TikTok's fortunes take a turn for the better as Trump supports partnerships with Oracle and Walmart

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September 20 (Sunday) was supposed to be the day when the US government's ban on TikTok came into effect. The day before the ban came into effect, Trump himself said that he had "conceptually" approved the cooperation agreement between TikTok's parent company ByteDance and Oracle.

Los Angeles Times

At around 7:00 a.m. Beijing time on September 20, ByteDance announced that it had reached a principled consensus with ByteDance, Oracle, and Walmart on cooperation on TikTok so that 100 million users in the United States could continue to use it. The three parties will follow this consensus and reach a cooperation agreement that meets the requirements of U.S. and Chinese laws as soon as possible.

The U.S. Department of Commerce also officially announced that "in view of recent positive developments," the ban that was originally scheduled to take effect today will be delayed by one week to September 27.

At this point, we can see that TikTok's fate has turned around, and this cooperation agreement is much better than directly shutting down the business or selling it completely.

1. The cooperation model is similar to "Yunshang Guizhou"

In the mentioned cooperation model, Oracle will become ByteDance's "data compliance partner" in the United States, similar to Apple's data compliance program implemented by Guizhou Cloud.

TikTok is likely to conduct data compliance in California, Oracle's headquarters, or "build a new company in Texas" as Trump said. It is basically a "California in the Cloud" or "Texas in the Cloud".

With another partner, Walmart, the plan is to integrate Walmart’s e-commerce and advertising into TikTok, allowing Walmart to reach omnichannel users while providing business services to omnichannel users. Walmart said last month: “This will enable the development of our third-party market and advertising business.”

US media stated that this cooperation agreement will not be carried out in the form of a direct sale. Oracle and Walmart will hold significant shares in TikTok, which means that the parent company ByteDance will still retain some shares.

Compared with the situation ByteDance faced a month ago, this is already the "best" outcome with a major reversal.

2. Why oracle bone script?

After TikTok began to be forced to sell, Microsoft had been the favored acquisition leader until September 13, when Microsoft published a statement on its official blog that ByteDance had rejected its plan to acquire TikTok's US business.

As the ban deadline approached, the buyer who seemed to be the "most promising" suddenly dropped out.

The wording of Microsoft's official statement also shows that it is very sorry for the failed acquisition, but there have been reports before that ByteDance and Microsoft's offers did not match. Microsoft is also facing pressure from internal employees. In a vote of 250 Microsoft internal employees, 63% of employees did not support the transaction, and some employees even directly stated that "an acquisition under such circumstances is unethical."

Before this, Walmart had been working with Microsoft to bid for TikTok, but after Microsoft was rejected, Walmart has been in contact with TikTok and actively expressed its intention to cooperate in the acquisition.

Among other buyers, Oracle is one of the few companies with the financial strength to "acquire" TikTok. The editor has found the following reasons that have pushed Oracle to become the ultimate winner of this game.

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2. Shareholders behind the scenes

The Wall Street Journal reported that the three major shareholders behind ByteDance - General Atlantic, Sequoia Capital, and Coatue Management - are the driving forces behind Oracle. These three institutions are all members of ByteDance's board of directors and will hold shares in part of TikTok's new business.

Previously, Zoom's rapid growth during the pandemic also encountered data security disputes in the United States. Oracle took advantage of the opportunity to become Zoom's cloud service provider, which not only solved Zoom's data compliance issues, but also brought a new wave of business growth to Oracle. This is probably why ByteDance's three major shareholders chose Oracle to solve TikTok's data compliance issues in the United States.

The founder's good relationship with Trump

Oracle founder Larry Ellison is one of the few Trump supporters among technology companies. Earlier this year, he even hosted a fundraising event for Trump's campaign at his home.

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Larry Ellison, photo from Sina Technology, please delete if infringed

Trump has praised Larry Ellison more than once in public interviews. Even before Oracle expressed its intention to acquire TikTok, Trump directly mentioned the acquisition news in the interview, and clearly supported Oracle's acquisition of TikTok when the acquisition situation was still unclear.

Since it was Trump who targeted TikTok and launched a fierce attack, the good relationship between the founder and Trump is also an advantage for Oracle in the competition.

3. Urgency of “Acquisition”

Although it can no longer be called an "acquisition," Oracle's urgency in doing so is far greater than that of Microsoft, which first started the acquisition negotiations.

Microsoft wants to acquire TIkTok mainly to take over TikTok's advertising share, and also to grab TikTok's cloud computing service share from Google Cloud. TikTok currently has over 100 million users in the United States and is one of the apps with the greatest demand for cloud computing. In July this year, ByteDance just purchased $800 million of cloud computing services from Google Cloud.

Both of these goals will add icing on the cake to Microsoft's current business.

Oracle's urgency is much higher, with Microsoft currently ranked No. 2 among cloud computing infrastructure providers, while Oracle has slipped out of the top five.

This year, Oracle became a partner and service provider for Zoom. If it can also acquire TikTok's cloud services, these two apps, which are the hottest during the epidemic, will definitely bring new growth momentum to Oracle, which is crucial for Oracle facing weak growth. Because it is more urgent, Oracle will cooperate more with TikTok during the negotiation process.

At the beginning of the ban, everyone thought that TikTok faced only two options - being banned from sale or operation by the United States, or completely divesting its U.S. business.

More than a month has passed, and TikTok seems to have taken a third path, retaining part of TikTok's equity under the premise of cooperation.

Such an outcome is better but also more difficult for ByteDance. Although it has reached a cooperation agreement with Oracle and Walmart, this agreement still needs to pass the review of the United States and China. Only after it is fully passed can TikTok truly survive.

WeChat, which was banned on the same day as TikTok and was originally scheduled to be banned on September 20, also ushered in temporary safety due to the joint appeal of WeChat users in the United States. The California Circuit Court will issue an injunction to suspend the US government's ban on WeChat. However, WeChat changed its corporate WeChat name to WeCom before the ban came into effect to avoid part of the ban , and netizens jokingly said, "What does your ban on WeChat have to do with my WeCom?"

The intentions of these two bans are obvious. If ByteDance directly sells TikTok, it is likely to initiate a series of restrictions on Chinese companies going overseas. If ByteDance can withstand the pressure and complete the cooperation agreement and pass the risk, it will not only greatly ease ByteDance's own globalization pressure, but also bring more confidence to Chinese Internet companies going overseas.

What will be the future of TikTok still needs further attention...