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Here's How Microsoft Would Benefit From The TikTok Deal

Here's How Microsoft Would Benefit From The TikTok Deal

Microsoft Corporation's (NASDAQ: MSFT) potential acquisition of TikTok in the United States could save the popular social media app from being banned, but what's in it for the tech giant?

TikTok, which is owned by China-based ByteDance, has faced criticism for potentially gathering data on millions of U.S. citizens. The uncertainty around what data is being collected and how it can potentially be used is seen as an issue of national security. For this reason, the app is already banned in India.

Getting involved with TikTok seems a little complicated. So here are a couple of ways Microsoft would benefit from buying TikTok.

Increased Social Media Presence: “Microsoft’s purchase of TikTok would make them the second-largest U.S. operator of a social media platform" behind Facebook Inc (NASDAQ: FB), Tigress Financial analyst Ivan Feinseth told Benzinga in an email.

Microsoft currently has little to no social media presence. Buying an already established social media platform will open different revenue streams for the company. Not only that, it’ll increase the brand name amongst younger generations.

See Also: Microsoft's Interest In Buying TikTok Is A 'Deal Of A Decade Opportunity'

Advertising: “Microsoft would also benefit by enabling it to drive Search and other forms of advertising on the TikTok platform, which would be the upside driver for Microsoft,” said Feinseth.

Advertising is a great way to bring in revenue for social media and tech companies. Twitter Inc (NASDAQ: TWTR) and Alphabet Inc's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google are no strangers to ad revenue. 

Potential For A Good Deal: Microsoft is in a good position to buy the app because, for TikTok, it’s either be bought or be banned.

“If Microsoft and TikTok cannot reach a deal, Pres. Trump has threatened to ban TikTok in the U.S... The purchase would lead to Microsoft owning and operating TikTok in the U.S., along with other countries, including Australia, Canada, and New Zealand,” said Feinseth.

Trump is willing to approve any deal by Sept. 15, at which he says the U.S. ban will take place.

Latest Ratings for MSFT

Sep 2020Morgan StanleyMaintainsOverweight
Jul 2020OppenheimerDowngradesOutperformPerform
Jul 2020Piper SandlerMaintainsOverweight

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