Microsoft buys TikTok – then what?

A Microsoft acquisition of TikTok’s U.S. subsidiary would hasten the short video platform’s evolution as a mainstream retail solution.

Microsoft has confirmed it is in negotiations to purchase the TikTok service in the U.S., as well as Canada, Australia, and New Zealand. This would result in Microsoft owning and operating TikTok in these markets.

The Trump administration has threatened to ban the short-video-sharing social network owned by Chinese entertainment company ByteDance. Microsoft taking it over in the U.S. would resolve security concerns regarding TikTok’s possible links to the Chinese Communist Party and open a new era for TikTok in domestic digital retail. Here are three ways this purchase would likely affect the U.S. retail industry.

Gain even more popularity with U.S. retailers

TikTok is thought to have as many as 80 million U.S. users, most of them members of the increasingly desirable Gen Z. Retailers will always go where customers - especially those in their teens and early 20s – are, and many major U.S. retailers have already launched TikTok promotional campaigns.

However, the potential for a domestic ban of the social platform and lingering concern over its connections to the Chinese government (TikTok maintains data from American users is stored in servers based in the U.S. and Singapore and that its data centers are not located within China) still loom. Remove these concerns and it is likely U.S. retailer presence on TikTok would become as ubiquitous as that on Facebook, Twitter, Instagram, or YouTube. 

Move beyond Gen Z

As anyone with children in the Gen Z demographic knows, TikTok is a youth-driven phenomenon. To paraphrase 1960s activist Jack Weinberg, its users’ mantra could be “Don’t trust anyone over 25.”

Microsoft is nothing if not a mass-market technology company. The company would surely appreciate the exposure to (and personal and behavioral data of) the Gen Z demographic a TikTok acquisition would enable. But most likely, it has already developed strategies to introduce TikTok to a wider age demographic. Integrations with Microsoft’s LinkedIn professional social network, as well as its Azure and Dynamics 365 digital commerce platforms, are just a few possible multigenerational initiatives that come to mind.

A whole new world

TikTok has been gradually increasing the amount of in-app commerce it conducts in the U.S. in the last couple of years. Globally, data from Sensor Tower indicates the company generated $78 million of in-app purchases in April 2020, although only around $6 million of that came from the U.S. But retailers in the U.S. have been piloting sales initiatives within TikTok, often in partnership with Gen Z social influencers.

If Microsoft purchases TikTok in the U.S., expect exponential growth in its usage as a platform for both e-commerce and recruiting (see above reference to integrations with LinkedIn and Microsoft e-commerce solutions). Microsoft is simply too vast an organization with too many highly-developed retail partnerships for a TikTok acquisition to not leverage those assets in pursuit of a new digital commerce vehicle.