This article is more than

4 year old

Why Kevin Mayer’s Exit Means TikTok Sale Is Now Inevitable

Source: Variety:
August 27, 2020 at 11:50
Variety Intelligence Platform
Variety Intelligence Platform
Microsoft seen as front-runner to acquire app from China's ByteDance after Trump orders U.S. divestiture

Needless to say, this isn’t how Kevin Mayer expected his bold career move to go.

Mayer, after just three months on the job as TikTok’s CEO and chief operating officer of Chinese parent company ByteDancesaid Wednesday that he is resigning amid the tumultuous geopolitical climate battering TikTok — led by Donald Trump’s anti-China agenda — which ultimately will force ByteDance to sell the TikTok app business in the U.S. (and likely other countries). He had started at TikTok and ByteDance on June 1, after leaving his high-ranking post at Disney where he headed the group responsible for launching Disney Plus and running the conglomerate’s other direct-to-consumer services.

“I was doing great things at Disney,” Mayer said in a June webinar. But, he said, “There comes a time in anyone’s career when you have to make a choice.”

This week, Mayer’s choice — after reading the handwriting on the wall — was to bow out of what he had seen as a once-in-a-lifetime opportunity to lead the fastest-growing social app in history.

Mayer and TikTok were prepared to fight Trump’s ban, filing a lawsuit against the president and his administration this Monday. TikTok’s suit alleges Trump’s Aug. 6 executive order, effectively mandating a sale of the app, violated the company’s constitutional right to due process. The hope may have been that TikTok could stall for time and perhaps gain a more favorable hearing under a Joe Biden administration.

But Mayer concluded the stars were aligned against TikTok and that it wasn’t a battle he could win. His resignation shows that ByteDance is fully moving ahead with a planned sale of TikTok, with Microsoft and Oracle the two leading suitors.

“We believe Mayer leaving is a huge blow to any prospects that TikTok had to trying to fight this battle and stay a standalone [company],” Wedbush Securities analyst Dan Ives wrote in a research note Thursday. His resignation “is another indicator that TikTok’s U.S. operations being sold eventually to Microsoft is likely on a path to being completed sooner rather than later given the Trump executive order.”

Microsoft is the leading “white knight” to win TikTok in a deal worth $35 billion-$40 billion, Ives predicted. Oracle, which is reportedly staging a bid for TikTok along with ByteDance investors General Atlantic and Sequoia Capital, may have the White House’s favor — given Oracle chairman Larry Ellison’s active support of Trump. In addition, Walmart was interested in acquiring TikTok and was working with Japan’s SoftBank on a bid, CNBC reported, which also noted Walmart was unlikely to clinch a deal because the retailer doesn’t have the tech infrastructure to support TikTok.

“[W]e continue to strongly believe this is Microsoft’s deal to lose at this point,” Ives wrote, characterizing other potential buyers as “not viable options given this complex Rubik’s Cube political backdrop and high price tag.”

Microsoft previously said it expected to conclude acquisition talks with ByteDance for TikTok by Sept. 15. Trump’s original order would prohibit U.S. companies from engaging in business as of Sept. 20; under a subsequent presidential order, ByteDance has a Nov. 12 deadline to divest TikTok’s U.S. assets.

Of course, Mayer knew (or should have known) that he was jumping on a ticking political time bomb when he joined TikTok and ByteDance. The Trump administration’s Committee on Foreign Investment in the United States was already several months into an investigation into whether it would force ByteDance to divest TikTok, something President Trump officially ordered earlier this month. TikTok argued that Trump exceeded his legal authority because his ban was “not based on a bona fide national emergency.” It also asserted that it had never turned over data on TikTok users to Chinese authorities and never would. But given political realities, none of that matters at this point.

As TikTok’s chief, Mayer hurt the company more than he helped, said Erik Gordon, professor at University of Michigan’s Ross School of Business.

“He burned too much time and credibility repeating that the company is not under Chinese control despite ample feedback that politicians on both sides of the aisle didn’t believe him,” Gordon said. Instead, Mayer should have focused on negotiating “protections that might have satisfied enough people to swing the issue his way.”

With Mayer’s departure, Vanessa Pappas, currently TikTok’s GM for North America, Australia and New Zealand, will serve as interim head of the company worldwide.

Mayer had joined ByteDance at “arguably our most challenging moment,” ByteDance founder/CEO Zhang Yiming wrote in memo to employees Wednesday. He acknowledged that “the political circumstances we are operating within could have significant impact on [Mayer’s] job in any scenario.”

“I want to let everyone know that we are moving quickly to find resolutions to the issues that we face globally, particularly in the U.S. and India,” Zhang said in the memo. (India banned TikTok in Juneamid an escalating border conflict with China.) “I cannot get into details at this point, but I can assure you that we are developing solutions that will be in the interest of users, creators, partners, and employees.”

Where Mayer lands next, meanwhile, is anyone’s guess although it doesn’t seem likely that he’ll return to Disney. One thing is certain: He was blindsided by Trump’s aggressive election-year move to wrest TikTok out of the hands of its Chinese owner.

Mayer seems to have believed TikTok’s controversial status in the U.S. could be managed through savvy lobbying. “There are a lot of politics going on,” he said in the June webinar. He added: “We are not really a Chinese company.”

Keywords
You did not use the site, Click here to remain logged. Timeout: 60 second