Twitter may compete to buy TikTok

A US social media giant is reportedly competing with software giant Microsoft in an effort－albeit one considered a long shot－to acquire another social media giant, TikTok.

Twitter, which has recently clashed with US President Donald Trump over some of his tweets, is in talks to buy the wildly popular video-sharing app that Trump has ordered to be sold because of its Chinese ownership, The Wall Street Journal reported.

US Secretary of State Mike Pompeo has claimed that TikTok could send user data on its US user base, made up mostly of young people, to China's government, an allegation that TikTok has strenuously denied. TikTok has said that it stores all US user data in the United States and does not share it with the Chinese government.

In a report on Friday, The New York Times said that the CIA had found no evidence that TikTok shared user data with the Chinese government.

Senator Mark Warner, Democrat of Virginia, said on Thursday at the virtual Aspen Security Forum that "on the hierarchy of problems we are talking about, an app that allows you to make funny videos does not really rank".

TikTok plans to sue the Trump administration, challenging the president's executive order banning the service, according to a report by National Public Radio.

The federal lawsuit will be filed as early as Tuesday, according to a person involved in the matter but not authorized to speak for the company, NPR reported. It will be filed in the US District Court for the Southern District of California, where TikTok's US operations are based, the person said.

"It's based on pure speculation and conjecture," the source said about the administration's ban, NPR reported. "The order has no findings of fact, just reiterates rhetoric about China that has been kicking around."

The Journal also reported on Friday that a small US company with ties to US defense and intelligence has embedded its software in mobile apps, allowing it to track the movements of hundreds of millions of mobile phones worldwide.

Anomaly Six LLC, based in Virginia and founded by two US military veterans, said in marketing material that it can gather location data from more than 500 mobile applications.

Microsoft, which announced on Aug 2 that it was pursuing a deal with TikTok for its operations in the US, Canada, Australia and New Zealand, said it was told by Trump to make a deal by Sept 15.

Trump also announced last week that the US Treasury should receive a percentage of the proceeds from any sale, which China has denounced as a "mafia" deal.

On Thursday, the White House issued an executive order that would bar people in the US from transactions with TikTok's owner, Beijing-based ByteDance, and with the messaging service WeChat and its owner, China's Tencent Holdings. The order is scheduled to take effect 45 days from Aug 6.

While a potential TikTok ban is proving unpopular with many of its users, a WeChat ban likely would have far more impact.

WeChat has more than 3 million users in the US, mainly Chinese immigrants of all ages who use it to communicate with each other and with people back home in China, where its billion users there make the app "as powerful as Twitter, WhatsApp, and Facebook combined in the US".

Far more impact

Trump likely hasn't considered the effect a WeChat ban could have on his Chinese supporters, according to an opinion piece published on Saturday on influential tech website Wired.

"We Chinese supporters found one another in 2016 mainly on WeChat," said Jack Jia, a jewelry designer in New York and the founder and president of Chinese American Alliance for Trump, an organization that mainly operates on WeChat.

"I won't vote for him again if he bans WeChat," said Cheng Zeng, who runs an agency serving international students. "If he bans WeChat, it'd be like he makes us Chinese Americans blind and dumb."

It isn't clear what TikTok's US operations are worth, but estimates run into the tens of billions of dollars. That has raised questions over how Twitter would finance such a deal－Twitter's market capitalization is about $29 billion, while Microsoft's exceeds $1.6 trillion.

"Twitter will have a hard time putting together enough financing to acquire even the US operations of TikTok. It doesn't have enough borrowing capacity," said Erik Gordon, a business professor at the University of Michigan.

"If it (Twitter) tries to put together an investor group, the terms will be tough. Twitter's own shareholders might prefer that management focus on its existing business," he added.

Twitter has far less financial might than other major tech players, though it does have high-powered investors such as private-equity firm Silver Lake, which is interested in helping fund a potential deal, a source told Reuters.

Twitter, because of its relatively smaller size, also has privately made a case that its bid would face less regulatory scrutiny than Microsoft's and will not face pressure from China because it is not active there, a source said.

Acquiring TikTok also would be a turnabout by Twitter on videosharing apps. In 2016, the company closed Vine, an app that let users share short videos, as part of a cost-cutting effort.

With nearly 85 million followers, Trump is Twitter's most prominent user but he has lately criticized the San Francisco-based company for labeling or restricting some of his posts that it says violate its policies. Trump and conservative politicians have regularly argued that Silicon Valley is biased against them.

Twitter also recently started labeling Chinese media "state-affiliated", a move seen as influenced by the Trump administration's campaign to ratchet up pressure on China's government.

And in a business decision that demonstrates the appeal of TikTok, Facebook's Instagram is launching its own version－Instagram Reels.

"Instagram has put a lot of effort into developing Reels and making it attractive to TikTok users and the creators who work on the app, but I'm not sure it can replace TikTok," said Seattle-area eMarketer analyst Debra Aho Williamson.

"Even if TikTok were to be banned in the US, which I think is unlikely to happen, users would find a way to keep using it," she said. "They are incredibly loyal and protective of TikTok."

Reuters and AP contributed to this story.