Apple: The Good And The Bad Of A TikTok Acquisition

Daniel Martins

Speculation has been running wildly about which US company or investment fund may step up and acquire TikTok’s US operations. While the focus of attention seems to be on Microsoft, Axios’ Dan Primack states that Apple could be in the race as well, according to his sources – granted, he also claims that Apple has officially denied interest in the social media company.

At this point, any talk about potential bidders, other than Microsoft, sounds like pure speculation to me. However, I took the time to think about why owning TikTok may or may not make sense for the Cupertino company. Feel free to share your views in the comments section below.

Why buy TikTok?

  • Entering the social media space would be a bold move for Apple, as it continues to evolve its services portfolio past the 2020 goal of doubling 2016 revenues. At an alleged user base size of 100 million in the US, TikTok has the potential to become a key service like the App Store currently is, not a side kick like the Apple Arcade or Apple News+.
  • Being a facilitator in the deal could help Apple score points with the White House. The Cupertino company is still under investigation by the US Congress for potential antitrust practices. As a reminder, the antitrust subcommittee is bipartisan, but has a slight Trump-friendly Republican majority.

Why step aside?

  • Whatever US company ends up buying TikTok, if any at all, will probably rub the Chinese government the wrong way. China has already threatened to add Apple to its “unreliable entity list”. With business struggling to recover in a market that once accounted for 25% of Apple’s total revenues, I doubt that Tim Cook and his team would want to stir the hornet’s nest, given the fragile US-China relations and Apple’s interest in the Asian market.
  • It is very unlike Apple to spend much money on big acquisitions. The company’s largest ever was the purchase of Beats, in 2014, for $3 billion – and the deal was largely strategic to the creation of the now successful Apple Music. ByteDance’s investors estimate TikTok to be worth $50 billion, with the US operations probably accounting for a fraction of that total. This is quite a price tag, even for Apple and its nearly $81 billion in net cash.
  • At the end of the day, TikTok is a promising but still unproven social media platform. Apple seems to follow the old General Electric mantra of only competing in industries where the company can occupy the number 1 or 2 positions in the market – think of the iPhone, iPad, Apple Watch, Apple Music, App Store, etc. With TikTok, Apple would probably live perpetually in the shadow of Facebook, Twitter, possibly even Snap.

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(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)

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