For Walmart, a political tug-of-war over TikTok has turned into an opportunity to snap up an app with a huge fan base.
The company confirmed Thursday that it is partnering with Microsoft to buy the technology platform owned by Beijing-based ByteDance.
TikTok's parent company is looking for a buyer after the U.S. government pushed for a ban on the app, claiming the Chinese government could access user data. TikTok has denied these allegations and is challenging the US government in a lawsuit. ByteDance is considering other offers, including one from Oracle, but may pick the buyer in the coming days, according to people familiar with the matter.
To some, the big box retailer – known for its huge supercentres and low prices – seems like an unlikely buyer for the tech platform for viral video and numerous teenage users. However, Walmart's background as a retailer rather than a tech company can actually give it an edge. Some companies like Amazon or Facebook were excluded from the bidding war because they already have a large technical presence and would raise antitrust concerns.
"It would be a coup for Walmart to be part of this asset," said Daniel Ives, managing director and technology analyst at Wedbush Securities. "Given the political background, it really falls into their lap."
TikTok fits in with Walmart's broader strategy of expanding its reach with customers, collecting valuable consumer data, and strengthening its e-commerce business to fend off Amazon, analysts and industry watchers say. It could also shake up its reputation by joining the video platform.
Walmart could reach hundreds of millions of consumers with the app. TikTok has approximately 100 million active US users monthly, up nearly 800% from January 2018, according to a lawsuit by the company. TikTok said it has more than 50 million US users every day.
By owning TikTok, Walmart and Microsoft have shaken their reputations and joined an app that is hugely popular with teenagers and children.
"It would really change the way you perceive Microsoft and your grandfather's Walmart," said Ives.
It's unclear how Walmart and Microsoft would structure the deal and how much they would pay for TikTok. According to sources, the deal is expected to be in the $ 20 billion to $ 30 billion range. Walmart spokesman Randy Hargrove declined to say how Walmart would split ownership of TikTok or whether it would be the majority owner.
Walmart has made numerous acquisitions of brands known for their online expertise and ability to attract a younger audience. Jet.com was purchased for $ 3.3 billion in 2016 to drive e-commerce expansion. The company bought digital natives, including men's fashion brand Bonobos and oversized women's clothing line Eloquii. However, some of the companies, including ModCloth, are only bought to be sold soon after. On Thursday, Walmart confirmed the sale of two additional online brands it acquired: Shoes.com and Bare Necessities.
The retailer also has an incubation arm, Store No. 8, which is based in Silicon Valley. It tested new concepts and introduced brands.
By making a bid on TikTok with Microsoft, Walmart is changing its content strategy. It is considering jumping into the video and entertainment business multiple times only to drop those plans. Among other things, the company bought the video-on-demand service Vudu in 2010 for an undisclosed sum – and then sold it to the film ticket company Fandango that year.
About two years ago, Walmart was considering launching its own streaming service for "Central America" and had discussions with former Epix CEO Mark Greenberg. Walmart decided not to push these plans after spending billions of dollars on new content.
Walmart's rival Amazon has used original TV and movies to attract customers to its subscription service Amazon Prime. Walmart confirmed it will launch its own membership program, Walmart +, but declined to say when it will debut and what perks it will include.
TikTok created a social network from short videos that often go viral with music, memes, dances, and other acts of self-expression. According to Lauren Kozak, senior advisor on social media, analytics, and data-driven marketing at The Diffusion Group, a media research and intelligence firm.
Kozak said Walmart's pursuit of TikTok makes sense as it seeks to transform itself into a tech company and gain a better understanding of young consumers.
Still, she said, if Walmart buys TikTok and tinkers with it, it could drive users away. She said this is especially true of the young users who are "very sensitive to corporate governance and branding".
"If they do too much with it, it will ruin TikTok and users will go elsewhere," she said. "It'll kind of upset them and make them feel like they have a corporate overlord. … It's possible that buying through them could break it."
– CNBC's Alex Sherman contributed to this story.
Disclosure: Comcast, the parent company of NBCUniversal and CNBC, owns Fandango.