Mumbai: Content startups, including social networks, news aggregators and video producers, have been getting a lot of attention from investors for some time now, but following the entry of deep-pocketed Chinese firms, early-stage investors have become cautious.
Both Indian and Chinese content startups were drawn to the Indian market because of its high growth potential. According to a report by auditing and consulting firm KPMG, the wide reach of smartphones and cheap internet plans led to an increase of 88% in online video consumption in 2018.
The initial phase of growth in the content space saw Indian language content sharing app Sharechat, vernacular news aggregator Dailyhunt and local language literature platform Pratilipi, among others, gain prominence. However, the recent entry of Chinese companies, such as SoftBank Group Corp.-backed Bytedance Ltd in 2018, which owns Sharechat-clone Helo and short-video platform TikTok, meant competition to win eyeballs has increased significantly. And, for the time being, it seems the Chinese are winning.
“Besides huge budgets, these Chinese apps know how to use technology and artificial intelligence better than anyone else in the world, including Google and Facebook," said Anand Lunia, managing partner, India Quotient, an early backer of Sharechat. “With their scale and ability to predict and provide personalized content, their sheer deep-tech expertise gives them an edge."
The opportunity for easy money is now over, he added.
On 28 January, Mint reported that Sharechat, one of the most prominent content startups in India, had seen its daily active users plateau in the last three months of 2018 at 5 million owing to competition from Chinese apps.
Bytedance is said to be spending $15-20 million a month to market Helo and TikTok in India after entering the market last year, Mint reported.
The dominance of Chinese apps can be witnessed in Google Play Store rankings, wherein TikTok occupies the top spot, Helo is at fifth and Sharechat at eighth.
“While there is no shortage of tech talent in India, Chinese as well as US content companies have significantly larger tech and data science resources, besides hefty marketing budgets. The entry of Chinese content companies in India (Bytedance’s Helo in particular) has made it difficult for Indian companies that once dominated the space," said Archana Rajaram, founding partner, Rajaram Legal, a law firm which advises on startup and tech deals.
Investors are also concerned by the revenue generating potential of such apps. “Vernacular videos have no real ad market as most of the viewers are wallet thin, and the other potential revenue models are yet to truly emerge in India," said Sajith Pai, part of the investment team at Blume Ventures.
A section of industry insiders said earlier investors had made general bets on vernacular content hoping that they will grow exponentially, and then they could make more specific bets. “Today, the ecosystem is much more complex, and it is not a spray and pray thing anymore," said Deepak Gupta, founding partner, WEH Ventures.