ByteDance eats into ShareChat’s market as daily active users dip

Bengaluru: About six months after its valuation jumped six-fold, user growth at regional language social media start-up ShareChat seems to have slowed.

According to numbers tracked by mobile analytics firm App Annie, the ShareChat app has seen its daily active users (DAU) plateau over the last three months of 2018 at 5 million as of December-end. The reason: Deep-pocketed Bytedance entering the space with a ShareChat-clone Helo in mid-2018.

The early success of ShareChat, which became the biggest new content start-up within a short span, had convinced investors that it was possible to create a local social network. While the investor sentiment in regional content start-ups is still bullish, there is a growing concern about Chinese apps giving regional peers a run for their money.

“The premise has been that these (regional social media) companies will acquire users and grow, after which they will figure out a way to monetize,” said an investor, requesting anonymity. “But ever since Bytedance launched its apps in India, companies such as ShareChat have witnessed a slowdown in growth, which is a concern.”

ShareChat currently claims to have more than 40 million monthly active users (MAU), while Helo claims to have 25 million MAUs as of December with the expectation of a 300% increase in 2019.

ShareChat’s success was a validation of the content consumption need of the internet users beyond metro users. This wasn’t the case before, due to the dominance of Facebook, Instagram, WhatsApp and YouTube.

The current trend of ShareChat’s sluggish growth could be worrisome as it questions the thesis of venture capitalists (VC) who have invested in regional content companies in the hope that the high rate of user acquisition will lead to eventual monetization.

Prior to the launch of Helo, ShareChat was growing at about 20% month-on-month, which has plummeted to 6% after Bytedance’s Helo and TikTok launched around June and September, respectively, according to a person directly aware of ShareChat’s growth rate.

Helo has been growing consistently from about 2 million DAU in October to approximately 4 million DAU as of December-end, according to App Annie data. The growth in user-base for Helo can be attributed to its robust algorithm and unlimited supply of marketing dollars from its parent company, Bytedance, which is also the world’s most valuable start-up.

In November, ShareChat took Bytedance to court for copying its design and indulging in unfair practices such as placing bids on ‘ShareChat’ as a keyword on Google’s AdWords platform for better discovery of Helo. The court ordered Bytedance to desist from using ‘ShareChat’ as an ad-word.

Helo with its deep-pockets is now turning to college campuses, among other places to market their product, understand users better, localize content and on-board talent to create content, according to one person familiar with the company’s customer-acquisition strategy.

In addition, Bytedance-owned short video sharing app TikTok has surged to the top of the charts in the social category in the app store. Its daily active user increased from 12.5 million in October to about 20 million as of December-end, according to App Annie data. The launch of TikTok has made things difficult for homegrown video-sharing app Clip backed by Matrix Partners and Shunwei Capital.

Bytedance spends about $15-20 million per month on marketing of both its products Helo and TikTok, according to industry estimates.

During 2018, regional content start-ups attracted the most amount of investor interest with ShareChat leading the charge.

Launched by three IIT-Kanpur alumni Ankush Sachdeva, Farid Ahsan and Bhanu Singh in October 2015, ShareChat had slowly become the investors’ darling in the regional content space. The company attracted several investors including the likes of Shunwei Capital, smartphone maker Xiaomi, SAIF Partners, Lightspeed Venture Partners, among others.

From being valued at $67 million in December 2017, the company’s valuation shot up to $460 million in less than a year when it raised money in the following year during September.

Despite the sluggish growth and cut-throat competition being given by its Chinese peers, ShareChat’s investors seem unperturbed as they believe unlike e-commerce, content is not a discounting game.

“When Amazon came to India, it gave Flipkart a tough competition by spending heavily on discounts, but this did not kill Flipkart. In fact, the war between Amazon and Flipkart, killed the other players in the sector,” said one of the company’s investors, requesting anonymity. “Something similar is expected in the battle between ShareChat and Bytedance. ShareChat will have a better product which will help it survive in the long-run.”