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What TikTok’s big deal means for cloud, e-commerce: TikTok Global created with Oracle, Walmart owning 20%

  • September 20, 2020

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TikTok’s US footprint is saved in a deal that includes Oracle and Walmart owning 20% of a newly formed TikTok Global and an IPO within 12 months. 

Oracle said it will be TikTok’s cloud provider in a deal that gives it a 12.5% stake in the social media network and a key reference customer. Walmart will own a 7.5% stake and explore the intersection of TikTok and e-commerce. 

In a statement, Oracle said “the technical decision” by TikTok was based on the Zoom reference account. However, TikTok, owned by ByteDance, was facing a Sunday shutdown order over security concerns by President Trump. Trump said he approved the deal earlier Saturday. Walmart announced its role in the deal for TikTok’s US operations shortly after Oracle. The Department of Commerce said the TikTok ban deadline has been extended by a week to Sept. 27.

More: With TikTok, Oracle hopes its cloud infrastructure business goes viral | ByteDance won’t allow TikTok’s algorithm to be part of a sale; Microsoft is rejected as suitor | US Commerce Department to ban TikTok and WeChat downloads starting Sept. 20  

Oracle CTO Larry Ellison, who touted cloud momentum on the company’s first quarter earnings call, said that TikTok will run on Oracle Cloud. CEO Safra Catz said:

Oracle will quickly deploy, rapidly scale, and operate TikTok systems in the Oracle Cloud. We are a hundred percent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok’s American users, and users throughout the world.

For Oracle, the cloud deal with TikTok is a win and can give it a higher profile. Should Oracle be able to use its cloud infrastructure to protect and isolate US data, TikTok will equate to a key reference customer. Oracle’s Generation 2 Cloud will isolate TikTok Global’s operations and respond to security threats autonomously.

While Oracle was looking to the TikTok deal for its cloud business, Walmart is thinking more about e-commerce. 

In its statement, Walmart outlined the following:

  • Along with the 7.5% stake in TikTok Global, Walmart will provide “ecommerce, fulfillment, payments and other omnichannel services to TikTok Global.”
  • Walmart CEO Doug McMillon will be one of the five board members of the newly created company.
  • The plan is to bring TikTok public in the US “within the next year.”
  • The move to make TikTok’s US operations independent will create 25,000 jobs.
  • TikTok Global will pay more than $5 billion in taxes to the US Treasury.
  • “Oracle, SIG, General Atlantic, Sequoia, Walmart and Coatue will create an educational initiative to develop and deliver an AI-driven online video curriculum to teach children from inner cities to the suburbs, a variety of courses from basic reading and math to science, history and computer engineering.”

A few observations

With the TikTok Global deal complete there are a few moving parts to consider.

  1. Walmart’s statement indicated “there is still work to do on final agreements” and this TikTok saga has had its twists and turns. In other words, don’t be surprised if there is some drama on the way to closing the deal.
  2. Neither Oracle nor Walmart addressed ByteDance’s algorithm behind TikTok. The algorithm is the secret sauce and it’s unclear whether China regulators will allow that IP transfer.
  3. China regulators would have to approve the deal.
  4. A TikTok Global IPO within a year would be the offering to watch for 2021. ByteDance will be able to monetize its TikTok Global stake and Walmart and Oracle will garner returns quickly. 
  5. With Oracle and Walmart partnering on TikTok Global it’s safe to assume that Oracle Cloud will play some role in Walmart’s infrastructure in the future. Today Walmart is closely partnered with Microsoft Azure.

Article source: https://www.zdnet.com/article/what-tiktoks-big-deal-means-for-cloud-e-commerce-tiktok-global-created-with-oracle-walmart-owning-20/#ftag=RSSbaffb68

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