The race to capture TikTok’s U.S. operations took a sharp turn Thursday, as Walmart Inc. said it is joining Microsoft Corp. ’s bid for the popular video-sharing app after other deep-pocketed suitors dropped out of the running.
The retail giant’s entry into the global sweepstakes was a surprise and comes as the parties grapple with a valuation for TikTok, which is facing a potential ban in the U.S. from the Trump administration over national-security concerns.
TikTok’s Beijing-based owner ByteDance Ltd. is asking about $30 billion for the U.S. operations, but bidders thus far haven’t been willing to meet that price, according to people familiar with the negotiations. By comparison, Twitter Inc. in recent weeks informally floated a bid closer to $10 billion as part of a range of pricing and scenarios, said some of the people.
Having more third-party sellers and advertisers through TikTok could help Walmart turn its money-losing e-commerce business profitable, Cowen & Co. analyst Oliver Chen said in a report.
TikTok, more importantly, could help Walmart appeal to coveted Gen Z shoppers and bring them to shop at Walmart, both in stores and online, and keep the company abreast of what teens want.
“The potential deal is a younger customer opportunity,” Chen said, adding that TikTok has increased its monthly active users to 100 million in August, from about 11 million in January 2018. TikTok would likely help Walmart “entrench the company’s appeal to a new and younger generation of shoppers.”
In a clear sign of its advertising ambition, Walmart has created Walmart Media Group, which the company describes as “an in-house advertising offering, to work with brands to influence shoppers.” Advertising, together with the likes of fuel and financial services, represent less than 1% of Walmart U.S.’s total sales, the company said in its annual report.
With Walmart’s plan to roll out its Amazon Prime-like Walmart Plus membership, there could also be a potential for Walmart to feature TikTok as part of the membership, analysts said.
Should Walmart and Microsoft win the bid, it would mark the latest in a string of tie-ups between the retailer and the tech giant, which is competing with Amazon’s AWS cloud business. Walmart in 2018 signed a five-year deal with Microsoft to use its Azure cloud and other services. Microsoft is also an investor in India’s e-commerce giant Flipkart, which Walmart has a majority stake in after a $16 billion acquisition in 2018. The two companies also have investments in Team8, a cybersecurity think tank founded by former leaders of Israel’s top military intelligence unit.