Oracle’s TikTok Bid Is Complicated by Culture Clashes and Ad Business Hurdles

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. “Even with top talent and the necessary adtech, it would take between eight to 18 months to create a scalable, meaningful operation," Shah said. "The absence of an existing team familiar with TikTok’s ecosystem adds another layer of complexity." The acquisition could provide Oracle with a valuable foothold in the U.S. media landscape but the transition wouldn’t be immediate, Shah noted. “Advertisers wouldn’t know whether they can continue spending on the platform, as the shift from ByteDance to Oracle would take time,” he said, adding that it's highly unlikely TikTok would be fully operational under Oracle by the April 5th deadline. A very different type of ad business Oracle could have some organizational muscle memory around advertising that might make it feel more comfortable acquiring a business like TikTok. However, TikTok's core product is content, and serving ads around that content, rather than advertising technology, Oracle's former ad business. “Content is fleeting,” said Arslanian. “You can create great technology that people love, but if the content stops, it makes everything much harder to sustain.” A culture clash Oracle is well-regarded for its M&A strategy, said Arslanian, particularly its methodical approach to integrating acquired companies into its stable, enterprise-focused structure. Its acquisitions include companies like the hardware solutions provider MICROS Systems and Sauce Video, a content creation and sourcing platform. However, the integration process may prove difficult with TikTok, which has a fast-paced innovation cycle that contrasts sharply with Oracle’s process, Arslanian noted. “These two conflicting views will make this deal a challenge,” Arslanian said. High-stakes bet with uncertain payoff If Oracle secures the deal, it could gain a foothold in the booming ecommerce space while reshaping its identity beyond enterprise software. But a misstep in managing TikTok’s delicate balance of advertisers, creators, and users could erode the app’s relevance—turning a promising acquisition into an expensive miscalculation. “Social media market is fleeting and you need to always be in the zeitgeist,” Arslanian said. “Entrenched incumbents like Oracle, or even Amazon, aren’t naturally positioned to acquire and successfully operate TikTok, which thrives on fast-evolving content.”

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Oracle’s TikTok Bid Is Complicated by Culture Clashes and Ad Business Hurdles

Ownership of the algorithm is just one of the wrinkles impacting Oracle's bid to take over the app before the April 5 deadline

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