Confirmed TikTok partnership gives Oracle shares a boost

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The clock is ticking for ByteDance to secure a deal for TikTok’s US business. Will Oracle be the partner that passes muster with the US government?

Short-form video-sharing platform TikTok has submitted a proposal to the US Treasury naming Oracle as a “trusted technology provider”, Oracle has confirmed.

The tech company’s statement follows a report in the Wall Street Journal and CNBC interview with US treasury secretary Steve Mnuchin revealing details of TikTok’s proposal.

TikTok also released a statement confirming a proposal had been submitted to the US Treasury Department. TikTok believes the deal with Oracle “would resolve the administration’s security concerns” and enable the platform to continue serving 100m monthly active users in the US.

Confirmation of the deal between the US tech veteran and ByteDance, the Chinese company that owns TikTok, delivered a boost for Oracle’s shares, which were up 4.3pc when the market closed on Monday (14 September).

It has been reported widely by those with knowledge of the deal – including Mnuchin – that the partnership will create jobs at a US TikTok HQ. The company currently employs just over 1,000 people in the US, but the Oracle deal could see TikTok create as many as 25,000 US jobs.

Sources speaking to Reuters claimed that Oracle will take over the management of TikTok’s US user data and be responsible for its safety and security.

Clock is ticking for a deal

US president Donald Trump issued an executive order in August stating that TikTok would be banned in the US unless sold by its Chinese parent company ByteDance. The deadline to reach a satisfactory agreement lands on 20 September.

Mnuchin, who chairs the Committee on Foreign Investment in the United States (CFIUS) that will review the proposed deal, told CNBC: “From our standpoint, we’ll need to make sure that the code is, one, secure, Americans’ data is secure, that the phones are secure and we’ll be looking to have discussions with Oracle over the next few days with our technical teams.”

CFIUS will make a recommendation to the Trump administration, which will conduct a separate national security review.

‘From our standpoint, we’ll need to make sure that the code is secure, that Americans’ data is secure’
– STEVE MNUCHIN

Microsoft had proposed acquiring TikTok’s US operations but ByteDance rejected this deal.

Twitter was reportedly in preliminary talks with ByteDance and Walmart was also interested in cutting a deal. The US retail giant had joined forces with Microsoft on an unsuccessful bid and had reportedly also been part of a previous consortium with SoftBank and Google parent company Alphabet aiming to join forces on an agreement, but this too fell apart. Walmart is reportedly still interested in an investment.

Why Oracle?

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Citing its 40-year track record in providing “secure technology solutions”, Oracle has emerged as a confident contender for the TikTok deal.

Oracle is a big name in enterprise tech, providing cloud infrastructure and database software to large businesses, schools and government bodies. Its current business may not be something that triggers excitement among younger generations – a market in which TikTok is immensely popular.

Providing the cloud infrastructure for a video app in rapid growth mode could be a boost for Oracle’s services. The company also provides digital advertising distribution to clients, and TikTok is seen as the next major platform for advertisers seeking a young, fast-growing market.

Oracle may also have an advantage given co-founder Larry Ellison’s support of the Trump campaign. He hosted a fundraiser for the sitting president’s re-election earlier this year, and Oracle CEO Safra Catz was part of Trump’s transition team in 2016.

However, support of the Oracle deal is in no way guaranteed. US senator Josh Hawley has called on the Treasury Department to reject the deal in an open letter, on the grounds that “ByteDance’s ownership of TikTok threatens the national security of the United States”.

Favouring a full sale – or even a ban – over any partnership with a US company, the Republican representative wrote: “The available evidence compels only one conclusion: ByteDance has no intention whatsoever of relinquishing ultimate control of TikTok. ByteDance, as TikTok’s parent company, will continue to be subject to Chinese laws that put Americans’ data at risk.”

TikTok rises and falls around the world

TikTok recently passed the milestone of 100m monthly active users in Europe and launched a Creator Fund for Europe earlier this month. This €250m investment over three years will support creators on the platform.

The company currently employs about 1,600 people in Europe, the majority of whom are based across the UK and Ireland.

Earlier this year, the company established an EMEA Trust and Safety Hub in Dublin and a newly established European data privacy team is also based in Ireland. By 2022, TikTok plans to have built a new data centre in Ireland on the back of a €420m investment.

In India, where TikTok was banned at the end of June, opportunists have rushed in to fill the void.

YouTube is set to launch the beta version of its TikTok rival, YouTube Shorts. This new platform will limit videos to 15 seconds, with creator tools similar to those on the popular ByteDance app. The product will be tested in India, with more creation features to be added in the coming weeks and months, and YouTube Shorts is set to expand to iOS and other countries shortly.

Elaine Burke is the editor of Siliconrepublic.com

editorial@siliconrepublic.com