A series of under-appreciated risks make acquiring TikTok anything but a sure thing. The bidders are reportedly now considering buying TikTok without the algorithm, a sign they're not approaching this deal with the necessary level of sophistication.
As TikTok owner ByteDance prepares to sell the app’s U.S. operation, some are already calling the deal a bargain, or the next Instagram. But this acquisition is filled with risks that the popular discussion has largely ignored.
A social app is a delicate piece of merchandise, one that will break in the hands of people who don’t know what to do with it. The leading bidders — Oracle, and a combination of Microsoft and Walmart — are understandably jumping at the chance to buy the hottest app on the planet. But the bear case on TikTok, however unpopular, is well worth considering.
Here are the main factors I’d worry about before signing the contract:
When Marissa Mayer bought Tumblr for $1 billion in May 2013, she said Yahoo would keep its hands off the app. “We won’t screw it up,” she promised, just before screwing it up. Yahoo’s uninvolved approach with Tumblr was the problem, as the app stayed stagnant and grew irrelevant. Without constant reinvention, consumer social apps go the route of Tumblr, Vine, and Myspace. They die. Facebook has only kept itself relevant through constant reinvention, transforming itself from an online directory to a broadcast platform to a series of smaller networks including Groups and messaging threads. TikTok itself is a reinvented version of Musical.ly.
To persist, TikTok’s leadership must be willing to take major product gambles instead of simply protecting the asset. But it’s unclear who its leaders will be. ByteDance CEO Zhang Yiming, who led the Musical.ly transformation, will not come along with the deal. TikTok CEO Kevin Mayer just quit. Many TikTok employees, who might inspire the app’s next reinvention, won’t come with either. As soon as Oracle makes a marketing automation VP the next head of TikTok, you can start saying goodbye.
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