.

Trump last week had said there would be a $5 billion U.S. education fund as part of the deal but ByteDance has said it was not aware of this.

ByteDance owning the majority of TikTok Global and the algorithms means that ByteDance is “not out of the game” and has avoided the worst-case scenario, China’s state-run newspaper Global Times said in an editorial published on Sunday.

Shen Yi, a Fudan University professor, said in a separate article published in the Global Times on Monday that Trump’s nod to the deal “could even been seen as a reversal of U.S. President Donald Trump’s executive order issued in August” and that it was helped by a “concerted effort” by the Chinese government, ByteDance and U.S. domestic forces.

“If the Trump administration makes more moves to block the deal, it may encounter direct checks and balances from interest groups of Wall Street.”

China preparing an antitrust investigation into Google: Sources

BEIJING/SINGAPORE/SHENZHEN: China is preparing to launch an antitrust probe into Alphabet Inc‘s Google, looking into allegations it has leveraged the dominance of its Android mobile operating system to stifle competition, two people familiar with the matter said.

The case was proposed by telecommunications equipment giant Huawei Technologies Co Ltd last year and has been submitted by the country’s top market regulator to the State Council’s antitrust committee for review, they added.

A decision on whether to proceed with a formal investigation may come as soon as October and could be affected by the state of China’s relationship with the United States, one of the people said.

The potential investigation follows a raft of actions by U.S. President Donald Trump‘s administration to hobble Chinese tech companies, citing national security risks.

This has included putting Huawei on its trade blacklist, threatening similar action for Semiconductor Manufacturing International Corp and ordering TikTok owner ByteDance to pest the short-form video app.

It also comes as China embarks on a major revamp of its antitrust laws with proposed amendments including a dramatic increase in maximum fines and expanded criteria for judging a company’s control of a market.

A potential probe would also look at accusations that Google’s market position could cause “extreme damage” to Chinese companies like Huawei, as losing the U.S. tech giant’s support for Android-based operating systems would lead to loss of confidence and revenue, a second person said.

The sources were not authorised to speak publicly on the matter and declined to be identified. Google did not provide immediate comment, while Huawei declined to comment.

China’s top market regulator, the State Administration for Market Regulation, and the State Council did not immediately respond to requests for comment.

EUROPE’S EXAMPLE

The U.S. trade blacklist bars Google from providing technical support to new Huawei phone models and access to Google Mobile Services, the bundle of developer services upon which most Android apps are based.

Google had a temporary licence that exempted it from the ban on Huawei but it expired in August.

It was not immediately clear what Google services the potential probe would focus on. Most Chinese smartphone vendors use an open-source version of the Android platform with alternatives to Google services on their domestic phones. Google’s search, email and other services are blocked in China.

Huawei has said it missed its 2019 revenue target by $12 billion, which company officials have attributed to U.S. actions against it. Seeking to overcome its reliance on Google, the Chinese firm announced plans this month to introduce its proprietary Harmony operating system in smartphones next year.

Chinese regulators will be looking at examples set by their peers in Europe and in India if it proceeds with the antitrust investigation, the first source said.

“China will also look at what other countries have done, including holding inquiries with Google executives,” said the person.

The second source added that one learning point would be how fines are levied based on a firm’s global revenues rather than local revenues.

The European Union fined Google 4.3 billion euros ($5.1 billion) in 2018 over anticompetitive practices, including forcing phone makers to pre-install Google apps on Android devices and blocking them from using rivals to Google’s Android and search engine.

That decision prompted Google to give European users more choice over default search tools and giving handset makers more leeway to use competing systems.

Indian authorities are looking into allegations that Google is abusing its market position to unfairly promote its mobile payments app.

US restricts technology sales to Chinese semiconductor giant SMIC

Washington has ordered US companies to seek permission before selling their technologies to Chinese semiconductor giant SMIC, its latest salvo in the battle for technological dominance over Beijing, the Wall Street Journal reported Saturday.

The Department of Commerce “has told US computer-chip companies that they must obtain licenses before exporting certain technology to China’s largest manufacturer of semiconductors,” according to the business daily.

The new rules were announced in a letter to the industry Friday, which says that “exports to Semiconductor Manufacturing International Corp. or its subsidiaries risk being used for Chinese military activities,” the report continued.

The newspaper said the administration of US President Donald Trump has “grown more concerned about Beijing’s practice of leaning on private companies to advance its military aims.”

The Commerce Department did not immediately respond to a request for comment by AFP.

The report comes as the White House says it will not back down from a plan to ban new US downloads of TikTok, the popular Chinese-owned video-sharing app, over what it says are national security concerns, setting up a court showdown ahead of a Sunday deadline.

For years China and the US have been scrapping for tech dominance.

SMIC is key to Beijing’s ambition to someday achieve semiconductor self-reliance. Analysts say China’s dependence on foreign — including US-made — chips hinders that national goal.

The issue was brought into stark relief earlier this year by the US campaign to hobble Chinese telecom giant Huawei, which Washington fears could allow China’s security state to tap into global telecoms networks.

The US Commerce Department in May announced plans to cut off Huawei’s access to global semiconductor supplies, which the company said would threaten its “survival.”

TikTok sues over ban ordered by Donald Trump

SAN FRANCISCO: Video app TikTok said on Monday it had filed a lawsuit challenging the US government’s crackdown on the popular Chinese-owned platform, which Washington accuses of being a national security threat

As tensions soared between the world’s two biggest economies, President Donald Trump signed an executive order on August 6 giving Americans 45 days to stop doing business with TikTok’s Chinese parent company ByteDance — effectively setting a deadline for a sale of the app to a US company.

“Today we are filing a complaint in federal court challenging the administration’s efforts to ban TikTok in the US,” the company said in a blog post.

TikTok argued in the lawsuit that Trump’s order was a misuse of International Emergency Economic Powers Act because the platform — on which users share often playful short-form videos — is not “an unusual and extraordinary threat.”

The executive order “has the potential to strip the rights of that community without any evidence to justify such an extreme action,” the suit contended.

“We believe the administration ignored our extensive efforts to address its concerns, which we conducted fully and in good faith even as we disagreed with the concerns themselves,” TikTok said.

TikTok’s kaleidoscopic feeds of clips feature everything from dance routines and hair-dye tutorials to jokes about daily life and politics.

The app has been downloaded 175 million times in the US and more than a billion times around the world.

Trump claims TikTok could be used by China to track the locations of federal employees, build dossiers on people for blackmail, and conduct corporate espionage.

The company has said it has never provided any US user data to the Chinese government, and Beijing has blasted Trump’s crackdown as political.

The US measures come ahead of November 3 elections in which Trump, behind his rival Joe Biden in the polls, is campaigning hard on an increasingly strident anti-Beijing message.

“The administration failed to follow due process and act in good faith, neither providing evidence that TikTok was an actual threat, nor justification for its punitive actions,” the company said.

“We believe the administration’s decisions were heavily politicized, and industry experts have said the same.”

Trump has increasingly taken a confrontational stance on China, challenging it on trade, military and economic fronts.

Shortly after Trump announced his moves against TikTok this month, the United States slapped sanctions on Hong Kong’s leader over the Chinese security clampdown after last year’s pro-democracy demonstrations.

Microsoft and Oracle are possible suitors for TikTok’s US operations.

Reports have said Oracle — whose chairman Larry Ellison has raised millions in campaign funds for Trump — was weighing a bid for TikTok’s operations in the US, Canada, Australia and New Zealand.

The Trump administration has also given ByteDance a 90-day deadline to pest TikTok before the app is banned in the United States.

The measures move away from the long-promoted American ideal of a global, open internet and could invite other countries to follow suit, analysts told AFP previously.

“It’s really an attempt to fragment the internet and the global information society along US and Chinese lines, and shut China out of the information economy,” said Milton Mueller, a Georgia Tech professor and founder of the Internet Governance Project.

TikTok-owner ByteDance to rake in $27 billion in ad revenue by year-end-sources

TikTok-owner ByteDance is on track to generate at least 180 billion yuan ($27.2 billion) in advertising revenue in China this year, which will cement its no. 2 spot in China’s digital ad market, two people with knowledge of the matter said.

The company’s overall revenue goal for 2020 is around $30 billion, Reuters previously reported, which means ByteDance’s ad revenue in China, accounting for the bulk of its total revenue, is in line with the company’s plan.

While TikTok is what ByteDance is best known for globally, the app contributes little to the Chinese company’s revenue overall. Douyin, the Chinese version of TikTok, contributes nearly 60% of ad revenues, followed by news aggregator Jinri Toutiao at 20% and long-form video platform Xigua at less than 3%, according to one of the sources.

ByteDance declined to comment.

ByteDance, one of the few Chinese companies with global reach, is currently battling with Washington over plans to force it to pest TikTok’s U.S. operations because of Washington’s national security concerns over the data of more than 100 million U.S. users.

ByteDance overtook Baidu to become China’s second largest digital ad player in the first half of 2019 with 23%($7.6 billion) of the total digital ad spend in the country, according to consultancy R3, with Alibaba Group in first place, raking in $10.9 billion or 33%.

The gap between ByteDance and Alibaba has been narrowed this year, according to the second source. Although ByteDance did not disclose ad revenue for 2019, Reuters has reported it generated a total revenue of $16 billion in 2019.

As ByteDance pursues its global ambitions it is looking to step up investing in three business priorities next year – e-commerce, search and longer-form videos – said the source.

It plans to invest a total of 10 billion yuan on Xigua next year, its longer form video app, with the aim of increasing the number of daily active users to over 100 million, the first source said.

Douyin’s e-commerce platform, one of the fastest-growing sectors within the company, is projected to hit around 150 billion yuan in gross merchandise value (GMV) this year, according to both sources, who declined to be named as the information had not been made public.

The final numbers will be adjusted at the end of the year as many important campaigns such as year-end sales haven’t been officially launched yet, the people said. Douyin held its first major shopping festival on Wednesday, in tandem with Alibaba’s mega shopping event Singles’ Day.

Douyin’s rival Kuaishou, which filed for a Hong Kong initial public offering last week, reported total revenue and ecommerce GMV for the first half of this year of 25.3 billion yuan and 109.6 billion yuan respectively.

In the search arena, ByteDance launched Toutiao Search for the Chinese market last August to take on China’s search engine giant Baidu. It has since hired experts including former Baidu executives to improve its platform’s architecture and range of search results.

ByteDance is in talks with investors to raise around $2 billion in a new financing round that will value it at $180 billion after the investment, more than double its valuation in the last fundraising round two years ago, Reuters has reported.