Tourists are seen at the iconic India Gate Park next to digital displays of the messaging app WhatsApp, in Mumbai on August 25, 2023. (Photo by Indranil Mukherjee/AFP) (Photo by Indranil Mukherjee/AFP via Getty Images)
Indranil Mukherjee | AFP | Getty Images
This report is taken from this week’s edition of CNBC’s ‘Inside India’ newsletter which brings you timely and insightful news and market commentary on the emerging powerhouse. Subscribe here.
The big story
India’s quest for homegrown social media platforms and messaging apps has been as elusive as my friends at Arattai – the latest made-in-India ‘WhatsApp Killer’, depending on who you ask.
Some see him as a bold competitor, others call him a copycat. The truth is somewhere in between.
India Internet and Smartphone The user base is second only to China, making New Delhi’s lack of local social media and messaging apps striking compared to Beijing’s popular offering.
More than a decade ago, China banned American social media and messaging apps, and that gave rise to homegrown players like WeChat, Weibo, and Douyin. South Korea and Vietnam didn’t even have to shun foreign products to build popular messaging apps KakaoTalk and Zalo, respectively.
But for a country that has built fintech powerhouses, e-commerce unicorns and numerous consumer technology apps, India’s inability to carve out a niche in the social media and messaging space is quite puzzling.
Could Arattai – which means chat in Tamil – progress beyond the initial chatter to emerge as a viable local alternative to WhatsApp? Or will it face the fate of quick apps like microblogging site Koo, which saw a similar euphoria around it but was eventually forced to close up shop?
In March 2020, serial entrepreneurs Aprameya Radhakrishna and Mayank Bidawatka launched the microblogging platform Koo in India, which was promoted as Twitter for non-English users. Driven by national appeal, celebrities and top influencers joined the app, and within its first 18 months of operation, Koo recorded 10 million downloads.
Government ministers also flocked to the local microblogging site, as the Indian state has come into conflict with X over content moderation disputes. In 2021, Koo raised $30 million in a funding round led by Tiger Global Management, according to data from Tracxn, and the following year, the app raised It is said It spread quickly in Brazil.
But growing a new social media platform in a market dominated by deep-pocketed players requires money and patience. The startup funding winter of 2023 crippled Koo’s business, as investors pulled back from backing unprofitable companies.
“By the time Koo stabilized its products, the capital dried up,” says Anurag Ramdasan, a partner at venture capital firm 3one4 Capital, which invested in Koo.
For the next phase of growth, Koo needed a corporate partnership to scale the app’s distribution. Ramadan added that they also needed to hire experienced people to develop the business, but that was too expensive without funding support.
One of the main differences between Aratay and those before it could be financing.
On stronger ground
Arattai is backed by Zoho Corporation, an Indian multinational company that makes business software and web-based tools. According to financial database Tracxn, Zoho had revenue of about $1 billion for the year ending March 2024 and profits of more than $300 million.
In February this year, a report by Burgundy Private and Hurun India said that Zoho was valued at around $11 billion, making it among the most valuable unlisted companies in the country.
“Koo was a limited endeavor with limited venture capital funds and limited time,” says Anand Lunia, co-founder of venture capital firm India Quotient. Zoho founder Sridhar Vembu describes him as a “perpetual entrepreneur” with “no venture capital pressures.”
“I don’t think he’s trying to win this title in the next three or five years,” Lonia said.
While access to patient capital sets Aratai apart from other Indian attempts to break the dominance of US social media and messaging apps in India, the path to success has more challenges.
In contrast to China, local competitors need to lure users away from existing popular platforms to make room for themselves. To get users to switch, and to create a network effect, the likes of Arattai need to differentiate the product.
“For any platform to succeed, it needs to either do something much better than the previous competitor, offer something different, or have buoyant political support,” says Joyjit Pal, a professor of information at the University of Michigan.
Looking beyond the hype
In the social media space, the products that have been making waves in the past few years have brought something new to the table. Instagram focused on photos, Snapchat brought filters, TikTok brought short videos, and Clubhouse — which was briefly popular — brought an audio-only format.
Korean company KakaoTalk was quick to capitalize on the country’s lack of native language options in 2010 by introducing Hangul (Korean script), Pal said.
Making a messaging app popular “is very difficult without introducing a new value proposition, and as such, outside of group sizes, direct commerce, or integrating AI into the messaging process, there’s not much that messaging platforms can do,” Pal said.
Bottom line: Arattai needs a hook that can attract users.
For now, the company relies on social media influencers, ministers and celebrities to endorse the platform, as happened with Ko. The Arattai app, launched in 2021, was largely unknown until the country’s education minister, Dharmendra Pradhan, mentioned it in an X post on September 24, urging Indians to switch to native apps.
This post brought the app into the spotlight which led to an increase in downloads. “We experienced a 100x increase in Arattai traffic in 3 days (new subscriptions went vertically from 3k/day to 350k/day),” Vembo said in a post on September 29.
Arattai’s total downloads from the Google Play Store are over 10 million, still tiny compared to WhatsApp. 500 million users In India. Creating an app that has a network impact takes time, and according to Lunia, sometimes it takes more — a government policy that shakes up the system.
For example, the ban on TikTok in 2020 is said to have made Instagram the Most popular Short video content is being implemented in India, while demonetisation has provided fertile ground for fintech applications to take off.
Demonetization was a political move in November 2016 by the government that absorbed about 86% of the currency in circulation in India, forcing the adoption of fintech applications and giving rise to companies like Paytm and PhonePe.
Such policy moves are rare, and while key figures in the government, including Prime Minister Narendra Modi, have called for self-sufficiency across the board and urged the adoption of local products, banning US apps to that end is not out of the question.
Therefore, Arattai will have to rely mostly on innovation that sets it apart from the competition, something Vembu highlighted that the company is aggressively pursuing. Will you succeed? I will update when my Arattai app starts active.
Top TV picks on CNBC
India, unlike the US, is not turning inward, said Taimur Baig, chief economist and managing director at DBS Group Research. New Delhi deals with and brings in foreign investors.
Mitul Kotecha, head of macro strategy for FX and emerging markets in Asia at Barclays, said the recent measures taken by India’s central bank to internationalize the country’s currency are promising, comparing them to China’s efforts to push the yuan.
Need to know
Anthropic opens its first office in India as rival OpenAI builds its presence in the country. The company plans to open its first office in India. Market entry The use of artificial intelligence is increasing and its competitor, OpenAI, is already making progress.
US tech giants have halted Indian data center deals under the weight of trade uncertainty. Companies postpone their decisions until… Renting large data centers In India, it is concerned about the recent tension in trade relations between New Delhi and Washington.
Tata Capital’s IPO, the largest so far this year, has been fully subscribed. Its $1.75 billion IPO was particularly attractive Strong interest From qualified institutional buyers. The company’s shares will be listed on stock exchanges on Monday, October 13.
Quote of the week
India will not necessarily turn inward because the US is turning inward… There will be a very different set of rules in dealing with the US, but elsewhere staying open for business and allowing the capital market to become more dynamic is absolutely imperative.
— Taimur Baig, Chief Economist and Managing Director, DBS Group Research
In the markets
the Classy 50’s The BSE Sensex rose 0.36%, while the BSE Sensex rose 0.33% on Thursday as of 12:45 pm local time. The broader index’s annual gain was 6.4%, while the Sensex advanced just over 5%.
The yield on India’s benchmark 10-year government bond was trading 2 basis points higher at 6.526%.
Coming
October 10: Canara HSBC Life Insurance launches initial public offering
October 13: List of Tata Capital shares on stock exchanges; India CPI data for September
Every weekday, CNBC’s ‘Inside India’ news show brings you news and market commentary on powerful emerging companies and the people behind their rise. Stream the show live on YouTube and catch highlights here.
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