Oracle is considered the frontrunner to acquire TikTok’s U.S. operations in a high-stakes race to take control of one of the world’s most influential social media platforms before the government’s deadline to sell or ban the app by April 5.
According to Bloomberg, Oracle’s involvement would entail providing security guarantees and taking a minority stake in a newly formed American entity, all while potentially leaving TikTok’s prized algorithm under Chinese ownership.
Herein lies the rub.
Under the bipartisan law’s divestiture requirements, foreign-owned entities are prohibited from holding more than 20% of the app, exerting control or direction over the platform, and maintaining any “operational relationship” with TikTok’s content recommendation algorithms or data-sharing practices. Oracle is proposing that the algorithm remains under Chinese ownership, so under its current guise, doesn’t meet the requirements of the law.
“It’s a fool’s errand from the beginning,” said David Arslanian, managing director of Progress Partners.
But beyond this major wrinkle—and the fact that sources believe the ban deadline is likely to get extended—while Oracle might have the data chops to take on TikTok, the closure of its ad business last year, plus the potential culture clash between a corporate B2B firm and a social media platform, present challenges.
“Oracle has a big advantage on politics, but the business and culture fundamentals are dubious,” said Matthew Newcomb, regional director, North America, U.K. and APAC, Azerio.
Below are the additional challenges Oracle faces in its bid for TikTok.
Rebuilding its ads business
The potential acquisition offers Oracle access to another ad business, and, since it shut down its own ad operations last year, it won’t be encumbered by legacy tech and operations.
While this could be “good news,” said Ameet Shah, partner and svp of publisher operations and strategy at Prohaska Consulting, the real challenge lies in building a cohesive team and infrastructure.
