BS READS: The search for an Indian giant in difficult social media terrain

How many players are able to sustain user growth will only be clear with time. That said, it is quite likely some may find the right investors and loyal audience and make it in the long haul

There was already some activity in the local social media scene before India banned the 59 Chinese apps in June.

TikTok, which arrived here in 2018, had opened up a niche. Short, instant-buffering videos put on a newsfeed showed a new way of consuming content, and became a viral phenomenon. Some Indian entrepreneurs saw an opportunity.

Co-founder Anish Khandelwal said he started working as early as February on Mitron, a short-video app that has recently become popular. “We set out to create a platform where people can watch any kind of short-videos. Not just humour, but also ‘how to do x’ sort of videos and cultural events.”

As far back as December, music-streaming app Gaana started ideating a platform for music creators. It culminated in HotShots, a new service within the Gaana app, “where singers and artists connect with our userbase through short videos and personalised content created only for Gaana,” according to Prashan Agarwal, CEO, Gaana.

Short-video was the buzzword, and following TikTok’s lead, many had begun experimenting with it. Then came the abrupt decision to ban Chinese apps. The directive -- which affected TikTok, Helo, Likee, Bigo Live, among others – left a wide community of creators and consumers without a platform.

In the days following the ban, a whole array of players had jumped in, looking to grab an audience of about 100 million, give or take, on to their platforms. ShareChat launched Moj and Times Internet forayed with TakaTak (whose resemblance to TikTok extends to its logo as well). Even Instagram fast-tracked the roll-out of its Reels feature, an adjacent video creation tool within the app.

While the dozen or so players have opportunistically gained hundreds of thousands of users, their long-term viability and growth is in question. Experts said that while the ‘Make in India’ tag has brought in early traction in the backdrop of anti-China sentiment, becoming a permanent social media destination requires not only a good tech product but also a constant supply of capital. The risk that India may lift the ban off TikTok also lurks around the corner, said social media executives, and many “influencers” may head back should that happen.

As entrepreneurs take bold strides in the space, they are realising that social media is a tough business to crack, and one where making money comes way down the line. It requires a constant effort to maintain virality and usefulness – a specific use-case for the platform – while working under the threat that more sophisticated and rich platforms can launch anytime. So, will the new platforms survive the test of the time?

Sharechat and local social media

“Because the apps are global, tomorrow another Facebook from the US or a TikTok from China can come and take up Indian users,” said serial entrepreneur K Ganesh. “It has happened in the case of Snapchat and so many others. All the social medias we have using forever have been predominantly foreign.”

The point is reinforced by the fact that none of the big VCs –- Sequoia, Nexus, and Chiratae Venture — have a social media start-up in their portfolios. “The social media business is based on user acquisition for deferred revenue, and typically shows high valuation and little or no revenue. The platforms need to get to a certain scale before they can start monetising the userbase,’ said Manish Singhal, founder of Pi Ventures.

 

In India, only two social media firms have continued to grow: ShareChat and Roposo. ShareChat is backed by Twitter and Chinese investors Shunwei Capital and Xiaomi, while Roposo, a Tiger-backed company, went through a number of pivots before getting sold to InMobi in a fire sale in November. InMobi has merged Roposo with its product Glance, which shows promotional content on smartphone lock-screens.

Globally as well, social media platforms have required a steady stream of patient capital. Facebook made its first profit five years after launching in 2004, and by this time it had raised about $250 million in venture funding. Twitter made its first profit full 12 years after launching and five years after going public. SnapChat is still not profitable, nine years after launch.

“Entrepreneurs as well as investors must have a long-term appetite to survive in this business,” said Ganesh.

The perils are amply evident in the story of ShareChat. It was started by IIT Kanpur graduates Ankush Sachdeva, Bhanu Pratap Singh and Farid Ahsan in 2015. The founders identified a gap in content in local languages, that was typically popular among audiences in tier-II towns, South India (where local dialects are more popular) and first-time users. Facebook or Instagram did not have that kind of content.

However, WhatsApp was popular in these circles. On WhatsApp groups, people would share a steady stream of good morning messages, quotations, jokes and other funny videos from their communities, sometimes in local languages. What ShareChat did was that it brought this content onto its platform. Sharechat declined to comment on this story.

The local-language focus made sure it had a loyal community of followers and creators, and a supply of content from regions where Facebook and Instagram did not have ample presence. Its reach in hinterlands is the primary reason for bagging an investment from Twitter (August 2019), which was looking for ways to grow its audience beyond tier-I India.

However, things changed when TikTok came into the picture.

TikTok went after the same audience with video-creation tools, and took over a sizable portion of users from Sharechat, according to experts. This was at a time when ShareChat was already working on levers to create revenue. Since 2018-19, ShareChat started ads, and later launched a fantasy sports platform Jeet 11, and forayed into short-videos with Moj app. Its FY19 revenue was Rs 29 crore, the first in its five-year existence.

Finding niches

Social media executives and experts concurred that so far as Facebook and Instagram have a free hand in India, creating a large content-agnostic platform is impossible. And that Indian players must find select niches to operate in.

The trend is playing out globally as well. Instagram was about food and travel pictures before it became a full-blown platform after Facebook’s investment in 2012. Reddit has come up as a community for codes, Pinterest is for artists, and so on. Niches also give platforms a select community of loyal users and ability to attract advertisers wanting to target those communities.

"For any social media it is important to have a 'moot'," said Gaana’s Agarwal. HotShots, its new offering, is focusing on the singer and creator community. People who come on to Gaana may also like to see and interact with singers and artists — and that becomes the selling point for HotShots.

“One of the biggest use cases of TikTok was to promote music, correct? People would launch songs and put it on TikTock, YouTube and Gaana. And that's how you make a song larger than life. So, I think music being one of the biggest promotion use-cases is where the play is. The place every singer wants to be is Ganna, “and” every singer wants to be on a short video platform too. If both those opportunities that are given by Gaana, then the entire community is with us” said Agarwal. HotShots is also using the Ganna’s copyrights for millions of songs and offering them to creators to use in their videos.

Since the Chinese app ban, VCs too have become active, but they are only offering petty change and waiting to see how the space shapes up. Short-video app Bolo Indya recently raised $300K from Eagle10 Ventures, and India Accelerator Group. Mitron also raised Rs 2 crore from 3one4 Capital and Letsventure. Anand Mahindra, who sometime back announced his inclination to back an Indian social media, has also put money in GoSocial, launched by a company called Hapramp.

In the new platforms that have emerged recently, it is too early to find differentiation, said Mitron’s Khandelwal. “Everybody is just trying to fill a gap that was created. Six months down the line, there’ll be ample differentiation.” He added that the conversations continue on traditional lines with VCs, who ask for commitments on user growth.

“Retention and engagement are two most important metrices for social media business. The other is open rate,” said Khandelwal. “If I am a creator, why would I open the app again and again. Ideally, a creator should also be a viewer. I want to see my social angle — how famous I am. That satisfies the creator. For viewers, they form a community or social circle -- you see their updates. That creates repeat behaviour for you,” said Khandelwal.

According to Agarwal every social media requires some hook. “You need some influencers who are successful, and then you need some influencers who will become successful. For that, you need an engaged user. And so that's where the quality of content matters.”

How many players are able to sustain user growth while providing a unique differentiating element will only be clear with time. Having said that, it is highly likely that some may find their moot, the right investors and loyal audience, and make it in the long haul.