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Microsoft is asking 'for some serious scrutiny' as it confirms talks to buy TikTok's U.S. operations :Cybersecurity Expert

Karim Hijazi, Prevailion CEO, alongside Yahoo Finance's Dan Howley, join The First Trade with Alexis Christoforous and Brian Sozzi to discuss the possibility of Microsoft buying TikTok's operations in the United States. Both Hijazi and Howley also weigh in on what this means for the social media industry overall and potential buyers beyond Microsoft.

Video Transcript

BRIAN SOZZI: Let's get back on the TikTok, Microsoft, Trump situation. Let's bring in Karim Hijazi, he's the CEO of the cybersecurity company, Prevailion. Also joining us is our tech editor, Dan Howley. Karim, let me start with you here. How big a security threat is TikTok?

KARIM HIJAZI: Good morning, Brian. It's a good question. We've all been debating whether or not there's any kind of intended implant, so to speak, within the application that could be responsible for all this concern. There was a lot of rumor milling back in late June when Apple and a few others identified that there were some bugs that allowed the clip board to actually be seen by TikTok.

And that was resolved and solved. And it was questionable whether that was something intended or not. I think that was, kind of, the rumor going around. So I don't think anyone really has a clear picture on whether or not this is definitively something that is malicious by design or if it's simply another social media app that is actually harvesting a bunch of information from willing people, which is unfortunately the nature of the problem with social media. Everyone hear me OK?

BRIAN SOZZI: Dan Howley, what do you think this would-- what do you think this would mean for Snapchat?

DAN HOWLEY: For Snapchat, I think that it'll be something along the lines of kind of a defeat almost. TikTok has a large growing audience of young users who are apparently very dedicated to it. I think when it comes to Microsoft scooping this up, it provides TikTok with a lot of extra firepower from Microsoft.

It gets them a ton of data and access to a market that they frankly haven't been a part of for some time, the youth audience, really. So I think that's really going to be the main benefit for the likes of Microsoft and why it could be an issue for Snap.

ALEXIS CHRISTOFOROUS: You know, Karim, Microsoft already owns Xbox, and it's gathering-- and Minecraft. So it does have some information on younger folks. This, though, buying the US operations of TikTok, which, sort of, put it in another stratosphere. But wouldn't this really bring Microsoft under the microscope of antitrust regulators, of those on the Hill who are putting Facebook and Google under the microscope when it comes to privacy data? Why would they do this to themselves?

KARIM HIJAZI: No, I think you're absolutely right. I think it's going to create-- because of how politically charged this is and the fact that ByteDance is by definition a Chinese company. They're definitely asking for some serious scrutiny. I think they're weighing it out, and if I were in Microsoft's shoes, I'm balancing the influx of usership as you identified similar to WhatsApp, with Facebook, that collection of users was worth it.

And it was worth the price and it was worth the challenge and the antitrust risks, so to speak, that would come with it. I don't know that this is the same situation with Microsoft. You're really dealing with a really, as I mentioned, politically charged situation. And I don't see it getting better because of the fact that there's also the risk that I was saying before that people are willingly putting their data into these apps. They're not necessarily spying on people.

The sheer fact that people are handing this data over and that data can be mined. And all this talk of, we'll just move all the data to the US and it'll live here. It's the internet. There's no guarantee that data is absolutely not in China anymore and only here. There's almost no way to confirm that. So I agree with you. I think it's going to create more trouble, but it might be financially worth it for them, so hard to say.

DAN HOWLEY: Karim, what do you think that, you know, that data that TikTok could have had from US users, or still does have, really. This deal, obviously, is far from being completed. But what could it possibly used for? I talked to experts before who've said that, well, it could be used for future issues, perhaps trying to blackmail users way down the line if they end up working for the government or major institutions. Is that really the threat here?

KARIM HIJAZI: That's more the ephemeral threat of, as you said, reputation and risk about having some, sort of, silly video that gets leveraged. My bigger concern and the team that we have is more concerned about the kind of data mining that you get from what's being pushed in through TikTok. So that is all the visual information being delivered.

You know, some of the games that I've seen on this app are go map your house out, let the kids run around and map the house out. I mean, that is incredibly scary data to have out there propagated. They're also doing facial recognition with the app, so they're starting to identify who is where. Then the geolocation of where you are with your phone at any given point is also very powerful.

So they can tell where people work, they can tell where people live. There's a lot of interesting data mined that way, I think, so aside the reputational impacts of disclosing some embarrassing video later, it's all that other mined data that I think is more concerning from a security and national security risk.

ALEXIS CHRISTOFOROUS: Hey, Dan Howley, would love to get your take on this. This is just coming over now. The White House advisor, Peter Navarro, tells CNN that Microsoft might not be the right company to buy TikTok's US operations, which then of course leads us to wonder, who would be the right company?

DAN HOWLEY: Yeah, I mean, it is interesting, right? Because we just had this big antitrust hearing on Capitol Hill between Amazon, Apple, Facebook, and Google. Microsoft was, you know, surprisingly not there, despite the fact that their market cap is just as high as the others, and they do have just as much play in the cloud space as well as the productivity space.

But I think the idea that they're not the suitor here has to deal with Microsoft's helping to build the great firewall in China, which is the firewall that blocks out content that Chinese authorities don't want citizens accessing. I don't know if that necessarily would preclude Microsoft from being part of these conversations to purchase this to make it an American company. I think the larger issue would be, how much are you adding to Microsoft's market power at that point, right?

Because they're not-- they don't really have a horse in the race when it comes to the advertising-- digital advertising industry. That's all Facebook and Google. So putting Microsoft in there with this would basically be giving already what is a juggernaut of a company a leg up. So I think that's really what the concern is.

BRIAN SOZZI: Karim, who would be a better fit? If Microsoft's not a good fit, who else could step up here?

KARIM HIJAZI: Well, I think social media as a whole, you know, the Facebook, the Twitters of the world conceivably. You know, we saw Twitter buying Periscope way back when. They did arguably pretty well, people still use that type of technology. Now, I know it's not a good time to talk about Twitter as far as the security issues are concerned.

Something else that I was going to mention that the other risk associated with this is that if something like Twitter, which is clearly an American firm, with all what we'd hope to have all the security procedures and protocols in place, was able to be socially engineered and have those accounts commandeered. What happens when something this big that doesn't have necessarily the code base that was designed here and monitored here gets involved?

But I still think that a juggernaut social media organization could probably manage this a little better because they've been dealing with these types of issues longer. So, you know, I can't speak to the financial wherewithal for them to be able to do it, but it's certainly a big social media giant that understands the nature of this would probably be the best in my opinion.

BRIAN SOZZI: All right, let's leave it there. Karim Hijazi, CEO of cybersecurity company Prevailion, and our very own tech editor, Dan Howley. Thanks so much.

KARIM HIJAZI: Thank you.