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After India banned Tiktok, its $20 billion market is up for grabs

TBP Desk
13 Sep 2022 19:40:12 | Update: 13 Sep 2022 19:52:08
After India banned Tiktok, its $20 billion market is up for grabs
Tik Tok logos are seen on smartphones in front of a displayed ByteDance logo in this illustration taken November 27, 2019 — Courtesy/ Reuters

Prateek Bhardwaj broke out as a social media star on TikTok's short-video platform, drawing in close to a million followers and a slew of big-brand endorsements. But he's no longer on the app.

The 30-year-old from small-town India defected to Moj, one of several Google-backed TikTok clones that sprouted after New Delhi banned the app from China's ByteDance Ltd in 2020. He barely missed a beat: his fan base has ballooned to 3.4 million and the content creator still plugs products from Xiaomi phones to Diageo whiskey.

Bhardwaj's smooth transition highlights the opportunity presented by TikTok's banishment from the world's fastest-growing mobile arena. The global leader in short video was swept up in a purge of Chinese apps by India after a violent border clash two years ago. That gave the impetus for Google's YouTube Shorts service as well as Moj and a slew of other contenders to fill the void. Far from blunting the growth of social video, TikTok's abrupt withdrawal has supercharged the segment.

US giants Meta Platforms and Alphabet are now battling for the lead in what promises to be a nearly $20 billion market, recruiting content creators with incentives and expanding their investment even while they're scaling back elsewhere in the world, reports NDTV.

To them, India represents the best growth potential for online video on the planet -- and the field is wide open. Meta, which already counts India as its biggest Instagram user base with about 400 million, wants to turn its Reels short-video offering into a direct TikTok replacement and is beefing it up with comparable recommendation algorithms. Google, whose YouTube is closing in on half a billion Indian users, introduced a TikTok copycat service immediately after the ban, but its local strategy also includes funding and grooming four of the biggest homegrown clones: InMobi's Roposo, DailyHunt's Josh, ShareChat's Moj, and MX Takatak.

"What has really defined the last two years for us is the explosive growth of Reels on Instagram," Ajit Mohan, Meta's India chief, said in an interview at the company's sprawling headquarters on the outskirts of New Delhi. "Our goal is to have a big global celebrity come out of India, out of its small towns. That's our North Star."

The South Asian nation had been TikTok's single biggest market -- ByteDance offers cousin app Douyin in China -- and the prohibition pushed its more than 200 million Indian users to seek alternatives. Mr Bhardwaj, who'd quit his prized IT job to jump on the TikTok bandwagon, was welcomed on Moj and Instagram when the Chinese service was halted. Instagram is spending more than $1 billion globally, a significant part of which will be deployed in India, on programs that help creators make money. Google is betting on the local savvy of operators like Moj.

While pursuing different courses, the two US firms agree that replacing TikTok must start with recruiting and training India-born creators.

"India's mobile and video usage is among the top opportunities that Google's $10 billion India Digitization Fund wants to power," YouTube regional director Ajay Vidyasagar said. "Storytelling is an intrinsic part of Indians' lives starting with the ancient aural traditions to the current many-to-many digital storytelling through channels like YouTube and short video apps."

Both Silicon Valley titans eye the same prize: a short-video app economy that's expected to generate sales of as much as $19 billion by 2030, according to consultancy Redseer. Short-video apps may command as much as 20 per cent of the digital ad market in India by then, the Bangalore-based consultants said, making it a sector the internet firms can't afford to ignore.

The US duo also wants to use India as a testing ground for their algorithms, influencer campaigns, and content experiments that can be exported to the US -- where an unfettered TikTok is laying waste to their ad revenue models. YouTube Shorts made its global debut in India as a beta service in September 2020 before expanding to the US six months later. Google is now starting to run ads on Shorts, whereas Meta is still struggling to find the right advertising format for Reels and might hope to unearth the solution in India.

"Leading digital media players have clearly shifted their content focus to short-form video, a step away from pursuing other opportunities like live cricket," said Vipin Gupta, managing director at Boston Consulting Group. Google and Meta "are investing heavily on Bharat-focused creators - influencers that are local to a region or a language or a culture."

This push to support online creators and social media stars is starting to play an instrumental role in India's wider entertainment ecosystem. Kabeer Kathpalia, known to his more than 31,000 Instagram followers by the moniker OAFF, landed a job in film production after his music caught the eye of a director.

"Even in my wildest dreams, I'd never imagined my videos would lead me to Bollywood," 33-year-old Mr Kathpalia said. The music maker's performances on Instagram laid the path for him to produce the score and songs for a blockbuster headlined by A-list actor Deepika Padukone.

Affordable devices and wireless data will fuel the growth of short-form video, which is expected to be a regular part of the online diet of 67% of all Indian smartphone users by 2025, doubling its share from 2020, according to Redseer.

To capture that growth and keep up with Meta's spending, the local contenders are investing heavily too. Moj operator ShareChat doubled its losses to $180 million in the fiscal year ending March 2021, spending more to amass its 300 million users who watch 6 billion short videos monthly.

The bulk of online ad spending in India still goes to Meta and Google. Both are going all-out to protect their share of that revenue, ShareChat co-founder Ankush Sachdeva said. "When your core is under threat, you'll invest whatever it takes."

Google's gross ad revenue in India is roughly 1.5 times that of Meta's local unit, though Instagram's owner is growing much faster in the country. Short video ad sales are still a small part of the overall pie for both.

"Short video is not Google's singular game," 29-year-old Sachdeva said. "But for Meta, content is bread and butter."

Instagram currently leads India's fledgling short-video market with users spread across noisy, overcrowded cities as well as idyllic towns. Its teams look for budding musicians, dancers, or comedians showing promise on the platform and go out to train them in audio-video tools and social media trends. Instagram scored twice as many downloads as two versions of Moj combined on Google's Play Store for Android devices in the first half of this year, according to app analytics firm SensorTower.

Meta's Instagram lite for phones with slower data connections, its move to allow cross-posting of some Instagram content to Facebook and its adoption of as many as 11 local languages have all helped it race ahead. Its India ad revenue grew 41 per cent to 93.3 billion rupees ($1.2 billion) in the fiscal year to the end of March 2021, more than the combined ad sales of two of the country's biggest broadcasters.

When TikTok was expelled, Sachdeva and two of his classmates from the Indian Institute of Technology Kanpur jumped at the opportunity. "We charged like bulls and launched Moj in 30 hours," Sachdeva said. Their Bangalore-based startup went on to raise $520 million in mid-June from investors including Google and Temasek Holdings Pte at a valuation of $5 billion.

Moj was designed to serve "snackable" content in an infinitely scrolling feed, particularly in Indian languages. To bring its tech to global standards like TikTok's, the firm put together an artificial intelligence team with engineers based in Bangalore, London, and Silicon Valley.

"Unless the AI is world-class, you are out of the game," Sachdeva said. A short video is set to be as ubiquitous on Indian phones as WhatsApp messaging is now, he added. Like rivals, Moj is tackling the supply side of creator videos by assembling a large influencer base. It recently turned its attention to generating revenue through channels like virtual gifting and video commerce on top of its traditional ad-based model.

But no matter who wins India's short-video war, a US tech company is sure to profit.

"Diversity of content and the ability to target the right users with the right content are key to creating stickiness in a short video. In that sense, Meta's Instagram is far superior," said Vishal Jacob, the chief digital officer at media agency Wavemaker India. "But Indian apps are poised to grow, benefiting from Google's tech as well as ad expertise."