Do you know about the Google-TikTok Deal? The rumors are that global search engine giant is planning to strike a deal with the Chinese app that’s been recently targeted for boycott. If the rumors are indeed true, there are many questions that arise from this Google-TikTok Deal.
Google has tried to change the landscape of social media by investing in various products from time to time – remember Orkut and Google Plus? Both were a failure. However, if the deal materializes, it could be a pivotal point for the company.
Investing in TikTok, a social media app, that has amassed a user base of millions across the globe will be a huge success for Google.
Benefits from Google-TikTok Deal
TikTok’s main strength is its young user base. Even though Google is used by almost everyone using TikTok, the strategic alliance could allow Google to integrate TikTok users into Google Ecosystem.
The first name comes to mind is YouTube, but there are other products like Drive, Sheets, Docs and Search. Given that many TikTok users use Android smartphones, they will be able to maximize the ad business without having to lose the portion to other players like Amazon, Facebook and Snap.
The video ads are one of the best ways to drive revenue for Google. The deal with TikTok can help solidify it. In 2019, TikTok signed up for a $800 million cloud service deal with Google. That deal can smoothen the integration of two.
If we consider how rivals of Google are valued based on their estimated revenue for 2021, Facebook is trading at 7x and Snap at 10x. Considering Google values TikTok for 15x, it gives us a rough estimate of $60 Billion. Since Google has over $100 billion cash to spend, they wouldn’t have a problem funding this deal.
However, there’s another customer in the neighbourhood who’s planning to buy the TikTok US business. Microsoft is considering buying TikTok US for around $10 billion. The purchase isn’t the issue, instead how is Microsoft going to run the company that has a user base of millions scattered all over the world and integrate it in the Microsoft ecosystem.
That’s why the deal isn’t final yet.
The word is that TikTok isn’t interested in selling out US operations only, they want to sell the entire company. That means Google can be a more prioritized buyer for ByteDance than Microsoft.
No matter how rosy it sounds, there are some risks in Google-TikTok Deal. Among them there are four prominent:
- Cultural difference: The cultural difference between the two companies can result in original engineers, artists and PM working at TikTok leaving their jobs.
- Losing audience: There are many potential TikTok alternatives being promoted in the market that can scatter the monolith user base of TikTok.
- Monetization: If Google fails to monetize the deal properly, it will be sunk..
- Antitrust: The antitrust laws are into news again, recently the top executives of Big Tech were summoned before Congress. The Google-TikTok can attract negative attention, labeling it an “anti-competitive, monopolistic” deal by the rivals and lawmakers. The other three risks can be managed by Google, but the fourth one is a tough nut. Google is already under scrutiny of regulars, it has YouTube under its belt. Buying TikTok means it will ruffle the feathers of regulators.
It is going to be interesting to see who ends up buying TikTok and at what cost. Do you think the Google-TikTok deal will happen? What’s your opinion?