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TikTok’s Price Is a Giant Question Mark in Already Complex Deal

With parent ByteDance worth $100 billion, analysts try to pin down how much a buyer would pay for part of a unit

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Microsoft Wants to Buy All of TikTok in U.S.

Microsoft Corp. has six weeks to hash out details of a proposal to buy the U.S. operations of TikTok that satisfies the Trump administration and shareholders in Chinese parent company ByteDance Ltd. Of all the tricky questions that still need to be resolved for the deal to move forward, one stands out: How much is the video-sharing app’s business worth?  

Analysts and bankers have pegged the value of TikTok's U.S. business anywhere from $20 billion to $50 billion, a wide range that reflects the complexity involved in separating TikTok's American and global businesses, in determining a reliable number of users, and how revenue breaks out just for the markets at stake in the deal. Microsoft’s discussions also include TikTok’s business in Canada, Australia and New Zealand. 

TikTok’s parent is a closely held Chinese internet giant that operates a family of hit entertainment applications. ByteDance generated more than $3 billion of net profit on $17 billion in revenue last year, helping lead to a private-market valuation of more than $100 billion, making it the world’s most valuable startup, Bloomberg News reported in May.

But venture capital investors’ stakes are in ByteDance as a whole, not in TikTok, so there hasn’t been a clear valuation for a standalone TikTok. On top of that, because Microsoft is considering buying only the app’s operations in four countries, a further carving out from the broader TikTok business would be necessary. Daniel Ives, an analyst at Wedbush Securities, estimates that TikTok's U.S. operations account for about 40% of ByteDance's valuation, or about $40 billion. 

If navigated well, Microsoft could turn the app into a $200 billion business, based on Ives’s estimates that TikTok has about 100 million active users in the U.S. and is bringing in around $2 billion in revenue already. The app could follow a similar path to Facebook Inc., which went public before it had fully revved up its advertising business. While TikTok has started displaying advertising on its app, the monetization of America's fastest-growing social media platform is still in nascent stages. 

Microsoft didn’t comment on a potential price in its blog post about its discussions to buy TikTok’s assets, and TikTok declined to comment on its valuation.