'Boring' Microsoft could become TikTok's unlikely saviour

"Holy s---, Microsoft just saved TikTok!" So one TikTok creator, speaking to the camera from under a banner reading "Thanks Daddy Microsoft", greeted the news that the stricken Chinese viral video app might yet escape a total ban from the United States.

It was the culmination of three days of peril – and typical Trumpian chaos – for TikTok and its Beijing-based parent company ByteDance. Having already been ejected from their biggest overseas market in India, executives were reportedly "desperate" to shield their creation from the wrath of the White House by selling it to an American company.

Negotiations with Microsoft - often described as "boring" compared to the other tech giants - were close to an accord when the President himself publicly declared his opposition. US officials were reportedly as confused as their corporate counterparts, with one suggesting: “Have you read ‘The Art of the Deal?”

On Sunday night, however, Microsoft announced that talks would resume following "a conversation" between its chief executive Satya Nadella and Trump, whom it thanked for his "personal involvement". It was all but a confirmation that the deal now has presidential blessing – at least or the time being.

Microsoft has been careful to signal that nothing is certain yet, only saying that we will know before Sep 15. But if the sale does go through – and the wind is behind it – it would be a giant shift, causing one of the most momentous shake-ups to the tech landscape in years.

"This would be a major strategic bet," says Dan Ives, managing director of equity research at Wedbush Securities

"[Microsoft] has for the last decade shied away from social media, to some extent to its own detriment... and TikTok essentially fell in its lap. Which would put it in a very formidable spot on day one."

How Microsoft can exploit its rivals' woes

In fact the timing is exquisite. Just last week, rivals such as Google and Amazon took a beating from furious politicians in a competition hearing from which Microsoft, despite having once been declared an abusive monopoly by a US court, was notably absent.

It would therefore have been the worst possible moment for Facebook, whose fear of TikTok is widely credited as the animus behind chief executive Mark Zuckerberg's increasingly strident public warnings about China, to make a move.

Only on Wednesday Zuckerberg was being grilled about internal emails in which he bluntly attributed his $1bn (£770m) acquisition of Instagram in 2012 to a desire to "neutralise a competitor". Good luck trying that again.

"The other tech stalwarts are up to their eyeballs in regulation, so their hands are tied," says Ives. "Yet Microsoft is untethered... [it] basically has a clear path under their noses."

Despite their differences, the two firms are not without synergies. Microsoft already has one strong hook in young consumers' leisure time due to its Xbox video game system. Integration could let gamers easily share video clips or live streams of their virtual exploits on TikTok, making it a competitor to Amazon's Twitch or Google's YouTube.

One TikTok creator poked fun at the possibilities in a skit on Sunday, assuming the roles of both Microsoft and a gamer who prefers Sony's Playstation 4. "OK, bro, I get that you're Microsoft, but why are you in my room?" the PS4 fan asks. "I just need a simple apology," says Microsoft. "And heck, I need a thank you for saving your ass."

A haunted gift horse

Yet TikTok may also prove a serious challenge for a company that has prospered by placing all its chips on prosaic business computing. Microsoft's only similar product is LinkedIn, a hyperactive professional networking service that is closer to American Psycho than Old Town Road.

The acquisition would burden Microsoft with responsibility for all of TikTok's content moderation scandals, forcing it to reckon with issues such as hate speech and censorship like never before.

It would also need to clean up TikTok's reputation for shadowy uses of artificial intelligence (AI). Over the past year, leaked documents have revealed how its algorithms systematically suppressed and filtered out videos by users judged to be poor, "ugly" or disabled.

At least Microsoft, which has made a name for itself in AI ethics and has incurred far fewer privacy scandals than its advertising-funded rivals, is in a good position to fix things. The company said on Sunday that it would add "world-class security, privacy and digital safety protections", as well as "transparency" for users and "appropriate oversight" for governments.

Could TikTok be a Facebook-killer?

All of which is very bad news for Zuckerberg. Though TikTok is not a social network per se, both it and Facebook make money via "display" advertising – that is, by collecting data on what users want to see in order to interrupt them with ads they did not ask for.

So far Snapchat or Twitter have been able to seriously dent Facebook's supremacy in that market: where they have a few hundred million users, it has around three billion. But according to reports, ByteDance boss Zhang Yiming was reluctant to sell all of TikTok because he believes it could succeed where they failed. With more than 800 million users prior to the split, he might be right.

If so, the danger to Facebook is now even worse. A Microsoft-owned TikTok would be able to assail it with all the resources of the world's second most valuable company. Worse, its American ownership would kill Zuckerberg's most fruitful lobbying strategy in one stroke. Might we dare to imagine a world in which there is more than one truly big social media company?

"With the unparalleled distribution Microsoft has, I think they could take it to the next level, as well as having the blessing of the White House," says Ives.

"Satya Nadella has had the golden touch with everything he would lay his hands on, so there is a load of confidence with what they can do here... Microsoft owners would also help US consumers who use TikTok sleep well at night, from a data perspective."

A 'chilling effect' in China

Zooming out, TikTok's travails have huge implications for the global tech industry. America's arguments against TikTok are so broad that they would theoretically mean a total ban on any Chinese firm competing in the US. Indeed, Trump's officials have signalled that they are gunning for others.

That creates the unprecedented situation of America building its own equivalent to China's "great firewall", which for so long sheltered Chinese tech giants from the predation of Silicon Valley. If maintained, it would bring a decisive end to the era of US technological openness and confidence.

Indeed, some TikTok users responded to the threat of a ban by sharing information about how to access it using a virtual private network (VNP) – the same technology used by some Chinese citizens to circumvent the firewall.

"This news, together with the ongoing issues with Huawei, will definitely have a chilling effect on Chinese companies considering entering the US market," says Rich Bishop, chief executive of the Beijing-based firm AppInChina, which helps foreign companies get a toehold in the People's Republic.

"The risk of building up a business and then having it blocked or completely shut down is just too high," he says. "Several CEOs that I’ve spoken with have said that they are shifting more of their focus to Southeast Asia instead."

"These actions are also likely to result in retaliatory measures against American tech companies in China, including Apple, Microsoft and Cisco. The recent removal of almost 50pc of paid games from the Apple App Store China is one example of this, but there are likely to be more in future."

Chinese social media users, he says, take a cynical view of the conflict, seeing it as just one more "tit for tat" move in the ongoing trade war. Many believe that the US is only acting because TikTok's "success" has now made it "a threat" to the likes of Facebook and Twitter.

The 'evil empire' meets Generation Z

There is, finally, a crowning irony to the idea of Microsoft as TikTok's messiah. One is among the world's fastest-growing and trendiest apps, at the bleeding edge of the cultural divide that is rapidly severing Generation Z from its forebears.

The other is a corporate software behemoth founded in 1975: long detested by programmers as "the evil empire" and "the dark side", its employees derided as "microserfs", and still regarded by some as one of Earth's most flagrantly uncool computer companies.

"It's not your grandfather's Microsoft," says Ives. "They could really change their perception among a whole other demographic by owning TikTok."

Indeed, a recent poll by Morning Consult, a data intelligence company, found that one third of US adults opposed a ban on TikTok, including 59pc of Gen Z. Some have speculated that banning TikTok could have motivated many young people to vote against Trump – not so strange, given the app's emergence as a tool of political activism.

“TikTok is to Black Lives Matter what Twitter was to the Arab Spring,” Kareem Rahma, a TikTok creator famous for her videos taken at protests, told the New York Times. “I saw a lot of youth on the ground TikTokking the protests as opposed to live-streaming, tweeting or Instagramming."

One older couple on TikTok clearly perceived the humour in the situation. "Thank you Microsoft!" says one of them as they lie in bed together, smiling up at the camera. "Now that you guys are in charge, things are going to be so – "

Then the video freezes, stutters and finally crashes to Windows's infamous "blue screen of death".