Conquest of mind share: With TikTok, Microsoft aims for the admiration of tweens

Microsoft made the announcement after its chief executive, Satya Nadella, talked with President Trump, who had threatened to ban the hugely popular social media company, which is owned by China’s ByteDance, because of national security fears.

A deal for TikTok ‚whose app featuring video clips has become wildly popular among young smartphone users‚ could give Microsoft, a company best known for databases and operating systems, control of one of the largest and most influential social networks in the country.

Microsoft is viewed as your grandpa’s company, and it is trying to change that, said Dan Ives, a managing director and an analyst at Wedbush Securities. “Microsoft goes from an uncool company to many under 25 to potentially as hip as TikTok if they get this done.” Microsoft declined to comment beyond its blog post.

Under Nadella, who became chief executive in early 2014, Microsoft has successfully turned the company into a giant of cloud computing. It has a market value above $1.5 trillion and more than $130 bn in cash. But Microsoft has not had a clear path to serving young consumers beyond its video gaming business. The company is behind the Xbox video game console and owns Minecraft, the hugely popular building game. As social media grew into enormous consumer businesses ‚ Facebook alone is worth more than $720 bn‚ Microsoft largely missed out. Under Nadella’s tenure, Microsoft’s biggest acquisitions have been of online communities, those whose networks hooked users but also required a complex cloud-computing infrastructure that Microsoft could provide. In 2014, it bought the Swedish company that created Minecraft for $2.5 bn, and in 2016, it acquired LinkedIn, the professional social network, for $26.2 bn. In 2018, Microsoft bought GitHub, an online network for software developers, for $7.5 bn.

If history is a guide, teens and tweens may not need to worry that Microsoft will mess up the product they love. With those recent acquisitions, Microsoft increased the financial and tech resources at the companies but largely let them run independently. When Christopher Wanstrath, co-founder of GitHub, discussed the deal in a call with investors after it was announced, he said the way Microsoft handled Minecraft and LinkedIn showed him how serious they are about growing new businesses while maintaining their independence and identity. Analysts say that patient approach has been successful. Until the coronavirus pandemic, LinkedIn had been growing faster under Microsoft’s ownership than before it was acquired.

TikTok, with its fun artificial intelligence tools and more than 100 million users in the United States, would most likely fit that pattern. To be successful, its owner would need to run the technology and sustain its online community. The deal being discussed involves purchasing TikTok offices in the United States, Canada, Australia and New Zealand. ByteDance, the parent company of TikTok, would continue to own the social media app’s offices in Beijing.

Microsoft also offers something other giant tech rivals cannot: peace in Washington. Amazon, Facebook and Google have to tread careful amid antitrust scrutiny, making a blockbuster deal with obvious political baggage unappealing. Other than its gaming business, Microsoft is mainly in business markets.