For Walmart, a political tug-of-war over TikTok has become an opportunity to follow an app with a huge fan base.
The company confirmed Thursday that it is partnering with Microsoft to buy the tech platform, which is owned by Beijing-based ByteDance.
The parent company of TikTok is looking for a buyer after the US government pushed for a ban on the app, claiming that the Chinese government could gain access to user data. TikTok has denied those allegations and is suing the U.S. government in a lawsuit. ByteDance is awaiting other offers, including one from Oracle, but could choose the buyer in the coming days, according to people familiar with the matter.
To some, the big-box retailer – best known for its gigantic Supercenters and its low prices – may seem like an unlikely buyer for the tech platform of viral videos and numerous teenage users. However, Walmart’s background as a retailer instead of a tech company may actually give it an advantage. Some companies, such as Amazon or Facebook, have been excluded from bidding war because they already have a large tech presence and would raise anti-trust concerns.
“For Walmart, it would be a coup to take part in this acquisition,” said Daniel Ives, chief operating officer and technology analyst at Wedbush Securities. “It really falls into their lap, given the political background.”
TikTok fits into Walmart’s broader strategy to expand its reach with customers, collect valuable consumer data and improve its e-commerce business to drive Amazon away, say industry analysts and watchers. It could also boost her reputation by joining the video platform.
Walmart was able to reach hundreds of millions of consumers with the app. TikTok has about 100 million monthly active U.S. users, an increase of nearly 800% from January 2018, according to a lawsuit filed by the company. The company said it has more than 50 million American users.
By having TikTok, Walmart and Microsoft could both boost their reputation and join an app that is very popular with teens and children.
“This would really change your grandfather’s perception of Microsoft and Walmart,” Ives said.
It is unclear how Walmart and Microsoft would structure the deal and how much they would pay for TikTok. The deal is expected to reach $ 20 billion to $ 30 billion, sources said. Walmart spokesman Randy Hargrove declined to say how Walmart would split TikTok’s ownership or say whether it would be the majority owner.
Walmart has made several acquisitions of brands known for their online talent and ability to attract a younger audience. It bought Jet.com for $ 3.3 billion in 2016 to drive e-commerce expansion. It bought digital natives, including men’s brand Bonobos, plus-size women’s clothing line Eloquii, among others. However, some of the companies, including ModCloth, are only bought to sell them shortly after. On Thursday, Walmart confirmed that it was selling two other online brands it acquired: Shoes.com and Bare Necessities.
The retailer also has an incubation arm, store no. 8, which is based in Silicon Valley. It has tested new concepts and launched brands.
By bidding on TikTok with Microsoft, Walmart is changing its content strategy. It is considered several times earlier to break into the video and entertainment industry, only to fall behind these plans. Among them, it bought the video-on-demand service Vudu in 2010 for an unknown sum – but then sold it to film sales company Fandango this year.
About two years ago, Walmart considered launching its own “Central America” streaming service and held talks with former Epix CEO Mark Greenberg. Walmart decided not to pursue these plans after it stopped spending billions of dollars on new content.
Walmart’s rival, Amazon, has used original TV and movies as a way to hook customers up with its subscription service, Amazon Prime. Walmart has confirmed that it will launch its own membership program, Walmart +, but declined to say when it will debut and what benefits it will include.
TikTok has created a social network of short videos that often go viral with music, memes, dances and other acts of self-expression. The app has gained a dedicated following because of its simplicity and ease of discovery because of its algorithmic surface and entertaining videos surface, said Lauren Kozak, senior advisor of social media, analytics and data-driven marketing for The Diffusion Group, a media research and insight solid.
Kozak said Walmart’s pursuit of TikTok makes sense as it seeks to transform into more of a tech company and gain a better understanding of young consumers.
However, she said, if Walmart buys TikTok and thinks about it, it could drive users away. She said this is especially true with her young users who are “very sensitive to business management and business branding.”
“If they do too much with it, it will destroy TikTok and users will go somewhere else,” she said. “It will make them kind of gross and make them feel like they have a business manager. … It is possible that the fact that they are buying it may break it.”
—CNBC’s Alex Sherman contributed to this story.
Announcement: Comcast, the parent company of NBCUniversal and CNBC, owns Fandango.