By Aaron Tilley and Euirim Choi
For Microsoft Corp., navigating the political and strategic
hurdles in its pursuit of TikTok's U.S. business might just be the
easy part -- figuring out how to carve out a chunk of a global app
and adopt its code and data may prove a far tougher task.
Splitting TikTok's U.S. operations from those of Beijing-based
parent ByteDance Ltd. presents myriad technical challenges,
industry officials say. Any buyer would have to rewrite software to
ensure those working on the hugely popular video-sharing app's
legacy operations couldn't access the U.S. data. Making sure that
trove of data is stored, processed and backed up entirely in the
U.S. would be another hurdle to overcome, these experts said.
Some of the most popular creators on TikTok worry the breakup
could diminish their ability to reach audiences around the globe.
Kyle Thomas, a 15-year-old TikTok user based in the U.K. with over
16 million followers, said he might leave the platform altogether
if U.S. viewers couldn't watch his content on it. Even though only
23% of his audience is in the U.S., Kyle, who makes money on
TikTok, said that a decline in viewers overall would "affect me a
lot. It could possibly knock me off the platform."
The White House had been pushing for a sale to U.S. owners,
citing the national-security risk that the Chinese government could
exploit the personal data the app collects. TikTok has said it
protects American users' data.
President Trump added urgency to any deal talks late Thursday
when he signed an executive order that would ban TikTok in the U.S.
within 45 days unless it is sold to an American buyer. The
president earlier in the week told Fox News he was open to an
American business buying all of TikTok and not just the U.S.
Microsoft, which previously set a mid-September deadline for a
potential deal, on Friday declined to comment on how the executive
order might impact negotiations. TikTok also declined to
Deal talks remain fluid, people familiar with the discussions
said, and it is unclear whether any potential buyer would want to
buy all of TikTok or that ByteDance would part with the entirety of
the app. Microsoft on Sunday said it was pursuing talks around
buying TikTok's U.S. operations, along with those in Australia,
Canada and New Zealand. Many details of the proposed deal remain
uncertain, including technical aspects and cost, and the company
has said there is no guarantee it can agree to terms with
Buying all of TikTok would drive up the purchase price and add
other risks, including the possibility of further angering China,
where U.S. pressure to force a sale has gone over badly. But such a
move could placate TikTok users anxious about the platform being
split in half and eliminate some of the technical challenges
associated with hiving off a part of the business to a new
Microsoft has said that TikTok, under its ownership, would build
on the popular user experience while adding privacy and security
protections, though the company hasn't provided further details.
Microsoft and TikTok are working to assure users that the app would
still function as one entity globally -- a U.S.-based user could
still view all content, including videos from those based in Korea
or Japan -- even if data were handled differently behind the
scenes, a person close to the deal said.
Microsoft has promised the White House it would ensure that all
private data from U.S.-based TikTok users would be transferred to
the U.S. and deleted elsewhere. Hosting TikTok's U.S. service on
Microsoft's systems could take nine months to a year or even
longer, the experts estimate.
The mid-September deal deadline makes sorting out many of the
technical details tricky, said Murli Thirumale, chief executive of
Portworx Inc., a cloud data management company. "If you didn't have
the timeline, I'd say it probably would take two years to
accomplish," he said. "You want to test everything."
TikTok has been expanding data centers in Virginia and worked
with Alphabet Inc.'s Google Cloud to store customer information in
the U.S., even though some information is still backed up
Microsoft would gain around 100 million or so mostly young users
with TikTok's U.S. business, bolstering its consumer-facing
operations. But the engineering challenge associated with taking
over TikTok is a point of concern for Microsoft, along with
financial and political issues, a person close to the deal talks
said. Microsoft is widely expected to host its TikTok operation in
its Azure cloud.
Many of TikTok's engineers are in China and the app shares
resources with other ByteDance units, a person familiar with its
systems said, and that could complicate splitting off the U.S.
operation. The two companies haven't said what, if any, TikTok
staff would transfer to Microsoft. TikTok had previously said it
would add as many as 10,000 jobs in the U.S. over the next three
Republican Sen. Josh Hawley of Missouri on Wednesday sent
Microsoft Chief Executive Satya Nadella a letter asking if the
company would allow ByteDance employees who might be affiliated
with the China's Communist Party to be involved in the transition,
expressing concern they could potentially add "backdoors" for data
He also has asked for assurances that Microsoft won't use
TikTok-derived artificial intelligence software in a way that user
data could find its way to Beijing.
Reshaping the platform -- moving the data and engineering needed
changes -- could cost into the tens of millions of dollars,
industry officials said. Microsoft, with more than $136 billion in
cash, can afford the tab.
Microsoft has firsthand experience with how complicated and
protracted these kinds of migrations can be. Its $26 billion
acquisition of professional net working site LinkedIn in 2016 has
been a yearslong integration process, and Microsoft waited until
last year to begin shifting LinkedIn onto its cloud. It had let
LinkedIn remain on its own data centers to give the group a sense
of independence, a person familiar with the unit's operations
--Georgia Wells and Michael C. Bender contributed to this
Write to Aaron Tilley at email@example.com
(END) Dow Jones Newswires
August 07, 2020 13:38 ET (17:38 GMT)
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