Why Walmart's smaller share in TikTok is as big a deal as Oracle's stake

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The months-long saga of Bytedance’s forced sale of TikTok in the U.S. is finally close to the finish line, and Walmart stands to gain new social tools and youthful consumers in its battle with Amazon and other brick and mortar chains.

Oracle has agreed to acquire a 12.5% stake and Walmart has a deal to buy 7.5% in the company, which will be called TikTok Global.

Walmart has been interested in TikTok at least since the initial Trump administration order in August that threatened a ban on TikTok if ByteDance didn’t divest the app to U.S. owners. Walmart, which would not return a request for comment by deadline, was initially tied to Microsoft's attempt to acquire TikTok in the U.S., then more recently sought a stake while Oracle worked on an acquisition.

Walmart faces both upside potential and downside risk, given the potential access to TikTok’s user base and data, coupled with the threat of trade war retaliation from China that could hurt Walmart’s Asian ambitions. With a deal in progress, further action by the Trump against TikTok is less likely, so the pendulum has swung in Walmart’s favor as it gains assets to fuel data analytics, buy buttons and its rivalry with Amazon. TikTok has grown more than 400% in the past year in the U.S., and is particularly popular with young consumers.

“This would be like Walmart investing in Amazon when it first started out,” said Richard Crone, a payments consultant. “TikTok is a growing social media platform and Walmart is getting in on the ground level.”

Walmart could use TikTok’s video-friendly social model in a manner similar to ShopShops, a popular Chinese app that allows consumers and merchants to connect via video. Merchants can post livestreams, and consumers can film and share videos in stores — and these videos can be connected to a checkout page.

Having ownership in social media platforms gives retailers the ability to directly source user likes/dislikes and interests, customize advertising and product placement, and potentially to design their own interactive advertising solutions from the bottom up, said Rick Oglesby, president of AZ Payments Group.

“We’re gradually moving towards an environment where shopping doesn’t have to be a separate activity,” Oglesby said. “We’ll be able to just do it on the fly, buying the things we like at the time that we see them. Social media is the best place to get that started because we’re already using it and because it’s already digital.”

There’s lots of ways Walmart could tie social networking and video to in-store and online shipping. The retailer’s recently launched Walmart+ subscription service includes a cashierless option called Scan & Go. Shoppers use Scan & Go by accessing a mobile app, scanning the QR codes of items on shelves and showing a receipt on the way out of the store. It’s easy to imagine Walmart embedding this function inside of TikTok videos.

Earlier in 2020 Walmart made a deal with Shopify to add about 1,200 Shopify sellers as part of a strategy to expand its $21 billion U.S. e-commerce business. Walmart has also added fulfillment for third-party sellers and streamlined its menu of third party products. TikTok adds social networking acumen to that strategy, giving Walmart a similar companion app to Facebook and Instagram. Instagram has buy buttons but Walmart’s core business is much closer to retail than Facebook.

Oracle can benefit by extending its online account management platform, which is used for bill payment and presentation. Oracle also supplies technology that supports incentive marketing. Oracle's merchant-facing technology includes CrowdTwist, a platform that provides services such as personalized shopping. Oracle also has an open banking API that can tie to TikTok to deepen Oracle's e-commerce reach.

“Oracle is the platform you never see,” Crone said. “If Oracle can socialize ERP for business then it’s game on.” Oracle didn’t return a request for comment by deadline.

Oracle and Walmart's opportunity to invest in TikTok stems from the Trump administration's claims that ByteDance and TikTok are security risks with data under Chinese government control. Trump pushed ByteDance to find a buyer that would manage data from within the U.S. The administration also put similar pressure on WeChat, resulting in a ban on new downloads that was announced Friday. The Oracle/Walmart deal appears to release most of the pressure on TikTok.

As part of the deal, TikTok Global will pay about $5 billion in taxes to fuel an education fund, which the Trump Administration suggested would meet demands that the U.S. receive payment from the divestiture. The ban on new TikTok downloads has at least temporarily been lifted. A federal court blocked an unrelated ban on WeChat, and the administration is appealing. The WeChat ban includes WeChat Pay, cutting off WeChat payment flows inside the U.S.

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M&A Digital payments Internet of things Retailers Walmart U.S. China Oracle
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