It happened during prime time. The Indian government’s penchant for the dramatic was reinforced when it announced that 59 apps had been banned just when debates on news channels kicked off. The government said that these apps harmed the sovereignty and security of the country. Co-incidentally all of these apps were of Chinese origin. The list of apps included the likes of TikTok, Likee, Bigo Live, UCBrowser, and ShareIT among others. The point of friction has been TikTok and its growing popularity in India.
Let’s address the elephant in the room. This was a political move done in response to the skirmish between the two neighbours which resulted in casualties on both sides. But while the incidents in June were a watershed moment, there was growing momentum against China for a while. The Indian army, for instance, had asked its officers and soldiers to delete Chinese apps from their phones. OnePlus was accused of having “backdoors” on their phones which allow access to sensitive information. And finally, media reports suggested that TikTok had security flaws that allowed hackers to take hold of accounts.
A few Chinese companies have been gradually leaving India, some because of public sentiment but most of them have left because they haven’t been able to break into the Indian market. Some of the 59 apps banned have little footprint in India. The notable exceptions are social media apps and UCBrowser. These companies not only hired executives in India, but also added to teams in technology and content moderation. Bytedance also promised to invest $1 billion in India through TikTok. Worst case scenario, there will be a scaling back of operations, which means loss of jobs. Currently, these apps are already unavailable on Google Play and on the App store.
Can it be done?
Can an app be blocked from usage even if it has been downloaded on a device? For a start, TikTok has seemingly turned off the switch. The app isn’t accessible to those in India.
DealStreetAsia has not been able to verify if all 59 apps are offline. But this doesn’t mean they won’t come back again. Is there a more permanent solution?
“So there are a few things to be understood about this ban. First, it is a press release by the government and the actual order is not to be found. So how binding a press release can be is unknown,” says Shashidhar KJ, Associate Fellow, Observer Research Foundation (ORF). ORF is an India-based independent think tank, which provides input on, among others, tech policy.
“Regardless, the ban can be enforced in two ways. First, the government approaches the app stores and asks them to take down these apps. The second is by asking the ISPs to block these applications,” he adds. To prevent these apps from coming back online, the government will have to insist that the ISPs enforce the ban. “If the ban is being enforced by the second method, that would mean that the government is looking at deep packet inspection which has profound implications for net neutrality in India.” It means the government would effectively violate its own net neutrality norms to execute the ban. And it is likely to find a challenge in the courts.
But TikTok had been skirting with trouble anyway. TikTok, for its part, denied sharing any user details with any entities outside India. “TikTok continues to comply with all data privacy and security requirements under Indian law and have not shared any information of our users in India with any foreign government, including the Chinese Government,” the company said in a statement.
So, will TikTok return if it can assure the Indian government that the data doesn’t flow out of the country?
“No, it can’t. The catch here is that there is no way to ascertain how and where the data can flow. There is no way to prove or disprove that data has left Indian shores,” says a senior executive at a social media company. He asked not to be identified.
TikTok has been accused before of pushing the envelope when it came to aggregator safe harbour rules. Tiktok has been accused of not only paying its creators but also nudging them to make specific content. Creators have accused TikTok of shadowbanning them if they spoke up against the Chinese company, while investigations have suggested the short form video company has been happy to suppress videos which it deems sensitive to the interests of China.
Outside this, in India, it isn’t just short term effects, there will be huge losses in the content creator ecosystems and agencies that manage talent. Though small, Tiktok is still an employment creator in an economy which is reeling from COVID-19 and depressed consumer sentiment.
“About a third of most agencies’ budget is diverted to TikTok influencers,” says an executive at one of India’s biggest influencer marketing agencies. “We are disappointed because we had a Rs 2.4 crore (~SGD 440,000) brand campaign in process, which has been disrupted.” It isn’t just about the agencies who are hurting but also the influencers.
A TikTok influencer earned anywhere between Rs 20,000 (~SGD 350) and Rs 75,000 (~SGD 1,400) per brand endorsement. It is an entire ecosystem that has disappeared in the three hours.
“Those in small villages and towns in India are not as plugged into the news as those in urban areas. For them, they woke up to an app that doesn’t work anymore,” the executive adds.
There are other platforms within India, such as the Xiaomi-backed Sharechat, which is contextually similar to Helo than to TikTok. Roposo (which was acquired by SoftBank-backed InMobi in November) is closer to the banned Shein. However, according to the agency executive mentioned above, accessibility and ease of use are points of friction.
Can’t these transactions just move to Instagram just like they are in the West? Yes and No. TikTok has catered primarily to smaller towns and villages in India. Instagram has a primarily urban audience. Additionally, creators have observed that their followings and reach drops when they move platforms. But since brands exist on Instagram, creators will move. But what about the users?
“Today, there isn’t a readymade replacement for TikTok. There are a few similar apps that seemingly look close to TikTok, however, I don’t think they rival TikTok’s discovery algorithm, music library or AR filters and games,” says Pranay Swarup, CEO and founder, Chtrbox, an India-based influencer marketing company.
The consensus is that it will be difficult to encourage users to move to another platform en masse.
Tit for tat
Chinese companies and entrepreneurs will be worried. But this is a song they have heard before. China has famously erected a firewall, which discourages foreign companies from operating in its territory. Case in point–Uber. The American company tried for years to break into the Chinese market but was beaten by unfavourable policy and a behemoth in the shape of Didi Chuxing. Eventually, Uber kneeled and gave up its operations to the Chinese company. Amazon, Google, Facebook and Twitter have been unable to get a toehold in China. Ultimately, they’ve been banned or have had to shut down. VPNs have been used to circumvent the ban but there is no momentum to bring back these companies.
In the Indian context, there are few, if any, apps that are exported to China, which Beijing can use as a pawn in this game. And according to reports, India constitutes a very small revenue base for any of these 59 apps. This ban will be, if anything, an irritant.
If India does plan to scale up this pushback against the Chinese, it will eventually have to look further afield.
Over the past few weeks, within India, there has been a growing movement to block Chinese-origin products and companies. Some of that storm was weathered not just by Chinese companies but also Indian technology companies, which have Chinese shareholders. For context, as of 2019, Chinese investors had pushed capital worth $4 billion into India.
A quick look into the cap table of five of India’s most popular startups shows large Chinese shareholdings. If they were forced to leave, the bottom would fall away from the entire tech ecosystem in India.
Alibaba and its affiliates hold almost 25% equity in financial services startup Paytm, which was last valued at $15 billion. Then there is ride-hailing company Ola (Didi Chuxing and Tencent), restaurant discovery and food delivery startup Zomato (Ant Financial), its rival Swiggy (Meituan) and grocery delivery firm BigBasket (Alibaba) — all have Chinese representatives on their board. All of these, potentially, could run afoul of this nationalist fervour. So far, the campaign to ban these companies has been restricted to fringe right-wing groups, though it has the potential to spiral out into the mainstream just like the 59-app ban. It is safe to assume that smaller Chinese venture investors in India will be making a beeline for the exit. A few smaller Indian startups are going to face sufficient anxiety in the months to come.
The heat, however, will be felt the most by handset manufacturers. Over 70% of the phones bought in India during the first quarter of 2020 were of Chinese origin.
Oppo, which commands a significant share of India’s smartphone market, faced protests by affiliates of the ruling party to shut down its plant near India’s capital, New Delhi. A senior executive mentioned above argues that there is little chance these handsets will be banned in India, the government could put roadblocks to make these handsets less desirable.
“Something simple like asking certain companies to do security testing in India or striking a deal with Vietnam or Korea so phones manufactured there would be cheaper,” says one of the people mentioned above. It is safe to say that the handsets, potentially, could get expensive. In a price-conscious country like India, it could be a body blow to some of the market leaders.
But after the big bang announcement, there is an uneasy silence. No more announcements are on the cards. But all of that could change depending on how China reacts either in trade or high in the Himalayas.
Curiously, in the list of 59 apps launched is Weibo. The Prime Minister of India, Narendra Modi, had announced in October 2016 that he had joined Weibo. There has been no mention if Modi plans to delete his profile on the Chinese social networking website.
Pahwa is an independent writer. This post was commissioned by DealStreetAsia.