Indian social media apps see traction after TikTok ban, but will the momentum sustain?

India Gate. Photo: Abhidev Vaishnav/unsplash

When the Indian government banned the popular video-sharing app TikTok in July, homegrown social media startups, looking to break into the big league, got their much-awaited opportunity.

The first to benefit were global players such as Facebook-owned Instagram, which rolled out its TikTok-like Reels feature, and Triller that saw a massive spike in user numbers. Since then, homegrown startups like Chingari, Sharechat, and Mitron, too, have got a leg-up.

The ban on 59 Chinese apps including TikTok, which had a user base of 200 million in the country, was the fallout of a border clash between Indian and Chinese troops in June. The skirmish also prompted prime minister Narendra Modi to launch his ‘Vocal for Local’ campaign to promote Made in India products.

“Ever since Modi announced the Vocal for Local initiative, several home-grown regional apps are fighting to claim TikTok’s throne,” said Ganesh K of Growthstory.in, an online platform that promotes greenfield ventures.

Roposo, which was last year acquired by Softbank-backed InMobi, said in July it was seeing new users peaking at 500,000 an hour and expected to gain 100 million by the month’s end. It had 55 million users when TikTok was banned.

Chingari, which means “spark” in Hindi, gained 3.5 million downloads within an hour of the ban and had more than 15 million downloads by early July. The company, incorporated in 2018, raised $1.3 million in seed funding earlier this month, while Mitron raised $5 million.

Sharechat, a homegrown startup incorporated in 2015 and which had attracted $258 million in the last two years, reported 500,000 new users per hour soon after the TikTok ban. It recently made headlines for being in talks with Microsoft to raise $100 million.

Data compiled by research firm Venture Intelligence show that the social media startups in India raised as much as $285 million between 2018 and now.

To break down the numbers further, investors this year have so far pumped in $38 million in the burgeoning sector, while the amount invested last year stood at $110 million. In 2018, when funding started to gather steam in the sector, investors put in $137 million in social media startups.

Expand Table

VC Investments in Social Media Startups in India (2015-2020 YTD)

YearNo. of DealsAmount ($M)
2020 YTD338
20195110
20188137
2017--
201629
2015423

Expand Table

Top VC-funded social media startups in India (2018-2020 YTD)

CompanyAmount ($M)Select Investors
Sharechat258Shunwei Capital, India Quotient, Lightspeed Ventures, SAIF
Roposo40Bertelsmann India Investments, Tiger Global
Samosa Labs8Xiaomi, Sequoia Capital India
Trell6Sequoia Capital India, Sprout Venture Partners, WEH Ventures, Beenext
MitronTV23ONE4 Capital, Nexus Venture Partners

TikTok playbook: Tough to replicate?

But the exuberance from the immediate aftermath of the ban is fading as it becomes clear that replicating TikTok’s success is not just about exploiting fortuitous policy changes.

Ahead of the ban, TikTok’s parent ByteDance had told the Indian courts that it had plans to invest about $1 billion in the country and hire about 1,000 workers. But the investments that have poured into the space since the ban has been nowhere in the same ballpark.

“Several new apps are seeing rapid downloads riding on the habit that TikTok helped create. However, whether these result in meaningful and sustainable ideas remain to be seen. That will require similar levels of innovation that TikTok executed in its Playbook to drive best in class retention and engagement,” said Tarun Davda, managing director at venture capital Matrix India.

“TikTok’s brand partnerships showed that monetisation is sure to follow if someone can recreate that playbook for Bharat. With larger companies like Instagram, Dailyhunt, Gaana, Sharechat etc throwing their hat in the ring, a simple copy-TikTok strategy isn’t going to work,” he added.

India was a big market for TikTok. The app clocked 611 million lifetime downloads, or 31 per cent of its total downloads, in the country, which was ahead of even its home market China. It had more than 200,000 influencers on its platform, and its users fell in a younger age group (average of 18-30) compared with Facebook’s 346 million users in the average age group of 28-45. All that gold dust was waiting to be swept up by the competition.

“The habit of expressing oneself on video platforms was established by Tiktok. Today, we see significant adoption of Indian platforms as well as Reels by customers across the country. This is an opportunity equally large as the user base of social media platforms. Advertising spend by consumer businesses is expected to rise on these platforms,” said Sreedhar Prasad, an independent e-commerce expert and former head of internet business at KPMG.

TikTok’s Midas touch was a result of the deep thought that went into cultivating its market. Davda pointed out four factors that enabled TikTok to raise its average session time to an enviable 56.9 minutes by March-end: Easy-to-use video creation tools; deep influencer engagement; world-class AI; and simultaneous capital investments in user acquisition, influencer engagement and content creation, and tech infrastructure.

The market still waits

The sheer momentum of the growth in the Indian online space is calling for a smart player with a well-thought-through plan and deep pockets to step in and fill the void left by TikTok.

In other words, TikTok’s market is still waiting to be tapped, but by a player who has internalised TikTok’s playbook. There are lessons from both TikTok’s rise and fall for anyone trying to fill the vacuum.

Experts compare what is happening in the Indian social media space to the case of Flipkart and Amazon in the online retail space. Flipkart, the homegrown online retailer acquired by Walmart, introduced online shopping culture to India that Amazon later exploited to overtake it quickly.

“The ban has opened the door for new opportunities for Indian players,” says Ganesh. “They can attract the Indian audience based on three factors: Made in India app, data stored in India and regional languages. Now, it will be interesting to see if the Indian players will be able to capture TikTok’s market in its absence.”

The Made-in-India badge, which helped in the immediate aftermath of the ban, may only have limited leverage in the long run as nationalist feelings cool down and technology and user experience become keys to tipping the scale.

Prasad points out that venture capitalists continue to have an interest in firms trying to connect people across the country; and in connecting people from tier II and III towns whose lifestyles and interests are vastly different from the youth in the metro cities like, say New Delhi, Bangalore or Mumbai.

There is also the opportunity offered by vernacular content, which remains largely untapped. India has 22 recognised regional languages and as more people come online they are going to be hungry for content in their own languages.

Most of the Indian startups trying to expand in the vacuum created by TikTok’s exit are betting big on this, offering regional language options.

Then there is COVID-19, which has fueled online content consumption as people are largely confined to their homes. Interestingly, these are the very factors that fueled TikTok’s heady rise before it fell a victim to geopolitics.

Recent reports have suggested that Reliance Industries, which has made huge inroads into the Indian mobile internet space through Jio Platforms, is in talks with ByteDance to buy TikTok in India.

So, the window may be closing fast for Indian startups hoping to replace TikTok in the country.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.