Twitter may be throwing its hat into the ring to purchase TikTok before the app is banned in the US, however there are questions over whether the company could afford the acquisition.
The Wall Street Journal has reported that although Microsoft is still the frontrunner in the race to acquire Chinese video-sharing platform TikTok, social media company Twitter has also been considering snapping up the app.
According to the report, Twitter has had preliminary talks with ByteDance, the parent company of TikTok. This would not be Twitter’s first venture into short-form video, as it acquired Vine in 2012.
While Microsoft is reportedly considering acquiring TikTok’s global operations, Twitter’s deal would only involve the Chinese firm’s US operations, according to sources familiar with the matter.
Through new executive orders published last week, US president Donald Trump has made plans to ban TikTok and instant messaging app WeChat from 20 September, citing security concerns about apps developed and owned by companies in China. Trump has said the only way TikTok can remain active in the US is if it is bought by a US-based company such as Microsoft.
Does Twitter have what it takes?
According to Reuters, Twitter has a market capitalisation of close to $30bn, which is almost as much as the valuation of TikTok’s assets that would be divested, so the social media platform would need to raise additional capital to fund the deal. Microsoft, on the other hand, has a market cap of more than $1.6trn as of August 2020.
Speaking to Reuters, University of Michigan’s Prof Erik Gordon said: “Twitter will have a hard time putting together enough financing to acquire even the US operations of TikTok. It doesn’t have enough borrowing capacity.
“If it tries to put together an investor group, the terms will be tough. Twitter’s own shareholders might prefer that management focus on its existing business.”
However, sources said that Twitter shareholder Silver Lake is “interested” in helping fund a potential deal. According to reports, Twitter has privately argued that its potential acquisition would attract less regulatory scrutiny than a deal involving Microsoft.
TikTok, ByteDance and Twitter have not commented on any discussions or negotiations.
Do it for the Vine
While Twitter hosts its own video-sharing functionality, it lacks the editing aspects, filters and other customisation tools that has attracted TikTok’s userbase.
Compared to social media competitors Facebook, Instagram and YouTube, Twitter’s video-sharing may be the most stripped back as it is intended to be used for sharing videos as quickly and as easily as one would write a tweet.
But Twitter previously dabbled in the world of viral video platforms with Vine, which enabled users to share six-second videos with minimum editing.
However, Vine was shut down just four years after the company was acquired by Twitter for a reported $30m in 2012, with commentators suggesting that Twitter didn’t take advantage of Vine’s features or figure out how to monetise them. Vine was eventually wound down in 2016, leaving space for TikTok to take over the gap in the market.