Good morning, Data Sheet readers. Tech writer Danielle Abril here, filling in for Adam.
Facebook, once a big buyer of social media companies, is apparently steering clear of today’s hot acquisition target: TikTok.
Instead, Microsoft is an unlikely suitor for the U.S. operations of the fast-growing video-sharing platform, owned by Chinese tech firm ByteDance.
Concerned about TikTok’s ties to China, President Trump threatened to shut down the app in the U.S. if it’s not bought by Sept. 15. You could say that the clock is…tick-tocking for TikTok.
Facebook’s absence from any negotiations—at least as far as we know—is a departure from its previous strategy of scooping up companies that could eventually challenge its dominance. Remember Instagram, WhatsApp, and Oculus?
Facebook is unlikely to pursue TikTok for a few key reasons. First, legislators are currently scrutinizing Facebook over its past acquisitions, including Instagram. During last week’s antitrust hearing, members of Congress brought up some damning evidence, such as internal emails, that showed Facebook’s plan to neutralize competitors by buying them out.
Meanwhile, Facebook is also in the middle of an antitrust investigation by the Federal Trade Commission. Obviously, Facebook wants to avoid anything that could fuel further skepticism—like buying a big rival.
What’s more, Facebook typically acquires smaller companies, but TikTok is already sizable, said Jason Helfstein, analyst at investment bank Oppenheimer. Facebook paid $1 billion for Instagram in 2012 and $19 billion for WhatsApp in 2014. But the price of TikTok’s operations in the U.S., Canada, Australia, and New Zealand is expected to be higher than both of those acquisitions combined—close to $50 billion, according to some investors.
For a lot less money, Facebook could copy TikTok. That’s exactly what Facebook did when Snapchat became a threat. In fact, Facebook already plans to introduce a TikTok clone in the U.S., called Instagram Reels, in August. Better late than never, I guess.
So what does it mean for Facebook if Microsoft wins the TikTok sweepstakes? Not much, according Helfstein. TikTok “would have to get 10 times bigger before it would start to become a threat to Facebook from a revenue standpoint,” he said.
But Dan Ives, analyst at investment firm Wedbush Securities, had a starkly different take, suggesting Microsoft’s “war chest” and marketing budget could pose a “major threat” to Facebook. “To me, this would be a nightmare situation, competitively speaking.”
As Helfstein says, “Anything is possible until the ink is dry.”
This edition of Data Sheet was curated by Aric Jenkins.
NEWSWORTHY
TikTok’s on the clock. President Trump on Monday officially gave his blessing to Microsoft’s pursuit of Chinese-owned social media sensation TikTok. It was a sharp reversal from last week, when Trump said he was considering outright banning the app in the U.S. Microsoft now has until Sept. 15 to close the deal—which would see the tech giant take control of TikTok operations in the U.S., Canada, Australia, and New Zealand—or else Trump will make do with his threat. The president added that “a very substantial portion of that [sale] price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen,” though it’s unclear how exactly this would work, or if it is legal. Such an arrangement also assumes China is happy to allow this deal to proceed, which—as you probably can guess—it is not.
The O.G. cool kids app—Snapchat—is rolling out a TikTok-esque feature. That’s ironic, given how Snapchat’s successful “Stories” feature was ripped off by Instagram and pretty much every social media network afterwards. Nevertheless, it’s an opportunity for Snapchat to make a play on the music-played-over-funny-video trend that TikTok has popularized, especially with the future of the latter unclear in the U.S. The new feature will allow users to embed popular songs into clips, though Snapchat maintains it’s designed more intimately for sharing music with “close friends” rather than a public audience. Snapchat isn’t the only social media platform trying to level the playing field with TikTok—Facebook is rolling out “Instagram Reels” in a matter of weeks.
Facebook is gambling on the future of NYC—and offices. The social media behemoth on Monday signed a lease to rent all of the office space in the storied James A. Farley Building, the former main post-office hub just outside of Penn Station. The deal is significant: 1) Despite all the talk of permanent remote work in a post-coronavirus world—including plans from Facebook itself—the company is still betting on physical office space. And 2) that office space is situated in the same area as Google, Apple, and Amazon, further cementing New York as Silicon Valley East. The city could use Facebook’s presence in Midtown Manhattan, as the area and city as a whole struggles to rebuild an economy shattered by the pandemic.
Did someone mention Google? New Pixel phones are on the way. The company unveiled three new entries of its flagship smartphone model, including a $349 budget offering that will compete with the iPhone SE. That device will go by the name Pixel 4A, which is now available for pre-order before shipping on Aug. 20. There’s also the Pixel 5, which comes with the 5G, and the Pixel 4A 5G. Those two will ship sometime this fall.
FOOD FOR THOUGHT
Some choice quotes from President Trump’s latest interview with Axios:
On whether he found John Lewis’ life impressive:
I can’t say one way or another. I find a lot of people impressive, I find many people not impressive. But he didn’t come to my inauguration. He didn’t come to my State of the Union speeches. And that's OK. That's his right. And, again, nobody has done more for Black Americans than I have. He should have come. I think he made a big mistake.
On the coronavirus pandemic in the United States:
They are dying, that's true. And you have—it is what it is. But that doesn't mean we aren't doing everything we can. It's under control as much as you can control it. This is a horrible plague.
IN CASE YOU MISSED IT
Congress wants to curb Big Tech. It could end up crushing startups instead By Patricia Nakache
TikTok tit-for-tat? Beijing has no obvious answer to Trump’s app ban By Grady McGregor
Warning: This malware is tied to the Chinese government, U.S. says By Alyza Sebenius
Workday CEO Aneel Bhusri on wanting workers back in person, and needing to hire more than 3% Black employees By Maria Aspan
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
BEFORE YOU GO
The MLB restart has been, well, a bit of a disaster. And with the NFL’s intention to have teams travel for away games, a similar fate could be on the cards for football—Odell Beckham Jr. certainly thinks so. But the NBA’s “bubble” restart appears to have gone pretty swimmingly so far. So instead of the risk of infection, we can focus on these fun pieces like how coaches are enjoying—or detesting—the new casual dress code at the Disney World campus. Could this lead to a new era of polo-donning head coaches?
Aric Jenkins
