Please ensure Javascript is enabled for purposes of website accessibility

Twitter Wants to Jumpstart Its Growth With TikTok, Challenging Microsoft

By Danny Vena – Aug 10, 2020 at 1:17PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The dance video app could breathe new life into the struggling micro-blogging site.

Twitter (TWTR) has held discussions with wildly popular short-form video-sharing app TikTok and its Chinese parent company ByteDance about a potential merger, according to a report in The Wall Street Journal.  The combination would involve the apps users in the U.S., Canada, Australia, and New Zealand. It isn't clear if the talks have progressed beyond the preliminary stage.

TikTok has more than 100 million users in the U.S., attracted by its easy-to-use video making capability and its intuitive recommendation engine. Such a combination could be a game-changer for Twitter. The company has continued to focus on its short messages, but has struggled to generate consistent revenue growth from its massive user base.

Woman smiling while looking at smartphone.

Image source: Getty Images.

Tech giant Microsoft (MSFT 3.07%) confirmed earlier this month that it has been in talks to acquire TikTok, which is a hit with teens and high-profile celebrities. The app frequently boasts clips of dance routines and  lip-syncing that go viral.

With a market cap of just $29 billion, Twitter would face a high hurdle trying to finance such a deal, as TikTok has recently been valued at as much as $60 billion. 

Because of a requirement by Chinese authorities that companies within its borders "cooperate" with government security efforts, there have been concerns about the personal data collected from the app's U.S. users. 

After continually raising the issue of national security over the past several months, President Donald Trump has given TikTok until September 15 to find a buyer or face a ban in the U.S. Over the weekend, Trump issued an executive order that would forbid any company in the U.S. from participating in any transactions with the TikTok or its parent company. 

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Microsoft. The Motley Fool owns shares of and recommends Microsoft and Twitter and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.