Oracle confirms deal with ByteDance to become ‘trusted technology provider’

Oracle Chairman and Chief Technolgoy Officer Larry Ellison delivers a keynote address during the Oracle OpenWorld conference in San Francisco on October 22, 2018.

Justin Sullivan | Getty Images

Oracle on Monday confirmed it has struck a deal with TikTok-owner ByteDance, weeks after the Trump Administration ordered a TikTok divestiture in the U.S. The deal proposal still needs to be approved by the U.S. government.

“Oracle confirms Secretary Mnuchin’s statement that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider,” Oracle said on Monday.

Mnuchin told CNBC on Monday morning that the U.S. government plans to review the deal this week. “I will just say from our standpoint, we’ll need to make sure that the code is, one, secure, Americans’ data is secure, that the phones are secure and we’ll be looking to have discussions with Oracle over the next few days with our technical teams,” he said.

Depending on how the deal works out, it might make Oracle more visible to young consumers and give it control over a prominent advertising venue. And it could boost Oracle’s cloud business.

Microsoft, which competes with Oracle in cloud computing and database software, was also interested in the social-media asset. But Microsoft’s bid was rejected, and the company announced it had withdrawn from the process on Sept. 13. Microsoft said on Aug. 2 that it had been in talks to acquire TikTok in the U.S. Walmart had also been interested in TikTok for its e-commerce potential, and joined forces on a bid with Microsoft last week after a consortium with Softbank and Google parent company Alphabet fell apart. On Monday Walmart said it was still keen to invest in TikTok. 

TikTok has said it has over 100 million monthly active users in the U.S. Many millions of users are in their teens, the New York Times reported earlier this month. The largest age bracket among TikTok users in the United Kingdom in December was 18-24, according to industry research company Comscore.

As an app that entertains people, TikTok stands out from the rest of Oracle, which sells software to large businesses, schools and government institutions. Oracle and TikTok share an interest in marketing, though. TikTok derives revenue by showing users ads, and Oracle offers software that marketers can use to manage the distribution of ads on Facebook and other channels. TikTok has been adding users quickly, while Oracle’s revenue has declined in four of the eight most recent quarters.

Acquisitions have helped the company expand Oracle’s portfolio. The 2010 Sun deal made Oracle a notable seller of servers for data centers, and it entered the market for point-of-sale retail equipment with the 2014 purchase of Micros. Oracle’s $9.1 billion acquisition of cloud software company NetSuite in 2016 was the largest transaction in its 43-year history.

Oracle maintains ties to the U.S. government. CEO Safra Catz was part of President Trump’s transition team, and Larry Ellison, a co-founder of the company and its chairman, hosted a fundraising event for Trump’s election campaign at one of his California homes earlier this year. Leon Panetta, a director of the Central Intelligence Agency and secretary of the Defense Department under President Obama, sits on Oracle’s board.  

ByteDance was founded in 2012, and that year it launched the news app Toutiao. It came out with TikTok for people outside China in 2017, after bringing out a similar app for people in China called Douyin. Also in 2017 ByteDance acquired a separate video sharing app called that had gained a following in the U.S. Last year the Committee on Foreign Investment in the U.S. contacted ByteDance about the deal because of concerns about the Chinese government’s ability to access user data. 

On Sunday ByteDance said it would adhere to the Chinese government’s updated restrictions on exports, which now touch on “recommendation of personalized information services based on data analysis,” among other things. TikTok relies on recommendation systems to determine which videos should be shown to its users.

This is breaking news. Please check back for updates. 

WATCH: Full interview with interim head of TikTok Vanessa Pappas

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