Taking TikTok to the next level: What Walmart's takeover bid could mean

January 1, 2021

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Walmart hit the headlines this Autumn when they announced their intention to buy out TikTok. But what could a potential takeover mean for the app?

Walmart made news this Fall when they teamed up with Oracle in a bid to buy the popular video sharing app TikTok. The app, which is primarily known for short viral videos and dance crazes, is seen as the next frontier of social media, and a vital link to the hearts and minds of Gen Z consumers. The massive retail chain ended up with a 7.5% stake in TikTok International, when ByteDance, the app’s parent company, agreed to sell off control of its operations outside of China. Walmart CEO Doug McMillon was also granted a seat on TkTok’s board, a move which indicated the app’s aspirations to branch out into lucrative eCommerce partnerships, and Walmart’s attempt to create a subscription-based service, Walmart+, to rival Amazon Prime.

An App’s Meteoric Rise Raises Concerns

TikTok is based on sharing short-form videos, like viral challenges, comedy skits, dancing, lip syncing and social commentary. It immediately connected with young internet users, and when Vine shut down in 2016 it spread rapidly across Asia and into western markets. Currently, over 100 million American regularly engage with TikTok, and the app has been downloaded over 2 billion times globally.

But with incredible growth came intense scrutiny. President Donald Trump became the app’s biggest critic. TikTok is owned by ByteDance, a Beijing based tech company often likened to Facebook because it owns and controls a family of social networking platforms. ByteDance has close connections to the Chinese government, a fact which has fuelled widespread concerns over the company’s data and privacy policies. These concerns prompted many companies, political parties, and government agencies to ban employees and members from downloading the app. 

As criticisms mounted, US regulators began investigating TikTok and the President ramped up his rhetoric, threatening to ban the app. Meanwhile, the app’s popularity with young users led to concerns that data was being collected from children without parental consent. TikTok was essentially forced to change its organizational structure in order to continue its global operations, as Trump threatened to ban the app if it didn’t sell its operations to an American company. This led to the complicated deal it brokered with Walmart and Oracle. Essentially, the company agreed to sell 20% of its shares to the two American companies. Oracle will potentially control the cloud services of TikTok international, handling privacy and data security and satisfying political concerns that China’s government was using the app as a trojan horse. Walmart meanwhile would be tasked with growing the brand’s business around the world and increasing profits by integrating eCommerce into the fabric of TikTok.

There is still some debate over who will actually control the company. President Trump expressed satisfaction with the deal, saying that the company was now 80% American owned and controlled, with 4 of the 5 board seats occupied by Walmart’s CEO and venture capitalists who had invested heavily in the company. Meanwhile ByteDance claims that it controls 80% of the company, since only 20% of its shares were sold to Oracle and Walmart. Oracle’s Executive Vice President Ken Glueck told reporters that: “Upon creation of TikTok Global, Oracle/Walmart will make their investment, and the TikTok Global shares will be distributed to their owners. Americans will be the majority and ByteDance will have no ownership in TikTok Global.” The future of the deal is still in the balance, as TikTok fights in the courts against a ban that it considers illegal, and Beijing weighs whether or not to grant its approval to the sale.

While things remain murky, what’s clear is that the deal is a swing for the fences from Walmart. If it goes through, this bold attempt to push back against Amazon’s eCommerce domination could dramatically change the future of online shopping.

Why This Partnership Could Upend The Status Quo In eCommerce

Even with the partnership in the balance Walmart recently rolled out a first of its kind live event on TikTok: The Holiday Shop-Along Spectacular. The event featured “TikTok creators like dancer Michael Le participating in a social media fashion show. When you see clothing in a dance or closet tour, you only have to tap it to start a purchase — think of it as the social media equivalent to a shopping channel.” While shoppable videos aren’t new, this event is the first example of a live shoppable event, and an attempt to forge a new way forward in social media marketing.

Influencer marketing is also hugely influential with Gen Z, and controlling a beloved platform will give Walmart an edge in reaching the next generation of consumers. TikTok has proven that it can create stars overnight: The Rock is 20th in followers on the platform, while a 16 you may never have heard of, Charli D’Amelio, is 1st with over 100 million followers. D’Amelio posted her 1st dance video in 2019, and her stratospheric rise is proof positive that TikTok stardom can happen overnight. Control of the platform means that Walmart will have an inside track towards developing close relationships with a new generation of celebrities.

Walmart has also announced that their investment in TikTok is “an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses.” While social media outlets have been attempting to convert attention into sales for years, the integrated approach which could emerge from this acquisition would break new ground, and give Walmart a chance to level the playing field in their battle with Amazon. It also signals that the links between social media and eCommerce are growing even closer in an era where our lives are increasingly moving online.

If your brand is trying to compete in this marketplace, now is the time to develop shoppable eCommerce platforms. If you need help creating shareable, shoppable social media content, or building your own online sales platform, Adimo is just an email away!

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