The ban includes apps from some of the largest Chinese technology companies, including Alibaba, Bytedance, Baidu, Tencent, Xiaomi, YY Inc and Lenovo, which have been building up user bases of millions in India. Even more worryingly for them, India’s move could set a global precedent, said experts tracking the digital economy.
Unlike US tech majors like Facebook and Google, which have been able to build big businesses in Europe and Asia, India and Southeast Asia are some of the markets that large Chinese companies have been betting on to show that they can succeed beyond their home turf. With no global competitors at home due to the great Chinese firewall, many of these companies have flourished in their huge domestic market, generating billions in profits. They have used these funds to expand globally, either through investments or direct operations.
“Chinese psychology is about not giving even an inch in life. All the Chinese companies were struggling to build revenues, but India is important to them as the last large consumer market in the world,” said the founder of a tech startup that counts a large Chinese company as one of its investors.
An analysis of India’s top 200 apps by install volume shows the share of Chinese apps was at 38% in 2019, marginally behind 41% for apps developed locally in India. In 2018, Chinese apps were ahead, at 43%, against India’s 38%. Apps like TikTok, Shareit and Xender have been topping Google’s Android ecosystem, which accounts for 90-95% of smartphones in India.
For example, Indians clocked 5.5 billion hours on TikTok in 2019, an increase of over five times from the 900 million hours spent in 2018, according to data of Android users assessed by mobile and data analytics firm App Annie. While Facebook is ahead in India, with total hours spent on the platform at around 25.5 billion hours, TikTok has been catching up fast by aggressively capturing new users. The TikTok app was downloaded 323 million times across Apple’s App Store and Android devices in India in 2019 — over twice the 156 million times Facebook was, according to Sensor Tower data reported by TOI in January. In December 2019, the total time spent on TikTok in India was more than the next 11 countries combined, according to App Annie. This underlines India’s importance for TikTok’s parent Bytedance, which is set to go for an IPO soon.
Bytedance, which also owns Helo and is the world’s most valuable startup at $100 billion, understands that India is an “MAU (monthly active users) market and not revenue market”, according to an industry analyst. This strategy is similar to that of Facebook – which counts its highest number of global users in India even though the country contributes only a fraction of FB’s revenues compared with the US.
Bytedance reported revenues of just Rs 44 crore ($6 million) in India in the financial year ending March 2019, according to MCA filings. It is expected to report higher revenues in 2019-20 given that in the last quarter (Jan-March) of the year, it earned Rs 22-30 crore or $3-4 million, according to a person with knowledge of the matter. This constitutes little more than a blip on the global dashboard – the company’s worldwide revenues in calendar 2019 were $17 billion and net profit $3 billion, according to Bloomberg.
Even so, losing the Indian market would take some of the lustre out of their valuation numbers. “If these companies are not global in nature, it restricts their ability to do a good global listing (IPO). India provides growth for the future- the fastest growing and highest volume market. It’s also the least competitive market – Facebook and Google have hardly any competition here in India, while they do in the US,” said Anand Lunia, co-founder of venture firm India Quotient, which has backed companies like Sharechat, which competes with Bytedance.
The founder of a tech startup said he expected the Chinese giants to fight the ban, adding, “The big danger for them is if other countries follow in India’s footsteps.”
While companies like Bytedance and Xiaomi have aggressively opened up direct operations in India, others like Alibaba and Tencent have primarily operated through investments. Alibaba Group has backed Indian unicorns like Paytm, Zomato and Bigbasket, while Tencent has backed Byju’s, Dream11, Ola and Udaan.
“Great organisations don’t see people as a commodity to be managed to help grow their money, they think of money as a commodity to be managed to help grow their people”