Microsoft nears big bet on TikTok after risky LinkedIn deal shows promise: Reuters analysis

Microsoft nears big bet on TikTok after risky LinkedIn deal shows promise: Reuters analysis

Microsoft Corp's potential acquisition of short-video app TikTok carries myriad risks, thrusting it into the politically fraught social media business and Sino-U.S. conflict amid increased scrutiny of big-tech companies.

But the deal could help Microsoft build on its $27 billion purchase of LinkedIn to become a bigger player in internet advertising now dominated by Facebook Inc and Alphabet Inc's Google.

Microsoft on Sunday said it aims to complete a deal by Sept. 15 for TikTok's U.S., Canada, Australia and New Zealand operations. It is likely to have an edge in pricing negotiations as the U.S. is effectively forcing TikTok's Chinese parent, ByteDance, to sell by threatening to ban the app as a security risk.

TikTok has taken teenagers around the world by storm and emerged as a significant competitor to Facebook and Google's YouTube. But like rivals, TikTok faces substantial new costs for content moderation as the spread of misinformation and allegations of political bias roil social media.

Increased oversight costs accounted for much of the 10-percentage-point drop in gross profit margins for Facebook and Alphabet over the last 3-1/2 years, Refinitiv data showed.

"Does Microsoft really want to own an app that breeds conspiracy theories in tweens?" said Hank