Oracle confirms deal with TikTok-owner ByteDance to become ‘trusted technology provider’

Oracle confirmed it has struck a deal with ByteDance, the Chinese owner of popular video-sharing app TikTok, weeks after President Donald Trump‘s administration ordered a TikTok divestiture in the United States. The deal still needs United States government approval. Oracle confirms Secretary Mnuchin’s statement that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which the company will serve as the trusted technology provider.

The United States government plans to review the deal. Citing concerns that Americans’ personal data would be shared with the Chinese government, the White House had imposed a September 20th 2020 deadline for ByteDance to announce a plan for a sale of TikTok in the United States or be banned by September 29th 2020. The deal would have to be done by November 12th 2020.

TikTok has said the Chinese government does not have access to user data. TikTok confirmed that it has submitted a proposal to the Treasury Department which it believes would resolve the Administration’s security concerns. The proposal would enable TikTok to continue supporting its community of 100 million people in the United States who love TikTok for connection and entertainment, as well as the hundreds of thousands of small business owners and creators who rely upon TikTok to grow their livelihoods and build meaningful careers.

Depending on how the deal works out, it could boost Oracle’s cloud business.

It might make Oracle more visible to young consumers and give it control over a prominent advertising venue. Microsoft, which competes with Oracle in cloud computing and database software, was also interested in TikTok’s United States operations. But Microsoft’s bid was rejected, and the company announced it had withdrawn from the process. Walmart had also been interested in TikTok for its e-commerce potential, and joined forces with Microsoft after a consortium with Softbank and Google fell apart.

Many millions of TikTok users are in their teens. The largest age bracket among TikTok users in the United Kingdom was 18-24. As an app that entertains people, TikTok stands out from the rest of Oracle, which sells software to large businesses, schools, and government institutions. Oracle and TikTok share an interest in marketing, though. TikTok derives revenue by showing users ads, and Oracle offers software that marketers can use to manage the distribution of ads on Facebook and other channels.

TikTok has been adding users quickly, while Oracle’s revenue has declined in four of the eight most recent quarters. Serving as a technology provider to TikTok might mean Oracle will offer its cloud infrastructure for the app to use. That would give Oracle another popular property for its executives to boast about as a cloud client, and it could attract additional cloud business.

Oracle was not among the top five cloud infrastructure providers by revenue in 2019.

The 2010 Sun deal made Oracle a notable seller of servers for data centers, and it entered the market for point-of-sale retail equipment with the 2014 purchase of Micros. Oracle’s $9.1 billion acquisition of cloud software company NetSuite in 2016 is the largest transaction in its 43-year history. ByteDance was founded in 2012, and that year it launched the news app Toutiao.

It came out with TikTok for people outside China in 2017, after bringing out a similar app for people in China called Douyin. Also in 2017, ByteDance acquired a separate video sharing app called Musical.ly that had gained a following in the United States. TikTok relies on recommendation systems to determine which videos it should show to users.