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Walmart’s Bid for TikTok Could Benefit the Retail Giant’s Ecommerce and Advertising Businesses

Walmart's move is part of a broader play to bring more shoppers, advertisers, vendors into the fold as the lines between content and commerce continue to blur.

Walmart and Microsoft Teaming Up

As reported by Bloomberg (via Yahoo Finance), Walmart Inc. is teaming up with Microsoft Corp. in a contest against Oracle Corp. to buy the U.S. assets of the popular video-sharing app TikTok from China’s ByteDance Ltd.

Oracle and Microsoft, with its new partner, both submitted bids in a deal that could come within the week, according to people familiar with the deliberations.

Walmart would also own a stake in a newly spun-off TikTok business, alongside Microsoft, people familiar with the matter said.

Competing offers have been made in what augurs the closing process of a deal, although it will take longer for final details to be worked out, one person said, requesting anonymity because they were not authorized to speak publicly about the negotiations.

A Walmart-Microsoft bid would “meet both the expectations of U.S. TikTok users while satisfying the concerns of U.S. government regulators,” Walmart said.

Walmart has already acknowledged the value of e-commerce when it comes to TikTok.

The company said Thursday that its interest in the app stems from the way it has "integrated e-commerce and advertising capabilities in other markets," and added that TikTok could bolster Walmart's access to consumers.

Walmart Statement Regarding Discussions with Microsoft About TikTok

Walmart Inc. issued a public statement regarding discussions with Microsoft involving ByteDance Ltd.’s TikTok service in the United States:

“The way TikTok has integrated e-commerce and advertising capabilities in other markets is a clear benefit to creators and users in those markets. We believe a potential relationship with TikTok U.S. in partnership with Microsoft could add this key functionality and provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses. We are confident that a Walmart and Microsoft partnership would meet both the expectations of U.S. TikTok users while satisfying the concerns of U.S. government regulators.”

According to Benzinga, the bids for TikTok are in, and ByteDance seems to have realized that "the writing is on the wall," meaning that a sale may be the only option with an executive order looming from U.S. President Donald Trump, according to Wedbush.

The TikTok Sale Analyst: Daniel Ives said Microsoft and Walmart have a 90% probability of winning the deal.

The TikTok Sale Takeaways: Although deal negotiations are likely to be complex, given technology and data privacy issues to be addressed, Microsoft seems to be the “only true white knight around,” Ives said in a Friday note.

Walmart's Digital Ambitions

If successful, Walmart’s bid alongside partner Microsoft Corp. could also enhance its soon-to-launch delivery subscription service, making it a more credible threat to rival Amazon's Prime offering. TikTok could even become a platform to sell Walmart’s products, catapulting the 58-year-old Arkansas retailer into the emerging realm of social commerce against Facebook and its Instagram platform.

For Walmart, It's a way to offer customers a hyper-personalized experience in both content and commerce said Deborah Weinswig, founder and CEO of Coresight Research.

TikTok would give Walmart access to a large, young, and loyal group of users coveted by advertising agencies and their blue-chip clients, who might shift some of their marketing budgets from Google, Facebook, and Amazon over to Walmart’s in-house media arm.

Data captured from TikToks users - who currently don’t shop at Walmart often, or at all - could also influence the types of products that Walmart chooses to carry on its marketplace site, where Walmart doesn’t own the inventory but generates a fee from every sale. TikTok’s digitally native viewers are just moving into their prime consumption years now, making it an ideal time to rope them in.

A tie-up would allow Walmart to tap into purchases made via social media, according to RBC Capital Markets analyst Mark Mahaney. One-quarter of US Instagram users reported making a purchase on the site this year, RBC found, up from 15 percent a year ago. There isn’t much direct commerce done over TikTok in the US now, but that could change under Walmart’s stewardship.

Combining social engagement with commerce is the magic formula for the future of retail, says Jordan Berke, who helped lead Walmart’s Chinese digital operations before departing last year to start Tomorrow Retail Consulting. Facebook is in the pole position to be America’s super app, but this places Walmart plus Microsoft as a solid No. 2.

Infographic: Visualizing the Social Media Universe in 2020

Amazon still has a leg up due to its detailed shopping histories for nearly half a billion people, who already do most of their internet shopping there, RBC’s Mahaney says.

About 265 million people shop at a Walmart store or on its website each week, but Walmart knows less about them. That’s why it’s about to launch a new subscription service dubbed Walmart+, which could narrow that gap.

As previously mentioned, owning TikTok could help Walmart more effectively battle e-commerce giant Amazon, which it competes with not only for direct sales but also for third-party sellers on its online marketplace and for advertisers.

"To the extent that TikTok would add more eyeballs for Walmart's e-commerce platforms, that would make Walmart more attractive for third-party sellers for both the Marketplace and as an advertising platform," stated DA Davidson senior research analyst Michael Baker.

Microsoft could be the perfect partner in the deal, because it, too, has a fierce rivalry with Amazon in the cloud business.

Breaking News: Centricus, Triller Seeking to Buy TikTok Assets for $20 Billion

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