Why TikTok's Oracle deal is a green light for advertisers to keep spending
TikTok appears to have won its standoff with President Donald Trump, brokering a deal with Oracle that would make the U.S. company a “trusted” tech partner without having to give up the farm. For advertisers, the partnership would mean they could resume business as usual with the Chinese-owned app, and not fear a sudden interruption.
As of this afternoon, TikTok and Oracle said they agreed to the partnership, while Trump’s Treasury Department said it would review the arrangement. Trump, of course, set off the TikTok scramble last month when he put a Sept. 15 deadline on the video app to sell or face a ban in the U.S—but he could still just as easily throw a tantrum and quash the deal as he could just power through and declare it the greatest deal in history.
Trump had launched a wild crusade against TikTok, owned by Chinese-based ByteDance, claiming that its access to consumer data on millions of Americans presented a national security risk. For the past six weeks, TikTok fielded offers from Microsoft, Oracle, Walmart and others to spin off the U.S. portion of the business and alleviate the national security concerns. And now there is a deal, at least in principal, that could sweep those concerns under the rug.
Here is what the Oracle deal would mean:
Who will own TikTok?
Not Oracle, according to the initial description of the deal. “Oracle will serve as the trusted technology provider,” Oracle said in a statement.
“This allows TikTok to escape a planned shutdown and gives the U.S. government some degree of oversight into the operations of TikTok,” said Jeff Pollard, VP and principal analyst at Forrester, in a blog post on Monday.
Oracle would become TikTok’s cloud provider, which is not much different from how Google is Snapchat’s cloud provider. Oracle would not own the coveted TikTok algorithm, which is widely viewed as the most valuable piece of intellectual property that ByteDance owns.
China threw a wrench in potential TikTok sales talks by prohibiting any transfer of such technology from Chinese companies to foreign firms.
Can advertisers rest easy working with TikTok, now?
There were concerns among advertisers that a ban would put brands in a difficult position. Trump threatened to prevent U.S. entities from doing business with the Chinese company. TikTok even began writing clauses into ad contracts that advertisers would not be on the hook in the event of a ban.
Oracle would give TikTok the cover it needs with U.S. authorities, and brands could continue to plan campaigns without changing much, says Brian Wieser, global president of business intelligence at GroupM. “If the transaction involves Oracle as merely a technology provider from the vantage point of how the product works and how it’s sold,” Wieser says. “Advertisers probably won’t need to care.”
“Data and privacy concerns would be somewhat quenched,” says Nicole Greene, senior director and digital marketing analyst at Gartner. “Because it will be in the hands of Oracle, versus TikTok.”
Could Oracle get more involved in advertising?
Oracle is already a player in the marketing technology landscape. It is a marketing partner with platforms like Facebook, Google, Reddit, Snapchat, Twitter and Pinterest.
Oracle owns Blue Kai, a data management platform, and Moat, a marketing analytics platform.
With TikTok, Oracle will have a way to expand more into advertising directly, with potential access to TikTok ad inventory. “It’s one of the most powerful, growing ad networks out there,” Greene says. “If Oracle can create an ad network that protects data privacy and still allows TikTok to operate as it has been, it could be enough for marketers to say maybe TikTok is a good opportunity.”
What will change for TikTok stars?
TikTok says the deal means it can continue to serve the 100 million monthly active users in the U.S. TikTok has said it will pay a portion of that creator community out of a $2 billion fund over the next three years.
“This proposal would enable us to continue supporting our community of 100 million people in the U.S. who love TikTok for connection and entertainment, as well as the hundreds of thousands of small business owners and creators who rely upon TikTok to grow their livelihoods and build meaningful careers,” a TikTok spokesperson said on Monday.
Are the national security concerns solved?
Oracle co-founder Larry Ellison is a close political supporter of the president, and Trump could claim victory just because his ally is the perceived winner. “The only problem is with the perception that a transaction occurred because of political reasons, it limits the confidence in the commercial merits of the transaction,” Wieser says.
An executive at a marketing technology company that is a close partner with TikTok says that Oracle could safeguard U.S. consumer data, but that’s not the only security concern. TikTok’s algorithm is where the company exerts the most control, deciding what content trends on the platform in a way that could influence U.S. citizens.
“Controlling what content people see, that was always a far greater security threat than data,” the marketing exec says, speaking on condition of anonymity. “You can drive culture, and change the way people think, how Americans think, about things like liberal democracy.”
In the end, the deal seems more like a face-saving measure for the administration. Trump could declare victory, while capitulating to China.
Trump was not going to risk shutting down a hugely popular app with millions of U.S. users right before an election.
“This is kind of a ‘save your ass’ sort of thing,” the TikTok marketing partner says.