With a bid for TikTok, Walmart turns to a political turf war for its own benefit

For Walmart, a political tug at TechTok has become an opportunity to nab an app with a huge fan following.

The company confirmed on Thursday that it was purchasing the technology platform in collaboration with Microsoft, which is owned by Beijing-based ByteDance.

Tiktok’s parent company is searching for a buyer after it was pushed by the US government to ban the app, alleging that the Chinese government could access user data. Tiktok has denied those allegations and is challenging the US government in the lawsuit. ByteDance is weighing other offers, including one from Oracle, but may choose a buyer in the coming days, according to people familiar with the case.

For some, the big-box retailer – known for its huge supercenters and its low prices – may seem like an unexpected buyer for the viral video and tech platform of many teenage users. Yet Walmart’s background as a retailer rather than a technology company may actually give it an edge. Some companies, such as Amazon or Facebook, have been left out of the bidding war because they already have a huge technological presence and will raise antitrust concerns.

“For Walmart, it will be a coup to get a share of this asset,” said Danblue Ives, managing director and technology analyst at Wesbush Securities. “It really falls into his lap, given his political background.”

TikTok fits into Walmart’s broader strategy to expand its reach to customers, collect valuable consumer data, and restrain its e-commerce business to Amazon, analysts and industry watchers. It can also shake up its reputation by associating itself with video platforms.

The app allows Walmart to reach millions of consumers. Tiktok has approximately 100 million monthly active US users since January 2018, an increase of nearly 800%, according to a lawsuit filed by the company. The company said it has more than 50 million daily US users.

By owning TikTok, both Walmart and Microsoft can shake up their reputation and associate themselves with an app that is extremely popular among teens and children.

“It would really change Microsoft and Walmart’s perception of your grandfather,” Ives said.

It is unclear how Walmart and Microsoft will structure the deal and how much they will pay for TickLock. According to sources, the deal is expected to be in the range of $ 20 billion to $ 30 billion. Walmart spokesman Randy Hargrove declined to say how Walmart would divest Tickcock’s ownership or say it would own a majority.

Walmart has acquired a number of brands for their ability to attract online lovers and younger audiences. It bought Jet.com for $ 3.3 billion in 2016 to boost its e-commerce expansion. It purchased digital natives including menswear brand Bonobos and plus-size women’s clothing line Elqui. However, some companies, including ModCloth, bought it to sell soon. On Thursday, Walmart confirmed that it was selling two other online brands: Shoes.com and Naked Requirements.

The retailer also owns an incubation arm, store number 8, which is located in Silicon Valley. It has tested new concepts and launched brands.

By bidding on TikTok with Microsoft, Walmart is changing its strategy on content. It is considered breaking in the video and entertainment business many times before only to drop those plans. Among them, it purchased video-on-demand service Vudu for an undisclosed sum in 2010 – but then sold it to movie ticketing company Fandango this year.

About two years ago, Walmart considered launching its own streaming service aimed at “Central America” ​​and held talks with Mark Greenberg, former CEO of Epics. Walmart decided not to pursue those plans after spending billions of dollars for new materials.

Walmart’s rival, Amazon, has used original TVs and movies to hook customers on its subscription service, Amazon Prime. Walmart confirmed that it would launch its own membership program, Walmart +, but declined to say when it would start and what the perks would include.

Tiktok has created a social network from short videos that are often viral with music, meme, dance and other works of self-expression. Social media, analytics and data-driven marketing Lauren Kojack, a media research senior consultant at The Diffusion Group, said the app received a dedicated following its search as a random and entertaining video algorithm due to its simplicity and enjoyment of search is. Insights Firm.

Kojak said Walmart’s pursuit of Ticktock makes sense as it seeks to transform itself into a tech company and gain a better understanding of younger consumers.

Still, she said, if Walmart buys Tiktok and tinkers with it, it can turn users away. She said this is especially true with its younger users who are “very sensitive to corporate control and corporate branding.”

“If they do too much with it, it will ruin Tikok and users will go elsewhere,” she said. “This will get them out of the gross and make them feel that they have a corporate suzerain. … It is possible that many of them may buy it that may break it.”

– of CNBC Alex Sherman Contributed to this story.

Disclosure: ComBC owns NBCUniversal and CNBC’s parent company, Fandango.


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