Specialist
Former director at ByteDance Ltd
Agenda
- TikTok's operating environment – pros and cons for possible buyers such as Microsoft (NASDAQ: MSFT), Oracle (NASDAQ: ORCL) and others
- Ability to improve data privacy – concerns around moving data to the US and re-engineering algorithms
- Monetisation opportunities, focusing on the US – investment needs for advertising technologies
- Outlook for H2 2020 and beyond – implications should sale not occur
Questions
1.
There has been a lot of press around TikTok since we last spoke [see TikTok – China-owned Social Media App Generating Global Growth & Success – 17 March 2020]. What core takeaways do you think investors should consider when assessing TikTok’s situation?
2.
What is the likelihood of Microsoft taking over TikTok vs a Microsoft-Walmart partnership takeover, a takeover by Oracle or other potential buyers, or even a no deal? What is the synergy potential of each? How might ByteDance be considering TikTok’s value?
3.
What do you think Microsoft and Walmart – the two front runners – could bring to TikTok vs Oracle? What might TikTok be considering in each company?
4.
How should we assess a TikTok sale only consisting of the English language countries relative to the whole business? How much of a balance needs to be found between the probable engineering complexities from offloading only certain countries relative to ByteDance’s likely desire to maximize value by selling TikTok whole? How difficult might this be in negotiations?
5.
TikTok was banned in India several months ago but the rhetoric with the government is not as intense as in the US. Might ByteDance consider offloading in India, given the breadth of users in the country? Who might be a buyer in India?
6.
TikTok’s valuation estimates have ranged between USD 30bn and USD 70bn overall, with USD 20bn-30bn for just the four countries. How much of the company’s overall value would you say is attributed to the algorithm itself? How should we think about the ability to take the algorithms in a TikTok sale? Is it likely that ByteDance will inherently have to retain them?
7.
ByteDance’s engineering support will likely stop if TikTok is only sold in a few countries. What time and costs might be required for a completely new team to rebuild the data collection and algorithm parts of TikTok? Is there a possibility that it is not feasible to expect a new TikTok team to be able to reconfigure things such as the algorithm to be as valuable as it was under ByteDance?
8.
I have read that it may take as long as 5-8 years to reconfigure once TikTok is sold. Would you expect content creator leakage to start in a matter of months or years? Do you think they will have an appetite to wait?
9.
TikTok is lightly monetised outside of China. What is the value prop for the rumoured suitors? Is there anything strategically valuable in the immediate term for Microsoft, Walmart or Oracle, given the challenges in making the transaction succeed? Is this simply a PR effort? Or a valuation play?
10.
How structurally challenged do you think advertising will be for TikTok in the long term? You mentioned brand safety risks. We’ve yet to discuss the complete lack of self-serve tools which is likely a bottleneck for any meaningful SMB advertising opportunity. Do you think advertising will fail to be fully tapped into, given that you can’t go targeted or full blast, contingent upon the young demographic using the app?
11.
What are your expectations for TikTok’s commerce opportunities? Would you expect it to extend the direct brand or merch deals? Does TikTok even at this point receive a cut? Is the key to success increasing creators’ views or having Walmart providing commerce strength?
12.
How much is the payment processing issue a function of the structural differences between China coming from a cash-based economy that garners the success of things such as WeChat, relative to the credit card, debit card dynamic that has fragmented payment processing in the US? Is large-scale payment through the same processor going to be the biggest issue?
13.
What differentiating factors do creators value in TikTok? Is it money they can make relative to video creation tools or UX comparison? How does it stack up to Reels, YouTube and the smaller players you mentioned? How much creator movement would you expect if TikTok’s tech issues are not resolved quickly?
14.
Can we discuss MAU sustainability during the transition period should they be bought, as well as MAU growth runway moving forward? Am I right to imply from your comments that TikTok has enough levers to pull to at least maintain viewership for its top creators reasonably well? Moving forward how are you assessing attainable MAU growth rates? Was growth driven more by the strengths of ByteDance’s algorithm vs the high amounts they spent on marketing? There is press around their willingness to spend 8 to 9 figures on customer acquisition and I question whether Microsoft, Walmart or Oracle would be willing to spend as much.
15.
What is your 12-24-month outlook for TikTok? Do you think things will progress positively or negatively for the company?
16.
Would you share anything we have not yet covered or any closing remarks?
