Microsoft could reenergise its advertising business with a huge supply of video if it follows through on acquiring TikTok's US operations from ByteDance. Reuters reported on Friday, citing a source familiar with the matter, that Microsoft is in exploratory deal talks as the US government prepares to force China-based ByteDance to divest its video app TikTok over data security concerns.
Microsoftgenerates the bulk of its $143 billion (roughly Rs. 10.71 lakh crores) in annual revenue by licensing software such asWindowsandOfficeas well as cloud storage and computing tools through itsAzureservice.
The company, with advertising supported businesses including itsBingsearch engine,MSNnews service, andLinkedInbusiness social network, disclosed this month that its search ads sales grew 1 percent to $7.7 billion (roughly Rs. 57,696 crores) over the last year. But that growth was flat when excluding fees it pays to partner websites and apps.
The ad market research company eMarketer has estimated LinkedIn's ad revenue at about $2 billion annually in the United States alone. But Microsoft also said this month LinkedIn ads sales have fallen this year as the novel coronavirus pandemic prompted advertisers to pare spending.
Social media services, includingFacebookand Alphabet'sYouTube, have seen their sales growth continue during the pandemic as users spend more time entertaining themselves online - particularly with video - and advertisers follow them there.
Without an entertainment service aimed at a broad audience, Microsoft has struggled to capture the increasingly lucrative videos flowing to YouTube, Facebook, and more recentlyTikTok, which widely opened its ad tools this month.
Increased US regulatory scrutiny of potentially anticompetitive behaviour by Facebook and YouTube have likely diminished their ability to purchase a major competitor soon, according to antitrust experts. Microsoft, though, faces fewer constraints.
"Its consumer strategy remains in flux and an aggressive acquisition (or strategic investment) of TikTok would be Microsoft throwing its hat in the ring and trying to compete with other tech giants in a new avenue of growth," Wedbush financial analyst Dan Ives said in a statement on Friday.
© Thomson Reuters 2020
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