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If data is the new oil, TikTok is a gusher. It has some 100 million users in the U.S. alone. Its AI, particularly its recommendation engine, is credited with driving engagement and the app's growth to nearly 700 million users worldwide.
When President Trump signed an executive order banning the Chinese-owned app last month, he pointed out why TikTok is especially valuable. The short-form video social media application collects "vast swaths of information from its users," Trump's executive order said. But it's not TikTok's data collection that bothers the U.S. -- it's who owns it.
The government doesn't want China using TikTok to sweep up information on U.S. customers. But if Microsoft, Oracle or Google's Alphabet were to acquire TikTok's U.S. operations, government concerns about data ownership may be alleviated. TikTok is owned by ByteDance Ltd. in Beijing.
Analysts and other industry observers see two primary benefits for an enterprise vendor to acquire TikTok's U.S. operations. Its AI technology and recommendation engine may have applications for HR and ERP systems, such as job recommendations or business intelligence about the trends and interests of its mostly young user base. Customer relationship software may benefit as well.
TikTok's data may also give Microsoft and Oracle, in particular, access to the types of customer data that are only available to the big social media platforms, such as Twitter and Facebook. The consumer market uses of TikTok are its leading application, according to analysts and other industry observers.
"We're really still a nation of consumers and that's why I think this has a lot of value," said Jonathan Crane, chief commercial officer at IPsoft Inc., which makes AI and cognitive tech systems. "TikTok really helps you envision what are people buying, what are they doing, what are their interests."
The value of TikTok data
For Oracle, TikTok will augment its existing advertising business; for Microsoft, its consumer products, said Blair Hanley Frank, principal analyst at ISG, a technology research and advisory firm. For Oracle, TikTok data may be used in its Data Cloud, a marketing intelligence platform.
It will take months for the enterprise vendor acquirer to cross-pollinate the consumer app with the business software, Frank said. But once that work is done, "enterprises could get access to advertising and consumer trends, improved advertising integration between the acquirer's CRM software and TikTok, and improved creation toolkits for marketing through TikTok."
Jonathan CraneChief commercial officer, IPsoft Inc.
TikTok's AI-enabled recommendation engine gets a lot of attention because of the app's remarkable growth.
In 2018, TikTok had 11.3 million U.S. monthly active users. Last October, it had 40 million U.S. users, and as of June, TikTok recorded 92 million monthly active users. It has approximately 50 million daily active users in the U.S., according to a lawsuit filed late last month against the U.S. over the administration's ban. Based on quarterly usage, 100 million Americans use the app, the lawsuit stated.
But a sale of TikTok's U.S. operations is far from certain.
ByteDance needs clearance from the Chinese government, which has restrictions on the export of AI technologies. There are also broad geopolitical issues at play.
A warning from China
The U.S. wants to bar Chinese telecom companies due to perceived security risks, but China sees U.S. efforts to do so as a way to "decouple" its technology development from China and therefore, from its profits, said China Daily, a government-owned English language daily publication, in an editorial on Thursday.
Without mentioning TikTok, China Daily warned that "it is naïve to believe that the U.S. will remain unscathed by its attempts to cut the reciprocal and mutually beneficial links with China."
Apart from the business-to-consumer value of TikTok, Microsoft's LinkedIn could gain in particular. The TikTok data about people and behavior could improve its job matching capabilities for LinkedIn job seekers, as well as deliver to recruiters "a more refined pool of potential hires," improving its efficiency, said Andrew MacMillen, a research analyst at Nucleus Research.
But data could also be used to inform Microsoft Dynamics 365, its ERP and CRM platform, and give the vendor access to something it doesn't have, namely "granular interpersonal data" that comes from owning a social network, MacMillen said.
Hernando Gomez, a principal in the management advisory services department at MBAF, a public accounting firm, sees clear advantages for Microsoft in owning TikTok because of its consumer reach and existing social network, LinkedIn.
TikTok's technology "can be applied to almost everything that is related to a consumer," Gomez said. Oracle could use the data and technology to develop new businesses and expand the capabilities of its existing technology.
Walmart is also reportedly partnering with Microsoft on a potential TikTok acquisition. Gomez sees TikTok's AI as powerful in its ability to build engagement.
"If you can bring that type of excitement, or engagement to a shopping experience online, that would be a huge boost," Gomez said.