Oracle confirmed Monday that it has struck a deal with TikTok owner ByteDance, weeks after the Trump administration ordered a TikTok divestiture in the U.S. The deal proposal still needs to be approved by the U.S. government.
“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 Oracle will serve as the trusted technology provider,” Oracle said Monday, referring to Treasury Secretary Steven Mnuchin.
The deal could 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, had also been interested in the TikTok. But Microsoft’s bid was rejected, and it announced Sunday that it had withdrawn from the process. Microsoft said Aug. 2 that it had been in talks to acquire TikTok in the U.S.
Walmart had also been interested in TikTok for its e-commerce potential, and it joined forces on a bid with Microsoft last week after a consortium with SoftBank and Google’s parent company, Alphabet, fell apart.
TikTok has said it has over 100 million monthly active users in the U.S. Many millions of users are in their teens, The New York Times reported this month. The largest age bracket among TikTok users in the United Kingdom in December was 18-24, according to the industry research company Comscore.
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.
Acquisitions have helped the company expand Oracle’s portfolio. 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. Until now, Oracle’s $9.1 billion acquisition of cloud software company NetSuite in 2016 was the largest transaction in its 43-year history.
Oracle maintains ties to the U.S. government. CEO Safra Catz was part of President Donald Trump’s transition team, and Chairman Larry Ellison, a co-founder of the company, hosted a fundraising event for Trump’s election campaign at one of his California homes this year. Leon Panetta, a director of the CIA and secretary of defense in the Obama administration, sits on Oracle’s board.
ByteDance was founded in 2012, and it launched the news app Toutiao that year. It came out with TikTok for people outside China in 2017 after having brought out a similar app for people in China called Douyin. ByteDance also in 2017 acquired a separate video sharing app called Musical.ly, which had gained a following in the U.S. Last year, the Committee on Foreign Investment in the U.S., a federal interagency panel, contacted ByteDance about the Musical.ly deal because of concerns about the Chinese government’s ability to access user data.
ByteDance said Sunday that it would adhere to the Chinese government’s updated restrictions on exports, which now touch on “recommendation of personalized information services based on data analysis,” among other things. TikTok relies on recommendation systems to determine which videos should be shown to its users.