Oracle Gets TikTok’s Coveted Rose
But is the partnership more akin to a friendship bracelet?
Ever since Trump threatened to ban TikTok unless it was sold to an American company by Sept. 15, the app has become America’s most eligible bachelor.
After scrambling to pony up enough cash, suitors began lining up one after the other in true ‘The Bachelor’ fashion, with Microsoft, Twitter, Walmart and Triller all vying for TikTok’s affections.
And, as with every season of The Bachelor, an early fan favourite emerged. In August, Microsoft launched a charm offensive to win over TikTok and its userbase, honouring to “build on the experience TikTok users currently love.” But China put a dagger through the company’s hopes of acquiring the app when it dramatically announced it would rather kill TikTok’s U.S. division than sell it to an American company.
So TikTok booted Microsoft out of the boardroom without so much as a wave goodbye. With time running on Trump’s deadline, it seemed TikTok was destined to become collateral in the escalating tech war between Washington and Beijing.
Enter Oracle on a white horse. The company, a B2B business that sells database technology and cloud systems, confirmed yesterday in a Bachelor-worthy twist that it was the lucky recipient of TikTok’s coveted red rose.
A partnership, not an acquisition
Except TikTok didn’t really give Oracle a rose. Oracle’s announcement made clear it was not buying TikTok.
Instead, Oracle will serve as a “trusted technology provider.”
At best, TikTok tied a friendship bracelet around Oracle’s wrist. While China's refusal to amputate TikTok’s U.S. division meant an acquisition was never really possible, no one expected Oracle to take up arms as TikTok’s trusted technology provider.
Because there’s no such thing as a trusted technology provider. Taking a leaf from The Bachelor’s playbook, it’s a made-up job. The title doesn't feature regularly, or at all, in merger agreements and has been carefully crafted as a people-pleaser term.
It pacifies the Trump administration, who can sleep at night knowing Oracle will keep a watchful eye over how TikTok and its parent company, ByteDance, use American data. At the same time, it safeguards China’s interests. TikTok’s mysterious algorithm is to ByteDance what the Krabby Patty formula is to Mr Krabs. And Beijing is intent on keeping the formula hidden for as long as possible.
Two weeks ago, China forbade certain AI technologies from being sold to foreign entities without the government’s approval. Since Oracle isn’t technically buying TikTok, it has no claim to TikTok’s algorithm, meaning Bytedance and China can keep American hands off of their crown jewel for the foreseeable future.
But what does Oracle’s role as a trusted technology provider really mean? Some — like Facebook’s ex-security chief Alex Stamos — think it makes Oracle a glorified babysitter.
“A deal where Oracle takes over hosting without source code and significant operational changes would not address any of the legitimate concerns about TikTok,” Stamos wrote on Twitter. “The White House accepting such a deal would demonstrate that this exercise was a pure grift.”
And, as Stamos points out, Oracle providing a managerial role fails to address one of the major concerns about TikTok — the “subtle manipulation of the media environment in the United States through the control of the algorithm.” Republican Senators, led by Marco Rubio, wrote to Trump this week with similar concerns that “corporate espionage” would continue unless TikTok’s algorithm was sold to a US entity.
These anxieties aren’t entirely inflammatory. Vice reported earlier this month that a Chinese technology company with links to Beijing’s military and intelligence agencies has been doing mass surveillance on millions of citizens in the US, UK Australia and India. One intelligence analyst described the database as “Cambridge Analytica on steroids.”
Those close to the deal, however, think the partnership goes far enough in protecting national security. The Financial Times reported ByteDance is planning to structure the deal like the acquisition of the US insurer Genworth by China’s Oceanside, according to deal insiders. This would see Oracle build a clear firewall between American users and Bytedance by ensuring data is processed and stored in the U.S.
Was Microsoft a better fit?
Microsoft, broken-hearted and bitter, was quick to highlight in its exit interview that an opaque partnership pales in comparison to an actual acquisition.
“We would have made significant changes to ensure the service met the highest standards for security, privacy, online safety and combatting misinformation.”
It’s a sad cry of what-might-have-been for Microsoft, who was convinced that its success with LinkedIn would make TikTok swoon. Since Microsoft acquired Linkedin for $26 billion in 2016, the platform’s user base has increased by 50 percent and its revenue has skyrocketed.
TikTok, however, wasn’t bowled over by the numbers, with reports emerging investors weren’t satisfied by the value attached to Microsoft’s offer. Microsoft’s magic wore off further when it reportedly offended ByteDance’s CEO by calling TikTok a security risk it could fix.
Not the type of language you want to use in the courtship phase.
What’s in it for Oracle?
Although TikTok’s motivations are clear, you would be forgiven if you’re scratching your head wondering how Oracle, a company inexperienced in all-things Gen Z, stands to benefit from this partnership. The screenshot below reveals you’re not alone.
The answer to Oracle’s involvement lies in a web of personal connections to Washington and ad tech potential.
Oracle’s Connection to Trump
Oracle’s current chairman and co-founder is Lary Ellison, the fifth richest man in the world and long-time Trump donor.
According to Forbes, Ellison held a re-election fundraiser for the Trump Campaign in February. Ellison was careful not to attend the fundraiser himself and maintains all he did was let Trump’s team use his property — something he would have done for any president. But on the day of the fundraiser, the Trump administration intervened in Oracle’s legal war against Google.
In 2010, Oracle sued Google’s parent company for using copyright interfaces from Oracle’s Java language in its Android software. The copyright case of the decade grew more acrimonious as time went on, eventually escalating to the Supreme Court. It was at this point Trump stepped in to ask Supreme Court justices to dismiss Alphabet’s appeal, calling Google’s arguments “unpersuasive.”
Two months later, the New York Times reported that it was Ellison who first sparked Trump’s interest in using hydroxychloroquine, a malaria drug, as a potential treatment for COVID-19.
So it’s no surprise that Trump is keen for an Oracle-TikTok deal. Last month, bringing out two of his favorite adjectives, he described Oracle as a “great company” and Ellison as a “tremendous guy” that could remedy TikTok’s data-security troubles.
Personal motivations, it seems, have been bubbling under the surface for months. As Stamos says, it feels like we’ve been played.
The Oracle Data Marketplace
But Oracle’s motivations extend beyond personal connections.
Data is the new oil, and TikTok is swimming in it.
According to the BBC, the data TikTok collects includes which videos are watched and commented on, location data, what phone model and operating systems are used and the keystroke rhythms users have when they type. As of 2018, TikTok was reported to have 54 million users. Today, the figure is closer to 689 million monthly active users.
That’s a lot of data. And Oracle is always in the market for more data.
The Oracle Data Marketplace (‘ODM’) is the largest third-party data marketplace in the world. According to its website, it powers eighty per cent of the top 20 ad networks, who use the marketplace to run “high-performance ad campaigns.” By using ODM, ad networks can access insights on more than 300 million users. Having access to TikTok’s data vault increases this figure almost three-fold, and would give Oracle access to data trends from a new, younger demographic.
So, for Oracle, settling for a friendship bracelet from TikTok was a no-brainer. It benefits from a cushy contract, an evangelical reputation as American privacy’s savior, and it wins political brownie points from the U.S. and China — all while developing its ad-tech potential.
But is the partnership set in stone?
Not yet.
Any partnership between Oracle and TikTok would require the approval of both American and Chinese governments.
Steve Mnuchin, U.S. Treasury Secretary, said the Committee on Foreign Investment will review the agreement this week to see if it goes far enough in meeting national security concerns.
But accepting the deal might prove tricky for the Trump administration for two reasons.
Trump previously demanded that any TikTok deal would have to involve payment to the Treasury — something which, surprise surprise, he never elaborated on. But, as reported by the Financial Times, those familiar with the Oracle-TikTok deal say it doesn’t include any payment at all.
This hurdle may be circumvented by the economic benefits the deal brings to America. Mnuchin has hinted at TikTok crowning the U.S. as its global headquarters and creating 20,000 jobs, something that will undoubtedly catch Trump’s attention.
But expectations are looming that Trump’s ego will be the partnership’s biggest rival. Although Trump spent most of January telling us how much he and Xi Jinping “love each other”, he quickly pulled a U-turn with the arrival of coronavirus. By July, Secretary of State Mike Pompeo was calling China the tyrant of the free world.
The Trump administration may feel giving into a partnership on Beijing’s terms after months of anti-China rhetoric will be construed as weakness in the run up to elections.
The letter Republican Senators wrote pleading with Trump to reject Oracle’s proposal on national security grounds is also likely to play heavily in the President’s mind over the coming days.
If Trump didn’t have a personal connection to Oracle, I imagine he would’ve logged into Twitter to stamp out any talk of a trusty partnership by now. But Ellison and Trump’s relationship adds an extra level of complexity to what is already a delicate situation.
So, all in all, we don’t know what to expect from Oracle, TikTok, Beijing or Washington in the coming weeks. It might end well. It might not. But everyone, from Wall Street to Hype House, is waiting with bated breath to find out how this series of The Bachelor (friendship edition) ends.
