Why Satya Nadella wants TikTok

The Big Story

TikTok 365 Enterprise Edition, Service Pack 2

OK, I admit it, my first thought upon hearing that Microsoft was interested in TikTok was "oh that'll be a disaster." This is the company that spent billions on Nokia and botched it, spent billions on Skype only to get slapped around the ring by Zoom, and has tried to figure out social countless times without ever even coming close. So sure: Spend billions on TikTok! What could go wrong?

This is all moving very fast, so here's an update on where we are:

• President Trump threatened to ban TikTok, but what we think he's really doing is trying to leverage ByteDance to sell 100% of the app to an American-owned company. According to an email that ByteDance founder Zhang Yiming reportedly sent employees today, CFIUS has ordered a full divestment of TikTok's U.S. operations.
• Microsoft went public with its interest yesterday, writing in a blog post that it "is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury."
• But you can practically taste the irritated sarcasm emanating from Redmond: "Microsoft appreciates the U.S. Government's and President Trump's personal involvement as it continues to develop strong security protections for the country."

The whole thing looks like Microsoft me-tooing its way into another industry, almost as if it saw the other four tech giants go in front of Congress and somehow decided that'd be a fun place to be. But the more I talk to people, the more I think Microsoft may actually have something here.

• It would almost certainly get TikTok at a discount, if the Trump administration is really telling ByteDance to sell the app or have it banned entirely. That's a lot of leverage for Satya Nadella and his team.
• TikTok's not just a fun social app, either. It's a booming ad business — and could be a bigger one, with advertisers looking for a way to reduce their reliance on Google and Facebook. Microsoft's ad business has slowed recently, and adding TikTok to the equation would speed it up bigtime.
• And Microsoft can pull off an acquisition: remember Minecraft? Popular with young people, its previous owner was … complicated. Microsoft has helped it expand without meddling in what makes it great. Everybody wins.

Whatever happens, we'll know by September 15, which is the date Microsoft gave as the deadline for closing discussions with ByteDance.

This is a legacy-defining move for Nadella, no matter how it shakes out. He's spent the entirety of his CEO tenure giving Microsoft investors what they want: a company focused on enterprise, on infrastructure, on the unsexy but profitable things that have made Microsoft a giant again. And it worked. He doesn't need to chase the hot new thing to make Microsoft more exciting — but he's earned the right to do so. And now, Nadella's chips are in the middle of the table.

In related news: The U.S. is reportedly looking at other Chinese companies, meaning WeChat and others could get The TikTok Treatment soon. But as Alex Stamos tweeted over the weekend, TikTok's the one to watch: "If the White House kills this we know this isn't about national security." ByteDance's founders, meanwhile, are reportedly planning to relocate to London, where they plan to build an HQ for the rest-of-the-world parts of TikTok that Microsoft isn't interested in. That could set the U.K. government up for another fight with Trump.

Advertising

So much for the ad boycott

Even in the best-case scenario, July's Facebook ad boycott always had a tinge of opportunism. You can imagine the conversations: "Well, the pandemic's destroyed our ad budget, but what if I could tell you we could get a whole bunch of earned media and good PR by NOT spending money?"

We'll have to wait until Facebook's next earnings report to know exactly what kind of damage the boycott did – and Facebook did indicate there's at least some — but things are getting back to normal. And in a hurry.

• The 100 top-spending advertisers on the platform spent 12% less this July than they did a year earlier, The New York Times reported — a gap made up almost entirely by the nine companies on that list that publicly joined the boycott.
• Overall ad revenue? Facebook said it was up 10% in the first three weeks of July.
• When Mark Zuckerberg said last week that small businesses need Facebook to survive, he was right: Most of the companies that boycotted told the Times they're planning on going back to Facebook.

This was always going to take longer than a month to play out, and from a publicity and scrutiny standpoint the boycott definitely had an effect: Mark Zuckerberg had to answer boycott questions during last week's hearing, for one thing.

I also suspect we're going to see a broader shift in how ad money gets spent in the next few quarters — Snap's already said the boycott "opened the door" with new advertisers — as some of those companies grapple with how reliant on Facebook they really are. But for now, Facebook came through a pretty ugly period relatively unscathed. As Facebook always seems to do.

Space

The future of space travel comes back to Earth

Even before Doug Hurley and Bob Behnken climbed onto SpaceX's Crew Dragon and went to space, Elon Musk was saying the thing he worried most about was reentry. Well, reentry was yesterday, and it went damn near perfectly.

• The Crew Dragon undocked from the ISS on Saturday, and landed in the Gulf of Mexico on Sunday.
• Crew Dragon will likely now be certified for more missions to the ISS, potentially starting later this year.

Yesterday was a big one for SpaceX and for NASA's Commercial Crew Program. As NASA's Jim Bridenstine said after the splashdown, the mission "has really just proven the business model for how we go forward, and how we do more than we've ever been able to do before."

• Meanwhile, Gwynne Shotwell was already telling SpaceX employees it's time to think about Mars. And Musk was thinking even bigger: "When space travel becomes as common as air travel, the future of civilization will be assured," he tweeted.
• All the investors, companies and agencies holding their breath about the future of the private space industry can finally exhale. And everyone else? Time to start making a Space Plan.

A MESSAGE FROM QUALTRICS

Qualtrics' Work Different free virtual event, on August 12, will explore how successful organizations like Atlassian, Microsoft, the NBA, and many others are listening to and taking action on the feedback from their customers and employees to create a "new better" for their business. Register now at Qualtrics.com.

People Are Talking

Mike Pompeo told Fox News what, exactly, the U.S. government sees as dangerous about Chinese apps:

• "Feeding data directly to the Chinese Communist Party, their national security apparatus. Could be their facial recognition patterns. It could be information about their residence, their phone numbers, their friends, who they're connected to. Those are the issues that President Trump has made clear we're going to take care of."

Mark Zuckerberg said Facebook is already planning for what happens when Election Day gets weird:

• "Getting people ready for the fact that there's a high likelihood that it takes days or weeks to count this — and there's nothing wrong or illegitimate about that."

Coming Up This Week

The story of the week will be TikTok-Microsoft-Trump. But there's another acquisition maybe brewing: Nvidia is reportedly in "advanced talks" to buy Arm, as SoftBank tries to sell off the company to free up some cash.

Lots of phones coming this week: Google's likely announcing the new Pixel 4a today, and Samsung's next Galaxy Unpacked event is on Wednesday.

The Black Hat virtual conference started on Saturday, and runs through Thursday.

Earnings season continues! Match, Square, Roku, Uber, Dropbox, Nintendo and others all report this week.

In Other News

• While Big Tech companies race toward $2 trillion valuations, they're also competing for another insane-sounding milestone: Who's going to be the first to have a $100 billion quarter? It might be Apple, it might be Amazon, and it might be next quarter.
• Meet the teenager who hacked Twitter.The NYT has a great profile of Graham Ivan Clark, the Florida kid who reportedly masterminded the takeover of some of Twitter's biggest accounts. Turns out it really was just about Bitcoin.
• Google is putting Windows apps on Chromebooks. Actually, you'll be able to run all of Windows on the devices someday soon, as Google tries to solve for that time you just really need to use Quicken.
• Google's also still working on exposure notifications. You're forgiven if you forgot, as the highly anticipated Apple-Google project seems to have … simmered. But a set of apps is apparently due "in the coming weeks."
• Apple wants cheaper rent. It's reportedly demanding up to a 50% rent decrease on some of its stores in the U.K., in exchange for extending its leases by a few years.
• Phishing attacks happen faster than you think. A huge study of phishing-based hacks found that from start to finish, they take about 21 hours. If you're going to stop them, it has to be before they even begin.

One More Thing

Previouslyonparksandrecreation

I've never been a fan of listening to podcasts at 1.5x speed, because it makes everyone sound super agitated. But I get why people like it. And now you can do it on Netflix, controlling playback speed between 0.5x and 1.5x. It's a useful accessibility feature for people with hearing or sight impairments, though many Hollywood types hate it — because of course they do. Anyway, if someone forces you to sit through "The Kissing Booth 2," at least you can now do it in record time.

A MESSAGE FROM QUALTRICS

Qualtrics' Work Different free virtual event, on August 12, will explore how successful organizations like Atlassian, Microsoft, the NBA, and many others are listening to and taking action on the feedback from their customers and employees to create a "new better" for their business. Register now at Qualtrics.com.