The Technology 202: Here’s why Walmart wants a stake in the TikTok deal

“It’s the crown jewel asset that falls in their lap,” said Daniel Ives, an analyst at Wedbush Securities. “The ecommerce piece of TikTok is in early days of being monetized, and now Walmart gets to build a fence around that user base.”

Walmart has been quietly acting more like a technology company in recent years. 

The TikTok deal is just the latest sign the superstore is transforming beyond the confines of brick-and-mortar. A deal with the viral video sensation could also bolster Walmart’s efforts to compete against Amazon, especially as the pandemic has allowed it to encroach on the ecommerce behemoth’s market share. 

(Amazon chief executive Jeff Bezos owns The Washington Post.)

Walmart’s online sales jumped 97 percent in the second quarter, the company recently said, boosting overall sales by nearly 6 percent, as my colleague Abha Bhattarai recently reported. Its e-commerce sales accounted for 5 percent of the overall U.S. online market in June, compared with 4.2 percent in January, according to data from Rakuten Intelligence. Amazon’s share of the market, meanwhile, declined during that period, from 42.1 percent to 38.5 percent.

Meanwhile, Walmart recently launched a subscription program to compete with Amazon Prime, called Walmart +. 

The fate of the TikTok deal remains highly uncertain, and it’s unclear if final approvals will be granted from both the White House and Beijing. The deal is in jeopardy amid disputes about how the company should be structured and Trump’s calls for Americans to have total control of it, as Rachel Lerman and Jeanne Whalen report.

Walmart has emerged as increasingly important to the negotiations because its participation allows American investors to have a greater stake in the company, and it also is appealing to ByteDance investors who may see Walmart as a partner that could help bolster ecommerce in its app. 

“It’s underestimated how significant the role of Walmart is in this deal,” Ives said. 

The company has yet to really pull back the curtain on exactly how it would employ the video app, which reported having more than 100 million American quarterly users. 

In a statement over the weekend, Walmart said the deal would “grow our third-party marketplace, fulfillment and advertising businesses.” 

Ecommerce is a new thing for TikTok, and currently more people are using the app to dance and lipsync than to shop. But Ives says Walmart could potentially look to the same playbook as Douyin, an app similar to TikTok that operates in China. Currently 400 million people shop on that app daily, according to Reuters. The shopping experience is like a short-form QVC, where people can view short videos and livestreams about products and then can buy them through the app. 

But it’s still a risky investment. 

Companies rarely see a return on their attempts to invest in tech”s next big. And some think Walmart might face a similar fate. 

“No chance it will make it cooler,” said Forrester analyst Sucharita Kodali. “It may make TikTok less cool if kids know about it.”

It’s risky to bet on apps with a young user base and little purchasing power. Kodali pointed to the challenges Snap confronted in monetizing as a sign of the potential struggles ahead for TikTok. 

“This will likely go down as the ‘we don’t know what we’ll get out of it but we hope to figure something out’ acquisition,” she told me. 

Such a deal could also open up Walmart to greater regulatory scrutiny, especially as momentum to regulate social media companies builds in Washington. 

Walmart would be winning something Amazon can’t have with this deal. 

Many major consumer tech giants were out of the running to strike a deal with TikTok before Trump even announced his proposed ban. That’s because they’re already facing harsh antitrust scrutiny in Washington. Amazon is no exception. 

The deal could allow Walmart, which isn’t currently under a harsh regulatory glare, to expand its digital advertising and exert greater control over an emerging popular social app – while Amazon is sidelined by its own regulatory headaches. 

“It really gave them a clear path to go after this,” Ives said. 

The meeting signals the department is close to filing the suit, Tony Romm reports. The case against Google would be the biggest federal antitrust case against a tech company since the 1998 suit against Microsoft. 

Republican state attorneys general will also meet with the White House to discuss a potential overhaul to Section 230 of the Communications Decency Act, a decades-old law preventing Internet companies from being held liable for content posted to their platforms. Trump released an executive order this summer requesting the Federal Communications Commission reevaluate the law. 

Attorney General William P. Barr, who has endorsed changes to the law that would address alleged biases against conservative content, will also attend. It’s unclear whether any Democrats were invited, Tony reports.

“Online censorship goes far beyond the issue of free speech, it’s also one of protecting consumers and ensuring they are informed of their rights and resources to fight back under the law,” White House spokesman Judd Deere said. “State attorneys general are on the front lines of this issue and President Trump wants to hear their perspectives.” 

The Justice Department and Google did not respond to requests for comment. 

But it also increases its stake in the outcome of Epic Games’s legal battle against Apple and what it means for the gaming world. Microsoft is in discussions with Apple over App Store rules preventing it from launching its gaming streaming service on Apple devices.

“This remains a bad experience for customers,” a Microsoft representative said earlier this month after an update to Apple’s iOS software.

“Our analysis shows that despite some progress, Twitter is not doing enough to protect women users, leading many women to silence or censor themselves on the platform,” said Rasha Abdul Rahim, co-director of Amnesty Tech. 

Amnesty International made 10 recommendations to Twitter to address the issue in 2018. Twitter has implemented only one of them, which was to offer users more guidance on how to appeal content decisions. It’s still lacking in transparency measures such as publishing how long on average it takes to deal with reports of abuse and how many moderators are employed by language and region, Amnesty says.

Amnesty said because Twitter doesn’t provide a breakdown of abuse reports by country, it’s hard to gauge the full extent of the problem. 

“Abuse and harassment have no place on our service — this scorecard does not fairly or fully capture our work nor does it accurately reflect the steps we have taken to improve the health of the conversation,” Twitter said in response to the report. Twitter said in a statement that more than one in two of the tweets it acts on for abuse are detected by technology rather than user reports — an increase from one in five in 2018.

Journalist Michael Leibel:

The New York Time’s Farhad Manjoo:

The Wall Street Journal’s Amol Sharma, who helped break the story, also had an idea:

The company told the Irish court it would be unable to operate if it could no longer send European user data back to the United States, David Gilbert at Vice reports.

Facebook is suing to stop the order, which was handed down by Ireland’s Data Protection Commission last month.

“This gives rise to an apprehension that [Facebook] is not being treated equally,”  Yvonne Cunnane, Facebook Ireland’s head of data protection and associate general counsel, wrote in a court filing. “If [Facebook] alone is being investigated and subject to a suspension of data transfers to the U.S., this would be liable to create a serious distortion of competition.”

Privacy experts say Facebook’s threat is an empty one.

“The idea that Facebook would withdraw from the European market is absurd brinkmanship that I don’t think anyone truly believes,” Michael Veale, a technology policy researcher at University College London, told Vice News.

• The Senate Commerce Committee will hold a hearing, “Revisiting the Need for Federal Data Privacy Legislation,” on Wednesday at 10 a.m.
• The House Energy and Commerce Committee will hold a hearing on social media’s role in radicalizing Americans on Thursday at 11 a.m.
• New America’s Open Technology Institute will hold a virtual panel exploring how Internet platforms are addressing the spread of election-related misinformation on Oct. 1 at 1:30 p.m.

At least it’s Friday…oh wait.