September 24, 2023

Walmart’s hopes of owning a stake in TikTok may be dashed, but don’t expect interest in the viral video app to wane.

According to a report in the Wall Street Journal on Wednesday, the company’s plan to buy the US social media app operations from Oracle has been put on hold indefinitely as the Biden administration investigates security concerns with Chinese tech companies. Nameless people who were familiar with the matter were quoted.

Walmart spokesman Randy Hargrove declined to comment on Wednesday’s report, referring questions to the Biden administration about a possible TikTok sale. Oracle did not respond to CNBC’s request for comment.

Speaking at a press conference at the White House on Wednesday, press secretary Jen Psaki said the government had not taken any new measures regarding the TikTok deal. She said that apps like TikTok continue to assess potential risks to US data.

Walmart is one of many retailers who have viewed the popular app as a way to follow trends, create shippable content, and build their brand among teenagers and 20 year olds. Walmart shoppers consulted TikTok when deciding which toys to order for the holiday season. In December there was a one-hour livestream event in the app. Those efforts will likely continue – even if Walmart doesn’t have a front row seat.

“We were really excited about what we saw, customer engagement and experience,” said Janey Whiteside, Walmart’s chief customer officer, in a recent interview about the livestream TikTok event. “Expect more of these things from us in the days, weeks, months ahead.”

She said events like this “really create more interesting places to work with brands.” This is gaining traction as the retailer plans to grow its advertising business more than 10x over the next five years and to compete better with Amazon in this industry.

Jefferies analyst Steph Wissink said a stake in TikTok would give Walmart an edge over competitors who also use the social media app. She likened it to being an auto mechanic versus an enthusiast. As a partial owner of TikTok, Walmart was able to open the hood and better understand the powerful social media app. It could collect more data on how advertising campaigns or videos can get more powerful. It could even tinker with how the app works to improve it or take other retailers out, she said.

“Right now, Walmart is an enthusiast as an outsider,” she said. “They use TikTok, they use social media, they use new advertising platforms in ways that appreciate a new way of connecting with consumers – but having the ability would give them an in-depth knowledge of how it works, the architecture and the mechanics of the motor. “

Still, she said, the app will remain an important media platform for Walmart by “creating brand awareness and relevance in a generation that will eventually age into their purchasing power years.” With the use of the app, she said, Walmart is thinking a decade ahead.

Walmart’s quest for TikTok began last year after President Donald Trump urged TikTok’s Beijing-based parent company, ByteDance, to find an American buyer or face a national ban. He said the popular video app raised security concerns because it could leak US users’ data to the Chinese government – a claim TikTok denied.

The retailer partnered with Microsoft, and later Oracle, last summer to acquire part of the social media company’s US operations. As part of the Oracle deal, Walmart would acquire a 7.5% stake in TikTok’s US operations, and its CEO, Doug McMillon, would get a seat on the board of the newly formed company.

In an interview on CNBC’s “Squawk Box” in October, McMillon said Walmart viewed TikTok as a “discovery opportunity” that could inspire shoppers to shop.

“If you’re watching a TikTok video and someone has a piece of clothing or an item on it that you really like, what if you could just and quickly purchase that item?” he said. “This is what we see in countries all over the world. And it fascinates us and we want to be part of it.”

Livestream events are already increasing sales for brands in China and other parts of Asia. They’re a core part of Alibaba’s Singles Day, a huge shopping festival that’s popular outside of the United States. According to a survey conducted by AlixPartners in the fall, two-thirds of Chinese consumers said they had bought products via live streaming in the past 12 months.

And it has become a sales tool that more US brands want to dominate too. Last month, for example, a heart-shaped bag by Kate Spade went viral on TikTok – another reminder of the app’s power.

“We were able to use that,” said Joanne Crevoiserat, CEO of Kate Spade’s parent company Tapestry, in an interview on CNBC’s “Closing Bell”. “The bag is sold out.”

– CNBC’s Lauren Feiner contributed to this report.