What would Walmart do with TikTok if its bid with Microsoft succeeds?

Discussion
Source: TikTok - @t_familyfy, @thekingofweird, @kotjcosplay
Aug 28, 2020
George Anderson

Walmart really wants a piece of TikTok and the 100 million Americans who use the short-form video app.

The retailer announced yesterday that it would join Microsoft in its bid to acquire TikTok’s business in the U.S. Microsoft is also bidding to buy TikTok’s Canadian, Australian and New Zealand operations.

Walmart had previously been part of a group with Google parent Alphabet and SoftBank that was also interested in acquiring TikTok but abandoned its effort. Joined with Microsoft, the two now appear to be competing with Oracle to determine who has the winning bid.

The retailer issued a statement yesterday regarding its interest in acquiring TikTok.

“The way TikTok has integrated e-commerce and advertising capabilities in other markets is a clear benefit to creators and users in those markets. We believe a potential relationship with TikTok U.S. in partnership with Microsoft could add this key functionality and provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses. We are confident that a Walmart and Microsoft partnership would meet both the expectations of U.S. TikTok users while satisfying the concerns of U.S. government regulators.”

TikTok’s parent company, ByteDance, is considering bids for the app, which has been downloaded over two billion times since its launch, after coming under public pressure from President Donald Trump and his allies in recent months.

Mr. Trump has sought to stoke national security fears that the app company is working in concert with the Chinese government to undermine the U.S. by turning over private information it collects on Americans. He asserts that the Chinese can use the data to track users’ movements, blackmail them and steal corporate and governmental intellectual property. President Trump signed an Executive Order on August 6 seeking to effectively ban TikTok in the U.S., citing national security as the primary factor in his decision.

Earlier this week, TikTok filed a suit against the U.S. government charging that Mr. Trump and his administration have ignored due process in its dealing with the company. It also claims that the government has further ignored “our extensive efforts to address its concerns, which we conducted fully and in good faith even as we disagreed with the concerns themselves.”

In its suit, TikTok points to its 100 million American users, more than 1,500 employees in the U.S. and leading American brands that use the platform daily as having a stake in the process. ByteDance also described plans to add 10,000 jobs in eight states.

DISCUSSION QUESTIONS: What would acquiring TikTok with Microsoft mean for Walmart’s U.S. business? How actively would you expect Walmart to be engaged in TikTok and what potential challenges do you see in running a major social platform?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This move would give Walmart access to a consumer group that is not currently a strong supporter of Walmart."
"Buyer beware. The secret sauce of TikTok likely will reveal the blind spots of why large multi-national corporations have never created a successful social media platform."
"I think [Walmart] can be “just” a retailer, but that alone will not put them in the Trillion Dollar Valuation Club."

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28 Comments on "What would Walmart do with TikTok if its bid with Microsoft succeeds?"


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Neil Saunders
BrainTrust

A social platform like TikTok would give Walmart easy access to the younger audience it wants and needs to attract. Having a serious stake in the world of social media would not only allow Walmart to bolster its marketing efforts, but it would also give it access to a rich seam of data that would help it target shoppers more effectively in terms of building campaigns, product development, and a whole host of other activities. Over time, the platform could also become a significant channel through which Walmart could directly generate sales.

Mark Ryski
BrainTrust

I’m not sure this play will deliver what Walmart is expecting. TikTok is clearly the hot platform today, but these social media platforms can come and go. With all the press and political involvement in this company, I’m not sure acquiring it will be worth the trouble – or deliver the value. I do understand Walmart’s desire to own a social media platform to engage and acquire new customers, and I think partnering with Microsoft is a good idea too, but given the competitive intensity among the bidders, and all the other baggage of TikTok, I’m just not convinced this is the best fit for Walmart.

Lee Peterson
BrainTrust

Data. And not only data, but data on millions of young people who, regardless of what you hear pontificated, no one can figure out how to market to. But TikTok did. And that M.O. combined with information on millions and millions of young people, is priceless. It’s smart of Walmart to figure out the bar of gold that is TikTok, but scary to think about down the road (for either Walmart or Microsoft).

Suresh Chaganti
BrainTrust

From the perspectives of synergy and ability to execute, Facebook would be a natural choice. I’m not sure why they are not all over this. The current bidders have dismal (Google Plus) to no record in building social media sites. Microsoft’s LinkedIn can be called social media but is a vastly different proposition.

Perhaps there is an element of FOMO or doing something to deter competition. TikTok is valuable, it’s just that the buyers may not be able to make the most out of it.

Gene Detroyer
BrainTrust

It is notable that Facebook heavily lobbied the administration to ban TikTok, because they could not compete for the demographic nor with the technology that ByteDance developed. Besides the fact that TikTok will no longer be international, Walmart could challenge Facebook and its success. Another aside, ByteDance’s three largest shareholders are KKR, Sequoia Capital and Hillhouse Capital.

Ray Riley
BrainTrust

A move like this bolsters Walmart’s value chain, and is their strongest competitive move to date against Amazon. I’ve been quite critical of their puff pieces in areas of media and streaming entertainment over the last two years, but this provides them with data and insights that traditional retailers simply wouldn’t have access to, in addition to the ability to influence consumers prior to even seeing an ad through the development of the platform. Hoping to get more clarity on the terms of this deal between Microsoft and Walmart.

Mohamed Amer
BrainTrust

Three potential advantages for Walmart. First, gain accèss and (partial) control over a dynamic advertising and e-commerce platform with a new way of creating demand. Second, gain access to a younger generation that expands Walmart’s customer base further while extending on the strength of the brand’s value proposition. Third, TikTok becomes a third-party platform that allows Walmart to be even more competitive with Amazon.

This move is a significant strategic move by the company that combines Walmart’s historically strong supply chain with a new model of selling applied to the next growth population segment. Walmart is not going down the path of Sears and former retail stalwarts; they are intent on recreating the company to remain at the top of the market.

Lisa Goller
BrainTrust

Acquiring TikTok would make Walmart more competitive and cooler among desirable Gen Zs and Millennials. Investing in this wildly popular mobile platform would give Walmart richer insights into younger consumers’ lifestyles.

Partnering with Microsoft would help Walmart compete with tech titan Amazon by innovating with real-time mobile marketing and social commerce. Deepening its omnichannel presence shows Walmart is adapting to consumers’ new online habits and the strategic significance of technology in retail.

To maximize effectiveness, Walmart would likely focus on its core retail business and leave the tech decisions to Microsoft.

Mohamed Amer
BrainTrust

The division of labor with Microsoft along the tech dimension is spot on!

Camille P. Schuster, PhD.
BrainTrust

This move would give Walmart access to a consumer group that is not currently a strong supporter of Walmart. The most important benefit would be the ability of Walmart to learn about this group. If Walmart jumps in to market to this consumer group without really understanding these consumers, the acquisition will not be worth the price.

Harley Feldman
BrainTrust

Buying into TikTok will give Walmart a younger and digital image that it does not have today. This should provide Walmart with a connection to younger consumers. Walmart is likely to let Microsoft take the lead on technical strategies and developments, and Walmart will take the lead on acquiring and engaging new TikTok users.

Ken Cassar
BrainTrust

I suspect that Walmart looks around and sees big tech companies becoming increasingly ambitious in their scope (and doubts Washington’s will to reign them in) and has made the judgement that it’s not enough to be just a retailer anymore. Personally, I think that they can be “just” a retailer, but that alone will not put them in the Trillion Dollar Valuation Club.

Gene Detroyer
BrainTrust

Surely that is what this move is all about.

Gene Detroyer
BrainTrust

If Walmart is doing this because they think this is going to sell one more product online or in the store they are making a huge mistake.

If they think this is a step to be more like Amazon and other tech companies in these changing times and embody the enterprise values they have attained, then it is a perfect strategy. I am all for it.

The future of Walmart is not in retail and they have the resources to become something more. We should not forget that only about 50 percent of Amazon’s revenue is in retail and less than 50 percent of their profits.

Ryan Mathews
BrainTrust

Walmart is taking a calculated risk here. As MySpace, Google+, and maybe even Facebook illustrate — the popularity of social media platforms is a fickle thing. If successful, the acquisition could attract the next generation of consumers to the Walmart stable. If not, it could have exactly the opposite effect. So the devil, as always, lies in both the details and the execution.

Gene Detroyer
BrainTrust

If the strategy is to attract the next generation of shoppers, it will fail. If the strategy is to become the next tech company a la Amazon, it gives Walmart a great future.

Ryan Mathews
BrainTrust

Gene, I agree — to a point. In my mind Amazon’s play isn’t a tech play per se, it’s a surround-the-consumer strategy enabled by tech.

Gene Detroyer
BrainTrust

Prediction: Within 10 years retail will be less than 20% of Amazon’s business.

Jeff Sward
BrainTrust

Walmart wants to talk to — and listen to — today’s customer in today’s language. Media, of some kind, on some device. It makes total sense for one of our biggest (physical) retailers to make this kind of (online) acquisition. And no, I think any past success or failure on Walmart’s part in the e-commerce arena should be used as a litmus test here. They keep pushing forward in an attempt to evolve and be more and more relevant. Lots of stubbed toes in this process, but they are determined to be a retailer with an evolving relevance. Sounds like the right plan to me.

Brandon Rael
BrainTrust

The lifeblood of any retail or consumer organization is access to new and emerging customer bases. Walmart has very aggressively and strategically made their intentions known in the digital and e-commerce space with the acquisition of jet.com, Bonobos, and other DTC brands. They have acquired not only a new customer segment but also the capabilities from a human capital perspective, that are now spread throughout their omnichannel organization.

TikTok is the hottest social media platform there. As with Instagram, brands and influencers are determining ways to monetize off of the TikTok platform, which has gone viral across the younger generations. At the surface it may not be a typical Walmart acquisition, however in my mind, its brilliant as the costs of acquiring new customers is far higher than retaining their current customers.

As the lines blur between the social and commerce worlds, Walmart is on the verge of getting ahead of the competition.

Cynthia Holcomb
BrainTrust

Buyer beware. The secret sauce of TikTok likely will reveal the blind spots of why large multi-national corporations have never created a successful social media platform. Neither Microsoft nor Walmart, being the great American companies they are, foundationally and functionally have the instincts and youth-oriented attitudes to capitalize on TikTok data as a means to obtain the goals outlined in this article.

Rick Moss
Staff

Gotta agree with you, Cynthia. And I can’t help worry for any brand that associates itself with a free-wheeling social platform. I expect both Walmart and Microsoft will regret the purchase with the onset of the first political scandal, conspiracy theory or moral transgression. If the corporate owners try to clamp down on free speech and creativity, the kids will jump ship for the next new thing. I don’t see a bright future here.

Ananda Chakravarty
BrainTrust

I would venture to say that this fits a solid opportunity for Walmart. This isn’t quite the same as a Facebook — this fits in closer to Google’s YouTube deal and it can just as well deal with a larger audience. It’s not just about the age group — most of these “kids” are over 18 with a large percentage in the 24-34 age group. Complications aside, still a huge opportunity to explore and more important can be existential for business if it becomes a modus operandi in the shopping space. The move is defensive as well.

Rick Moss
Staff

Good points, Ananda, but Google is Google. Microsoft is … well, Bing. Scott Galloway in his newsletter today echoes Cynthia’s sentiments: “Walmart and Oracle bidding for TikTok is two midlife-crisis firms believing 15-second videos are hair plugs. If either go through with this, they’re going to look ridiculous.”

Ananda Chakravarty
BrainTrust

Lol! Scott definitely has a way of putting things in a vivid perspective and I love his commentary — but these are not lightweights bidding for the fastest growing and broadest $78B startup that has outshined even Uber. These guys are comfortable with hair loss and isn’t Satya Nadella bald anyway?

As long as they don’t mess it up by putting corporate screws to the company, they’ll have a solid unicorn for a few years that can be spun off or sold if they want. TikTok is home to Kroger, Nike, Pepsi, Maybelline, NFL, Universal, and more, and it’s in a growth stage worldwide. The fact that it’s a US-only spinoff makes it more valuable as the rest of TikTok will continue unabated. What makes this real is the fact that it’s real-time and it’s second only after WhatsApp for downloads in 2020 to date, and will most likely exceed it over time. Target and Amazon are eating Walmart up in the 18-34 age range — they need to stem the tide. Nothing ridiculous about that.

Ricardo Belmar
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader
2 months 1 day ago
Data + audience. With TikTok, Walmart gains access to an audience they largely don’t have today in their customer base along with significant data about that audience that can help their marketing efforts. Also as they’ve recently been bolstering their ad platform online, having a social media network could help them gain more ad revenues by combining advertising offers across mediums. That said, this is a pretty far afield effort for Walmart so the Microsoft tie-in makes sense as it’s unlikely Walmart has the in-house expertise needed to maintain TikTok’s success. The biggest challenge I see, which has been the subject of many discussions on LinkedIn since yesterday, lies in the technical details and what IP is included in the deal. TikTok’s fame is derived from the algorithm powering its feed, without which the service couldn’t likely continue to succeed. Plus, what backend equipment, etc. is included? All of those details matter since this is a deal where the company is being carved out from a larger organizational structure and technology integration. All those technical… Read more »
Rachelle King
BrainTrust

Walmart has a laser focus on growing their digital and mobile commerce business. Strategic partnerships (or acquisitions) are a smart way to accelerate growth on these platforms. While social media may not be their core expertise, engaging omnichannel consumers with convenient commerce solutions is very much in their wheelhouse. This has promising opportunity written all over it for Walmart.