Axios Login

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August 28, 2020

Phew. Another Friday. Congratulations on some fine adulting this week.

Today's Login is 1,288 words, a 5-minute read.

1 big thing: Microsoft and Walmart's TikTok calculus

Illustration of a shopping cart with Microsoft, Walmart and Tik Tok logos.
Illustration: Aïda Amer/Axios

As Microsoft and Walmart work together on a deal to buy TikTok's U.S. business from China's ByteDance, the giants each see fresh opportunities to expand into long-coveted markets — advertising in Microsoft's case and e-commerce for Walmart. But both companies have decidedly mixed track records in these realms, Axios' Sara Fischer reports.

By the numbers: Walmart makes less than 8% of its total revenue on e-commerce, despite pricey forays into the industry, like its $3.3 billion acquisition of the now-defunct in 2016. Microsoft makes less than 5% of its revenue on digital ads, despite its $26.2 billion acquisition of LinkedIn in 2016 and numerous other forays into ad-supported businesses.

Driving the news: A deal involving Microsoft and Walmart deal would allow TikTok to remain in the U.S., and would provide a platform for creators to sell goods via a social e-commerce infrastructure, sources tell Axios' Dan Primack.

  • Be smart: The goal would be to build out a business similar to the one ByteDance operates with its Chinese-based TikTok app, called Douyin.
  • Douyin makes most of its revenue from advertising, but has made big investments to increase its e-commerce revenue, mostly via partnerships with Chinese tech giants like Alibaba.
  • The app boasts 400 million daily active users, making it one of China's biggest social video apps.

Microsoft has a long history of digital acquisitions and product development in ad-supported software, beginning with search and, more recently, with investments in other networks, like LinkedIn. But its ad business is still tiny compared to software rivals like Google and Facebook.

  • A series of acquisitions and partnerships over the past 15 years has helped the company develop what it today calls Microsoft Audience Network, a pay-per-click advertising platform for search result ads.
  • Microsoft makes most of its ad revenue on search ads via its search engine Bing, and network advertising from Bing, MSN,, the Microsoft Edge browser and LinkedIn. LinkedIn brings in about $2 billion of the company's roughly $6 billion in annual ad revenue, per estimates from eMarketer.
  • Microsoft has experimented with all different kinds of advertising businesses over the past two decades, including trying to create rivals to YouTube and Twitch and to testing ad-funded versions of Office and Windows. None of those efforts were successful.

Walmart has pushed to expand its e-commerce business aggressively in the past few years, although it has faced some bumps along the way.

  • In 2019, Walmart shut down, an e-commerce company it bought for $3.3 billion. The deal helped Walmart jump-start its foray into e-commerce, but Jet's brand proved less attractive than Walmart's.
  • Today, Walmart makes about $41 billion on e-commerce annually, and it's pushing aggressively to take on Amazon by expanding its online marketplace.
  • In June, Walmart said it would open its online marketplace, which reaches 120 million monthly visitors, to Shopify's more than 1 million business clients in an effort to take on Amazon's e-commerce dominance.

Yes, but: It's still unclear how a Microsoft-Walmart bid for TikTok would work, and other bidders, including Trump administration favorite Oracle, are also in the game.

The big picture: TikTok's business is still young.

  • It says it has 100 million active U.S. users, up from around 26 million at the year's start, and brought in $176 million in revenue last year,
  • Analysts see big potential for revenue and growth, but any shift in ownership could risk diluting the secret sauce that has made TikTok a hit with youth.

2. Discord looks to grow beyond its gaming roots

Illustration of a repeating pattern of computers with the Discord logo displayed on the screen.
Illustration: Aïda Amer/Axios

Discord began in 2015 as a way for gamers to talk to one another before, during, and after play. Now, the chat company is pursuing a far broader vision: to be the Slack for your non-work life.

Why it matters: In the age of COVID-19, more than ever before, people need the online equivalent of social spaces like bars, restaurants and stages.

How it works: 

  • Discord allows people to create their own online community space, to set and enforce rules and decide whether to remain invite-only or open it to the public.
  • Users can share messages in various channels, chat privately and have group discussions. More recently, the company has added group video chat.
  • Discord calls each community's space a "server," but it's not a server in the sense of a separate computer controlled by the user. Users can run servers without needing system-administrator knowhow.
  • This arrangement has pros and cons. It means Discord controls the data and is responsible for complying with law enforcement. But it also means the service can enforce its own code of conduct, handling trust, safety and security.

"We view it as mostly a benefit," CEO Jason Citron told Axios. "It gives us the ability to ensure that Discord is a safe place to talk."

Flashback: When the site realized after the 2017 Charlottesville rally that white supremacists were using the chat platform to organize, Discord acted quickly and publicly, Citron said. "We wanted to make clear Discord would be a hostile place for extremist behavior."

The big picture: Citron said Discord is trying to enable online social spaces that can serve different functions.

  • In the real world, an auditorium looks quite different from a classroom from a coffee shop, with each design offering cues to how the space is used.
  • Discord, which has more than 100 million monthly active users, is trying to create similar types of spaces online.
  • In part to fuel that expanded vision, Discord raised $100 million in June, led by Index Ventures, valuing the company at a reported $3.5 billion.

What's next: At the top of Citron's list is getting more people outside the gaming world to know about Discord. "It is a new way to talk and spend time," he said. "If you don't really dive into it you can miss the magic of the service."

3. Poll: Americans like anti-tech talk from candidates

More Americans want to see presidential candidates criticize Big Tech on the campaign trail than they did last year, according to a new Morning Consult/Politico poll.

Why it matters: Politicians from both parties are already making increasingly pointed attacks on the tech industry, and the survey suggests a growing proportion of the American people want to hear just that, Axios' Kyle Daly reports.

Yes, but: It's still a minority of all Americans that say they want presidential candidates get tough on tech.

  • And other industries remain higher priorities. Tech lags behind health care, pharmaceuticals, finance and others to come in at No. 11 in the list of industries people want to see candidates scrutinize more heavily.

By the numbers:

  • 45% of U.S. adults want presidential candidates to be more critical of the technology industry, up from 40% in August 2019.
  • That figure ticks up among people who affiliate themselves with a political party. 48% of Democrats and 49% of Republicans want candidates to be more critical, up six and five points year on year, respectively.

4. Google explains how it's good for competition

Google has set up a new website to make its case for why it is good for competition, arguing its free services aid small businesses and "provide thousands of dollars a year in value to the average American."

Why it matters: The move comes as a host of U.S. antitrust investigations are moving forward, including by both federal and state agencies.

What they're saying: "Our free products like Search, Gmail and Maps help people every day, and enable small businesses to grow and reach customers," Google said in a statement to Axios. "We face robust competition, which drives us to innovate, and leads to better products, lower prices and more choices for everyone.”

My thought bubble: In June, Apple announced a study of how much its App Store contributes to the economy — just hours before regulators in Europe announced an investigation.

5. Take Note

On Tap

  • It's National Red Wine Day, so now you have a good excuse for the bottle you have already opened, unless it is a white.

Trading Places

  • The Libra Association, the group created to oversee the Facebook-initiated cryptocurrency, has hired former Department of Homeland Security lawyer Steve Bunnell as its new chief legal officer. Bunnell succeeds Robert Werner, who joined Libra just this past May.


6. After you Login

Want to see life-size Hot Wheels in action? Of course you do.