Microsoft-TikTok: What it Means & Why It Validates India’s Stance

Donald Trump had called for a ban on TikTok but on 3 August described it as a “hot brand” and discussed its sale.

Following weeks of public bashing, United States President Donald Trump appeared to take it a step further. Instead of an outright ban, TikTok can now sell its US operations to Microsoft. CEO Sataya Nadella confirmed the negotiations on 3 August.

(Image: Kamran Akhtar/ The Quint)

On 16 July, TikTok, in a full page advertisement in an Australian newspaper, appealed to not make the app “ a political football.”

Come August and the Chinese app continues to be dribbled around with possible bans, warnings, scrutinies and now a potential sale in the US. In the latest chapter for TikTok, US giant Microsoft is in discussions for a possible purchase of the app.

Following the app’s ban in India on 29 June, the axe has been dangling over the app’s US operations as well with United States President Donald Trump reiterating his threat to ban the app several times.

However, following weeks of public bashing, President Trump appeared to take it a step further. Instead of an outright ban, TikTok can now sell its US operations to an American company.

Moreover, Microsoft’s statement regarding data security, privacy and storage of TikTok data echoes the position taken by India regarding ‘data sovereignty’ and its concerns about Chinese apps sharing data with the Chinese government.

As the geopolitics continues to rage and unfold in unprecedented ways, The Quint explains what a possible deal would mean for TikTok, the US, China and India.

From ‘Ban’ to ‘Buy’, Why the 45-Day Deadline?

Trump has been adamant for a while that the US will ban TikTok. In fact, he reiterated his threat to ban the app just a day prior to Microsoft’s formal announcement.

“As far as TikTok is concerned, we’re banning them from the United States,” Trump had said aboard the Air Force One on Friday.

However, the U-turn does not come as a surprise. Reuters reported on 16 July that White House economic adviser Larry Kudlow told reporters a move by TikTok to leave Beijing ByteDance Technology Co would be a better option than a ban on the app.

With a deadline to hash out a deal with TikTok’s parent company ByteDance by 15 September, Trump described the app as a “hot” brand.

However, by setting a 45-day deadline, Trump appears to be pushing for three things:

• With elections less than 100 days away, Trump comes across as brokering a deal that is beneficial to the US and keeps Chinese influence out.

• While his comments about the government’s claim over a slice of the deal may be dismissed, a deal will provide him leverage to harp on how this will lead to jobs and revenue creation for the US.

• The 15 September deadline also makes him appear tough on his stance and not going back on his decision to ban the app outright.

Why Would Microsoft Be Interested in TikTok?

Microsoft, unlike other Big Tech US companies, is still operating in China through LinkedIn. The company’s eye on acquiring a property like TikTok makes inherent sense for a number of reasons.

• Ad Revenues: Microsoft has performed woefully compared to Facebook and Google when it comes to revenues from advertising. “Bing and LinkedIn’s advertising business is around a quarter of YouTube’s, and their annual income is what Facebook earns from ads in a week,” WIRED reported. They will get much needed legitimacy in the online advertising space.

• Social Media: Microsoft famously lost out in the smartphone race and has struggled to make any significant headway in the social media space. Acquiring TikTok will give the US company access to a massive platform. “The name is hot, the brand is hot,” Trump himself said of the app during a press briefing on 3 August. US is TikTok’s largest revenue generator outside China.

• Data: The key part of any TikTok deal will be the data and users Microsoft gains access to. “TikTok could help correct a Microsoft blindspot and even influence how other software and services are developed inside the company,” Verge reports.

How Is India Viewing The Developments?

From a cyber diplomacy perspective, India appears to have important gains from the US’ actions on TikTok.

Data Localisation: India has consistently batted for “data sovereignty” and “data localisation” at home as well as global forums like the G20.

The Indian government views data as an economic good and hence the data of its citizens should belong to India, be bound by its laws and certain categories of data can only be stored within the country.

Now, Satya Nadella’s statement on TikTok data also mirrors India’s policy position. “Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States,” he stated.

Trump echoing India’s concerns about TikTok passing on data to the Chinese government and his calls for greater control over data appear to vindicate India’s position.

Medianama founder Nikhil Pahwa writes, “With both the EU and India pushing for “data sovereignty” and “data localisation” (adequacy not-withstanding), and China already there, this move from a US-based company will only strengthen the resolve of other countries to follow suit."

Chinese Control of Data: Second, India’s concern about Chinese apps sharing data with the Chinese government have also been echoed by the US.

To mitigate this, Nadella’s statement goes on the say that “any such data is currently stored or backed-up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred.”

The Ministry of Electronics & IT (MeitY), while announcing the ban on 29 June had stated that the apps have “engaged in activities which are prejudicial to sovereignty and integrity of India, defence of India, security of state and public order.”

International affairs expert, C Raja Mohan, writing in The Indian Express on Washington’s hardening stance on Chinese technology, says, “The new American consensus appears to be in sync with India’s own recent turn towards decoupling from China and the plan to rearrange its digital engagement with the world within a framework of trusted political partnerships.”

Why is TikTok Calling Itself a “Political Football”?

TikTok’s ban in India may have been a major setback but the Chinese-owned company has found itself increasingly embroiled in similar complications across the world. The United States, Australia, and even Pakistan took a hard stance on the app amidst growing geopolitical and data security machinations.

While the US has described the app as a “national security risk,” Australia says it is scrutinising it for privacy risks and Pakistan has threatened it with a ban on charges of obscenity and vulgarity.

The Five-Eyes Alliance, comprising the US, Canada, the UK, Australia and New Zealand, also appear to be collectively taking on Chinese technology. Nadella announced that Microsoft’s negotiation could result in the company “owning and operating TikTok” in not just the US but also in Canada, Australia and New Zealand.

While the UK appears to be missing from the tech company’s acquisition plans, it is important to note that two weeks after the US designated Huawei and ZTE as “national security threats,” the United Kingdom announced that it is going to ban Huawei’s 5G technology and equipment from its telecommunications network by the end of this year.

Does This Put Pressure on TikTok & ByteDance?

For ByteDance, a sale of the US arm of its TikTok business seems like the best option. According to The Information, TikTok is expected to do around $500 million business in the US in 2020. Given its worth and faced with expulsion from the US – following a similar ban in India – the Chinese giant appears to have decided a sale is one of the few options available.

ByteDance founder and CEO, Yimin Zhang, in a mail to his employees wrote, “As you may know, in the current environment, we faced the real possibility of a forced sale of TikTok’s US business by the Committee for Foreign Investment in the United States (CFIUS) or an executive order banning the TikTok app in the US.”

ByteDance, which owns a suite of apps, is valued at over $100 billion with India and the US as important markets. CNBC reported that the Chinese company generated more than $3 billion of net profit on over $17 billion in revenue last year.

“TikTok is continuing to play nice with the Indian government: they haven’t gone to court,” Pahwa writes. However, in the unprecedented world of TikTok, it would be unwise to rule out any scenario.