The Sino-Indian app — war… drama … dilemma?
What happens when a border skirmish becomes a question of digital sovereignty.
In a manner increasingly peculiarly of itself, the Indian government has (yet again) summoned its power of overnight announcements and made short work of 59 apps — all Chinese — citing threats to the country’s ‘sovereignty and security.’
A debate soon bludgeoned out of that evening’s press release and materialized into a social media public trial. The Death Note was put into effect.
Some explained how it was an answer to Chinese transgression at the border. Some talked about its futility in providing a political resolution. But most, missed the plot. This was the first time ever that a government, any government, ever, used app regulations as political leverage in territorial battles. This how Constantinople fell — if Constantinople were a massive Chinese-app digital empire. But wait…
The devil and the deep blue sea
Of the 59 apps listed, none can match Tik Tok’s recall and pervasiveness in India. Over time, it has built a strong presence among new digital users and built household names out of an anonymous bunch of upstarts. In fact, 30% of its entire user-base is Indian. That would mean this ban is of huge consequence to the Chinese income right? Wrong. India doesn’t even feature among the top 10 revenue generators for Tik Tok.
And that is also emblematic of India’s role in digital innovation. Despite its immense MAU/DAU pull, cost of consumer acquisition of the incentive-friendly Indian is higher than in other markets of comparable size. Walmart India’s digital payments business PhonePe has a first hand account of predatory competition.
In an interview, CEO Sameer Nigam lamented about the unsustainability of cash burn in India, and their helplessness in avoiding it-
This dog eat dog situation may be hard for Indian apps with little backing, but has been perfect for Chinese apps or investors who did not care as much about the cash burn as they did about Indian exposure. In fact, India’s app growth story has so far also been reliant on Chinese interest in the field. 18 out of the 30 Indian unicorns, have Chinese investors on board.
But the rising witch-hunt for traces of Chinese elements and unpatriotic businesses that take their money or help, has forced Indian apps into a peculiar dilemma —
How do we dish competitive apps, in a price sensitive market, without the support of our most aggressive financial backers?
Beheading a Hydra
For India, it is not only a question of replacing Chinese apps, it is about substantiating their inherent demand with suitable domestic solutions.
Mitron TV — Tik Tok’s Indian competitor, which was actually developed in Pakistan and bought for a mere $34, has racked up over 10 million+ downloads on Play Store. It even raised ₹2 crore from seed funding rounds. While that could have been great news to India (except for the Pakistan part of course), the app was just over a month ago, banned from the Play Store for being in violation of Google’s “spam and minimum functionality” policy. The app is now back on the Play Store, and whether it is safe to use or not, one can only ponder.
Another Indian competitor — Chingari’s bets went up in flames when renowned French security researcher Elliot Alderson disclosed security concerns on its parent company Globussoft’s website. Chingari has since stated that their app is secure.
One report, Indian Express citing independent security researcher Indrajeet Bhuyan read-
“These apps can be bought from online marketplaces for as little as Rs. 3,000. These scripts are easy to buy, and even the owner of the apps does not know how the app works. Now, if 10 people buy the same script, all the apps will have the same flaw.”
Mitron TV’s removal served as a live example. But many might still slip under the radar. The domestic alternatives hence, haven’t been resourceful, formidable, or durable. And even if they were, the pressure of battling yet another international contender can be insurmountable.
India’s app ecosystem is facing a hydra’s onslaught. Much like the monster from Greco-Roman mythology, India’s competitors have more heads than our swords. And when the Tik Tok ban removed a Chinese market leader, an American behemoth swooped in to challenge for the throne.
Both Instagram and Gaana (touted as India’s largest music streaming app) launched their short-video extensions in India. But the launch of Instagram Reels can be of far greater consequence.
That is primarily because the few competing brands that might have some domestic currency (like Gaana), are still years behind in technology. Instagram has a large influencer community, resplendent monetization and tech capabilities, and provides the opportunity to reach an international audience as did Tik Tok.
TikTok’s biggest market has (so far) been new smartphone adopters in India (either youth, or lower tier citizens who just learnt how to use a smartphone). That is a big number and a bigger opportunity market. Except for Jio, not many Indian apps have been able to crack that audience as expertly as China.
Until we are a competent, combative tech nation, opportunities like these will be openings for global apps to enter the Indian market. Is that a bad thing for the audience? Probably not. But it will make building homegrown solutions difficult.
The question of sustainability
India’s problem isn’t that the app ecosystem is in its nascence and therefore underprepared. It is that the country has shot itself in the foot before the race.
China has provided Indian apps a funding of over $6 billion in just the past two years. 18 out of our 30 unicorns are Chinese-backed. And Chinese investments have (to some degree,) done away with VC conservatism, propelling intriguing money plays.
A large number of people are currently employed by these companies. If the entire country were to abandon Indian companies directly or indirectly related to China, it would immobilize our plans of digital expansion.
This aggression against China-funded Indian application is understandable and ridiculous. It sets a dangerous precedent of making apps a proxy in a political ping-pong. Which means, future altercations (if any) with any other country will put to risk start-ups and entrepreneurs backed, dealing with or even arbitrarily linked to an alien country.
Then again, China controls both the means, and the ends . Not just applications or investments, it has a massive control over the mothership — the smartphone market in itself. According to an Economic Times article — China controls 80% of India’s smartphone market while Indian players whose presence is near inexistent still use Chinese components to survive.
Call me a traitor but, I will not soon switch over from my OnePlus to any of the MILK (a rather creative acronym for Micromax, Intex, Lava, and Karbonn) that is already turning, anytime soon. And apparently, many people think just like I do-
This doesn’t mean India shouldn’t take a step against China if national security is called into question, it means this should be an alarming call for the country to bolster its domestic produce both in terms of quantity of reach and quality of product. But until then, to think that import substitution works like we think it should, is a product of uncontained adrenaline. It didn’t work for us in the previous years, and there is no proof to tell us otherwise.
The only option in sight, is economic consolidation. As Arvind Panagariya — former (and the first) vice-chairman of the government of India think-tank NITI Aayog put it in an interview with The Wire (that I later found on The Ken’s newsletter)-
“We need to keep strategic patience with China because trade war can cause damage to India. See, we have to continuously deal with the threat from China because we have a very long common border. We have to live with these tensions. It is important for us to ensure that our economy is strong. We should focus on becoming a 10 trillion dollar economy. China is currently at 14 trillion dollars. If our economy is strong, China will be quiet at the borders.”
AN APPENDIX OF THE MORE IMPORTANT THINGS
- For the trigger happy, the blow from an China vs India trade spat may not be unilateral. [The Week reports]
- Long term political Sino-U.S. rivalry will deepen its roots. The United States may actually follow India’s modus operandi and ban Tik Tok. [The Verge says]
- What that means is, Instagram and other U.S. companies might prepare a coup against Bytedance’s social video app. There’s no reason why (if it happens,) they shouldn’t plan to take over the international market. More competition for Indian apps?
- Indian startup founders are wary of raising Chinese capital, boon or bane? [The Economic Times mulls]
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