TikTok appears to be closing in on a deal to sell its U.S. operations in the coming days, as the controversial, fast-growing social video app reels amid the Trump administration’s looming ban and the abrupt resignation of its chief executive, Kevin Mayer.
Mayer’s surprise exit came late Wednesday night as the company has been under immense pressure after Trump signed executive orders, including one that would require TikTok’s Chinese parent company, ByteDance, to divest TikTok’s U.S. operations by Nov. 12.
TikTok filed a lawsuit this week calling the order unconstitutional, and a separate lawsuit has also been filed on behalf of employees.
As TikTok’s troubles mount, multiple potential buyers are circling in hopes of tapping into the app’s enormous reach with young consumers.
Several potential bidders have emerged for TikTok, including a joint bid from Microsoft and retail giant Walmart, and a separate bid by Oracle Corp. Oracle founder Larry Ellison reportedly hosted a Trump fundraiser in February, making him one of the few tech titans to back the president, who has also publicly supported Oracle’s bid.
Walmart on Thursday confirmed its interest in a deal involving Microsoft and TikTok, in a pairing that one prominent analyst said gives the companies a major advantage in their pursuit of the tech firm’s U.S. business. Microsoft has said it is also exploring buying TikTok’s Canadian, Australian and New Zealand operations.
“The way TikTok has integrated e-commerce and advertising capabilities in other markets is a clear benefit to creators and users in those markets,” Walmart said in a statement. “We are confident that a Walmart and Microsoft partnership would meet both the expectations of US TikTok users while satisfying the concerns of US government regulators.”
TikTok could help Walmart in its efforts to compete with Amazon.com’s massive e-commerce platform by increasing its marketing clout, especially among the young. As the pandemic has driven more customers online, Walmart saw its e-commerce sales double in the last quarter.
A TikTok purchase would also be a major coup for Microsoft, which would get a popular new customer for its cloud computing business, and a boost to its advertising arm.
“In our opinion, this is the final piece of the puzzle that ultimately cements Microsoft successfully acquiring TikTok’s US operations for likely $35 billion to $40 billion,” Wedbush Securities analyst Daniel Ives said in a note.
Buying TikTok could help both Microsoft and Walmart get a leg up on the competition, analysts said.
Walmart has previously dabbled in digital media with the video-on-demand site Vudu, which it sold to Fandango earlier this year. Outside of video games, Microsoft’s efforts in entertainment have been modest. It wound down its Hollywood arm, Xbox Entertainment Studios, in 2014. Disney last year teamed with the company to use its Microsoft Azure cloud computing system for entertainment production.
“Both companies are battling with Amazon,” said Tal Chalozin, co-founder of ad-tech firm Innovid. “The two of them are almost like Transformers combining to fight.”
It’s less obvious why Oracle, the enterprise software company, would want to buy TikTok.
“It would be Ellison taking a risky shot at building a consumer strategy, but ultimately this would be like the Dodgers going after someone from the Lakers next season to add to their team,” Chalozin said.
Representatives of Microsoft and Oracle declined to comment.
Microsoft and Walmart’s bid comes at an uncertain time for TikTok.
Mayer joined the tech company only three months ago, after he left Walt Disney Co., where he ran the Burbank entertainment giant’s streaming business. His position at TikTok was supposed to bring more legitimacy to the app known for sparking silly viral dance crazes. TikTok had long faced scrutiny over its use of data and ties to China.
The service secured a foothold in the U.S. by becoming especially popular among teens and is expanding to a broader audience, most recently with a massive marketing campaign involving multiple stars.
The app has seen a surge in use as people shelter in place and look for ways to be entertained during the coronavirus crisis. The number of people using TikTok in the U.S. has grown dramatically, from 11.2 million monthly active users in January 2018 to 91.9 million users in June 2020, according to a recent court filing.
Mayer’s exit took the tech and entertainment industries by surprise and is seen as a blow to TikTok’s efforts to navigate the treacherous political waters.
“It’s more bad news for TikTok,” said Carl Tobias, a law professor at University of Richmond. “The whole idea was that he would be the face of the company and interface with the politicians in D.C. who politicized this. And maybe that was a tall order.”
Mayer wrote in a memo to staff on Wednesday night that he has always been “globally focused” in his work and “leading a global team that includes TikTok U.S. was a big draw for me.”
He was not only CEO of TikTok but also chief operating officer of ByteDance, giving him a prominent role at what was poised to become a major global tech and entertainment player. The U.S. government’s actions to break up the company promised to bifurcate his role.
“I understand that the role that I signed up for — including running TikTok globally — will look very different as a result of the U.S. administration’s action to push for a sell off of the U.S. business,” Mayer said in his note.
Vanessa Pappas, currently general manager of TikTok U.S., will become interim head.
In a statement, TikTok said, “We appreciate that the political dynamics of the last few months have significantly changed what the scope of Kevin’s role would be going forward, and fully respect his decision.”
As news spread about Mayer’s departure, it was another dose of drama for the company’s 1,500 U.S. employees, including those who work out of TikTok’s U.S. headquarters in Culver City.
“This is one more source of uncertainty,” said an employee who was not authorized to comment. “People are committed to the product, but what’s going on is beyond our control.”
The exit is also a setback for Mayer, who until recently was riding high at Disney because of the successful launch of Disney+, the Mouse House’s $7-a-month competitor to Netflix. The app has been a major success for Disney, soaring to more than 60 million subscribers globally since its November launch.
Mayer played a key role in growing Disney into what it is today, establishing a reputation as a master deal maker through acquisitions such as that of 21st Century Fox assets, Pixar Animation Studios, Marvel Entertainment and Lucasfilm.
Mayer left Disney after being passed over for the role of succeeding Bob Iger as chief executive after his 15-year run. The company’s board named former parks and products head Bob Chapek as CEO in February, shortly before the coronavirus hammered Disney’s business by shuttering movie theaters, theme parks and film productions.
His move to TikTok was not the first time he left Disney for an unexpected destination. In 2000, he left to run Playboy Enterprises’ digital subsidiary, where his stint was brief. He soon returned to Disney in 2005 after additional stints at Clear Channel and L.E.K. Consulting.
Nonetheless, Disney insiders were surprised by Mayer’s departure at the time because he appeared to have one of the most interesting jobs in Hollywood. TikTok was already controversial because of its China ties, though it wasn’t obvious to outsiders at the time how much of a political lightning rod the company would become.
“He left to become the Bob Iger of TikTok,” said Ted Chervin, co-managing director of Century City-based talent agency ICM Partners. But now, with TikTok facing heat from the U.S. government, “it became a much different beast,” he added.
It is unclear what Mayer will do next, but Chervin thinks Mayer is well positioned to land another CEO gig at a major company.
His resignation will probably increase anxiety among creators and employees who are concerned about what will happen when Trump’s first executive order against TikTok goes into effect on Sept. 20. That order could bar U.S. companies from placing ads on the app or potentially stop TikTok U.S. employees from getting paid.
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Kyle Hjelmeseth, president of G&B Digital Management, a firm that works with digital content creators, said he immediately got several messages from talent about Mayer’s departure.
“Overall this news is putting a lot of influencers, platforms and agencies in a nervous position of, ‘Did I put my eggs in the wrong basket?’” he said.
Trump, who has been waging a trade battle with China, says TikTok threatens national security. In the U.S., the app is used by 100 million people.
TikTok has maintained that the government has provided no evidence to support its claims and that its U.S. user data are stored in Virginia and backed up in Singapore. The company said it has not and will not give information to the Chinese government.
