TikTok's efforts to dominate the Indian market just hit a major roadblock. They have a lot to lose in the world's second most populous country. India has been the biggest driver of new app downloads, generating close to 611 million installs since its launch in 2017.
TikTok, the Chinese short-form video streaming app, has taken India by storm. But the recent surprise ban on TikTok has created a vacuum for millions of millennial creators and users. Many of them are turning to homegrown social media apps but who is best positioned to replace TikTok’s relevance in the world’s second largest internet market? Is it Instagram or a homegrown app? Or is it going to remain TikTok only?
To understand this, let’s first unravel TikTok’s dominance and how it amassed hundreds of millions of users in India. We’ll then discuss the implication of the ban on ByteDance (parent company of TikTok) and finally talk about who is in the front row to win the market.
TikTok So Far
After every few years, a new platform emerges and it redefines how people use social media, thus providing new and unique ways to interact. The mass adoption of new social media platforms flows through continuous cycles. Instagram, Snapchat, LinkedIn, Whatsapp, Telegram, Quora are some of the big names from the past decade. TikTok is the latest addition to this list. And it led us to ask, why and how TikTok became a sensation in the social media circles?
A mix of lip-sync videos and micro-video content, TikTok provides an easy platform to get hooked on. Every 2 out of 3 users of TikTok are less than 24 years old. The majority of the content that we consume is moving to video. With its shorter video format, TikTok perfectly captures the millennials and teenagers looking for micro-entertainment and quick entertainment. Lately, TikTok has become more popular than Facebook among younger teens in the US!
But you don’t get 1 billion active users just by switching to a 15 second video format. We believe the thing that works for TikTok is their platform itself. TikTok has invested a lot in developing and perfecting its algorithms. It's ‘For You’ page analyzes the user data and does an incredible job at showing the content best suited for the user. TikTok allows users to download their videos easily or upload them to other platforms (like WhatsApp) directly.
All these allow the content a massive organic reach, incomparable to anything that existed before. This offers its users instant gratification, the opportunity to go viral, and a chance to connect with those who share similar interests. Unlike Instagram’s “filters” TikTok drives on “authenticity”. This allows virtually anyone to be a content creator. Tiktok has created a massive ecosystem of content creators and users.
For every two TikTok lurkers there’s about one creator. For Youtube, the creator- consumer ratio is 1:10 compared to 1:2 ratio of TikTok.
TikTok has seen about 611 million downloads in India over the app’s lifetime, and at the same time, it has become a part of the lifestyle for 200 million monthly users. TikTok is the fastest social media to reach a billion users.
TikTok’s parent ByteDance (Portfolio includes TikTok, Helo, Vigo Video, Toutiao, BaBe, Xigua Video, Flipagram) recorded a doubling of global revenue to $17 billion in 2019 over the previous year, with $3 billion in profit. Just to give you a perspective Instagram reported $20B ad revenue and Youtube reported $15B in the same period.
Now, talking specifically about TikTok, the revenue numbers are bleak when compared to other rivals. TikTok brought in $177 million in revenues in 2019 (excluding non-iOS revenue from China). China and the USA were the biggest contributors and accounted for 69% and 20% of the total. TikTok clocked in a meagre $6 million in revenues in India from its 200 million active users. The numbers may seem little but they have recently seen exponential growth in their earning. TikTok initially earned its revenues from in-app purchases, such as emojis and digital gifts. But short video ads have emerged as the key revenue generator, especially in China. Another major point that needs to be highlighted here is that TikTok’s focus over these years has been growth and providing excellent user experience. Needless to say, they have checked on both of these boxes and before the ban, they were very well positioned to capitalize on its 2 billion user base.
$100 Billion Valuation? Maybe Not!
A series of clashes with China led the Indian government to ban 59 apps including TikTok. Though the statement from the government did not mention the border clashes between the two giants but described the apps as stealing and surreptitiously transmitting user data in an unauthorized manner.
Before the ban, there were rumors that ByteDance could fetch a valuation of between $150 billion and $180 billion in an initial public offering. ByteDance is the highest valued ‘startup’ in the world.
“The fact that ByteDance is making profit, if true, and sitting on a $6 billion cash pile means that it is not in a rush at all to come to market to raise capital, and therefore less likely to offer the shares at a more reasonable price for IPO investors” - DZT Research
Case in point - the upcoming IPO of TikTok - 20% active user base comes from India (200M out of 1B active users) and this will impact the valuations negatively.
App Wars: Homegrown TikToks – Roposo, Sharechat, Mitron, Chingari
In the event of TikTok’s absence, a number of startups including Twitter-backed Sharechat, Chingari, InMobi Group’s Roposo, and Mitron have ramped up their efforts and have claimed to court tens of millions of users. However, at the end of the first week of July, there’s still no match for TikTok’s 200 million users. What matters, though, is not downloads, but the actual use of the app. Let’s compare the time spent pre-ban and post-ban.
Times Internet owned Gaana also rolled out HotShots that curates user-generated videos. Gaana had more than 150 million monthly active users as of earlier this year. Local language news aggregator Dailyhunt, e-commerce giant Flipkart and Zee5 too, have joined the short-videos bandwagon.
Instagram, which has already attracted tens of thousands of influencers in India, is perhaps best positioned to replace TikTok’s relevance in the world’s second largest internet market using “Reels” feature in the app. Instagram had about 165 million monthly active users in India in June 2020, up from 110 million in June last year.
But why is Flipkart entering into short-form video streaming? It sounds like an unrelated diversification, but the company believes that most new consumers are introduced to the internet through online videos. Hence, video content and entertainment could play a big role in getting consumers to come and buy online. So the strategy here is completely different and they are trying to get users to spend more time on their app.
And everyone’s struggling!
Social media platforms work on the "network effect", meaning that more users lead to more content, which in turn leads to more users. Long-term success will depend on the "stickiness factor" that is brought about by continuous innovation. Also, millennials are short on patience, so you cannot have technical glitches. Retaining users, getting them to create a digital footprint and making them addicted to the app is crucial in this 'winner takes all' market. According to industry estimates, around 12-15% retention is considered good for a short video app. So, a few million downloads just do not suffice in the cut-throat industry.
Clearly, for these upcoming apps, their shot at success is almost fully tied to how long the ban on TikTok lasts. Remember the ban on Maggi noodles? TikTok’s return could jeopardize the prospects of all these Indian apps.
Is it a second Snapchat moment?
There could be a potentially bad scenario for ByteDance and that is Facebook considering TikTok takeover. Four out of the five most popular apps and most downloaded apps (Whatsapp, TikTok, Messenger, Facebook, Instagram) are owned by Facebook. It is because it bought or knocked off every “next big thing” in social media before it grew too big.
In 2012, Facebook bought photo-sharing app “Instagram” for $1 billion after it became the most downloaded iPhone app at that time. Two years later, Whatsapp became the world’s second biggest messaging app. After lots of failed bids, Facebook paid whopping $19 billion just to get it out of their way. Then Snapchat came along with its ephemeral stories feature that threatened reduced time spent on Facebook. When Snapchat refused the acquisition deal, Facebook blatantly ripped its signature feature and introduced it on Instagram, Whatsapp and messenger apps. And meanwhile, Snapchat’s growth has nearly stalled for three years.
Facebook made its first attempt to kill TikTok in 2018 by launching a copycat app ‘Lasso’. But, it was a failure. Now in the second attempt, Facebook rolled out the “Reels” feature, again a rip-off from TikTok. As of now, it is available only in Brazil and India, but it’s a matter of time before Facebook rolls out this to the rest of the world.
Would Facebook be able to wipe out TikTok with Reels feature? Only time will tell. But if the answer is ‘No’’, Facebook will come with full force to wipe out the competition in the third attempt. Even if it means to pay top dollars to acquire TikTok.
We’ll end on a scary note - Imagine a single corporation, with no competition, controlling your entire ‘social’ presence.
This piece is co-written by Harsh Parmar