Show an ad over header. AMP

Microsoft and Walmart look to boost ads, e-commerce with TikTok deal

As Microsoft and Walmart pursue a joint deal to buy TikTok's U.S. business from China's ByteDance, the giants each see fresh opportunities to expand into long-coveted markets — advertising in Microsoft's case and e-commerce for Walmart. But both companies have decidedly mixed track records in these realms.

By the numbers: Walmart currently makes less than 8% of its total revenue on e-commerce, despite pricey forays into the industry, like its $3.3 billion acquisition of the now-defunct Jet.com in 2016. Microsoft makes less than 5% of its revenue on digital ads, despite its $26.2 billion acquisition of LinkedIn in 2016 and numerous other forays into ad-supported businesses


Driving the news: A joint Microsoft and Walmart deal would allow TikTok to remain in the U.S., and would provide a platform for creators to sell goods via a social e-commerce infrastructure, sources tell Axios' Dan Primack.

  • Be smart: The goal would be to build out a business similar to the one ByteDance operates with its Chinese-based TikTok app, called Douyin.
  • Douyin makes most of its revenue from advertising, but has made big investments to increase its e-commerce revenue, mostly via partnerships with Chinese tech giants like Alibaba.
  • The app boasts 400 million daily active users, making it one of China's biggest social video apps.

Microsoft has a long history of digital acquisitions and product development in ad-supported software, beginning with search and, more recently, with investments in other networks, like LinkedIn. But its ad business is still tiny compared to software rivals like Google and Facebook.

  • A series of acquisitions and partnerships over the past 15 years has helped the company develop what it today calls Microsoft Audience Network, a pay-per-click advertising platform for search result ads.
  • Microsoft makes most of its ad revenue on search ads via its search engine Bing, and network advertising from Bing, MSN, Outlook.com, the Microsoft Edge browser and LinkedIn. LinkedIn brings in about $2 billion of the company's roughly $6 billion in annual ad revenue, per estimates from eMarketer.
  • Microsoft has experimented with all different kinds of advertising businesses over the past two decades, including trying to create rivals to YouTube and Twitch and to testing ad-funded versions of Office and Windows. None of those efforts were successful.
  • Most recently, it's made several smaller ad tech acquisitions to help boost its advertising revenue, including advertising data company Drawbridge and retail ad tech company Promote IQ, both in 2019.

Walmart has pushed to expand its e-commerce business aggressively in the past few years, although it has faced some bumps along the way.

  • In 2019, Walmart shut down Jet.com, an e-commerce company it bought for $3.3 billion. The deal helped Walmart jump-start its foray into e-commerce, but Jet's brand proved less attractive than Walmart's.
  • Today, Walmart makes about $41 billion on e-commerce annually, and it's pushing aggressively to take on Amazon by expanding its online marketplace.
  • In June, Walmart said it would open its online marketplace, which reaches 120 million monthly visitors, to Shopify's more than 1 million business clients in an effort to take on Amazon's e-commerce dominance.
  • The company reportedly plans to launch a subscription delivery business to rival Amazon's this summer. A relationship with TikTok could help it market to millions of new customers.

Yes, but: It's still unclear at this point what a joint Microsoft-Walmart bid for TikTok would even look like or how it might be structured.

  • Nor is it clear that this combo is guaranteed to win the bid. A handful of other tech giants, including Oracle and Softbank, have also reportedly expressed interest.

The big picture: TikTok has a lot of potential, but its business is still nascent.

  • The company announced this year it hit 100 million active users in the U.S., up from around 26 million at the beginning of the year.
  • While its ad business is growing, TikTok is still only beginning to experiment with in-app purchases and e-commerce.
  • The app brought in $176 million in revenue last year, which is tiny compared to tech giants like Google and Facebook, but analysts see big potential for revenue and growth.
  • Plus, any shift in ownership could risk diluting the secret sauce that has made TikTok a youth-market hit.

Go deeper: Microsoft working with Walmart on TikTok deal

House Democrats unveil sweeping reforms package to curtail presidential abuses

House Democrats on Wednesday unveiled sweeping legislation aimed at preventing presidential abuse and corruption, strengthening transparency and accountability, and protecting elections from foreign interference.

Why it matters: While the bill has practically no chance of becoming law while Trump is in office and Republicans hold the Senate, it's a pre-election message from Democrats on how they plan to govern should Trump lose in November. It also gives Democratic members an anti-corruption platform to run on in the weeks before the election.

Keep reading... Show less

TikTok's content-moderation time bomb

When the dust finally clears from the fight over TikTok, whoever winds up running the burgeoning short-video-sharing service is likely to face a world of trouble trying to manage speech on it.

Why it matters: Facebook’s story already shows us how much can go wrong when online platforms beloved by passionate young users turn into public squares.

Keep reading... Show less

Making sense of China's very vague new plan to reach "carbon neutrality"

Major climate news arrived on Tuesday when Chinese President Xi Jinping said China would aim for "carbon neutrality" by 2060 and a CO2 emissions peak before 2030.

Why it matters: China is by far the world's largest greenhouse gas emitter. So its success or failure at reining in planet-warming gases affects everyone's future.

Keep reading... Show less

Less travel is causing the NBA to see better basketball

In addition to keeping out the coronavirus, the NBA bubble has also delivered a stellar on-court product, with crisp, entertaining play night in and night out.

Why it matters: General managers, athletic trainers and league officials believe the lack of travel is a driving force behind the high quality of play — an observation that could lead to scheduling changes for next season and beyond.

Keep reading... Show less

Senate Republicans release report on Biden-Ukraine investigation with rehashed information

Senate Republicans, led by Sens. Ron Johnson (R-Wis.) and Chuck Grassley (R-Iowa), on Wednesday released an interim report on their probe into Joe Biden and his son's dealings in Ukraine.

Why it matters: The report's rushed release ahead of the presidential election is certainly timed to damage Biden, amplifying bipartisan concern that the investigation was meant to target the former vice president's electoral chances.

Keep reading... Show less

The high-wage jobs aren't coming back

Reproduced from Indeed; Chart: Axios Visuals

The pandemic has caught up with high-wage jobs.

The big picture: Early on, the pandemic walloped hiring across the wage spectrum and in every sector. Now, states have opened up, and the lower-wage retail and restaurant jobs have slowly come back — but higher-paying jobs are lagging behind.

Keep reading... Show less

The FDA plans to toughen coronavirus vaccine standards

The Food and Drug Administration plans to toughen the requirements for a coronavirus vaccine emergency authorization, which would make it more difficult for one to be ready by the election, the Washington Post reported Tuesday.

Why it matters: Public skepticism of an eventual vaccine keeps increasing as President Trump keeps making promises that are at odds with members of his own administration.

Keep reading... Show less

Wall Street fears meltdown over election and Supreme Court

The death of Justice Ruth Bader Ginsburg and President Trump's vow to name her replacement to the Supreme Court before November's election are amplifying Wall Street's worries about major volatility and market losses ahead of and even after the election.

The big picture: The 2020 election is the most expensive event risk on record, per Bloomberg — with insurance bets on implied volatility six times their normal level, according to JPMorgan analysts. And it could take days or even weeks to count the record number of mail-in ballots and declare a winner.

Keep reading... Show less

Insights

mail-copy

Get Goodhumans in your inbox

Most Read

More Stories