ShareChat’s acquisition of Clip comes at an interesting time in the vernacular (i.e. non-English) content ecosystem. Aggressive expansion of Chinese players, such as TikTok and Helo into India, are already showing consolidation effects. All these players are going after the buzzwordy “next billion“. These are users who have just begun to use the internet, are primarily in emerging markets, and don’t necessarily understand English.
ShareChat has become the poster boy of this ecosystem.
Started in 2015 by 3 IIT Kanpur graduates, Faridh Ahsan, Bhanu Singh and Ankush Sachdeva, ShareChat evolved out of multiple experiments. Straight out of college, and after 14 failed projects, the young trio started a Whatsapp group to debate. The flashpoint was starting a debate on movie stars Shahrukh Khan and Salman Khan. While the debate was a failure, the experiment resulted in 32,000 signups, largely from tier-2 and 3 cities.
ShareChat, a product of cleverly named MohallaTech (Mohalla means neighbourhood), was thus born.
The beauty of such products is the very apparent, but hidden, problem that they solve. Communication is a core human behaviour. Expression is a fundamental human need, and it is visible when people are in familiar settings.
For people just getting onto the internet, it is already a new and intimidating place. This is especially true if their interactions are in a language foreign to them. India has a population of 1.2Bn, and only 10% of them speak English. For the rest of the 90%, English is both intimidating and complex.
Platforms in English would thus be extremely unfamiliar for the “Next Billion”
It is not only the language that is intimidating. In his excellent piece, “India2 and building for the next billion”, Sajith Pai observes that just changing the language is not enough. The user experience for users should also feel familiar. Porter Erisman, in his compelling book “The Next 6 Billion Shoppers“, talks about how chaotic and colourful Alibaba’s platform was. This was done to ensure Chinese users felt at home.
Facebook’s snazzy user experience would alienate new users, and ShareChat would capitalize. This would be the “hidden” problem that ShareChat would solve, and is now clear as a day.
ShareChat would evolve from a WhatsApp group creator to a platform of its own. Within its first 3 months in late 2015, the company would see 100,000 installs. By mid-2016, it had already reached 1.3MM installs, and 500K active users.
10x in half a year? That is the definition of viral growth.
ShareChat, like its name suggests, focused on sharing. The platform looks like a mix of Twitter, Facebook and (obviously) Whatsapp. But according to their founder, it aims to become India’s WeChat. The choice of parallel is striking and well placed, and it shows that the company wants to be India’s answer to Facebook.
Earlier this year, when Facebook was struggling with multiple core company issues, I had talked about how Facebook’s fall could help vernacular content’s rise.
Despite India being an open market, there are very Indian problems that very Indian companies need to solve. Global tech companies like Facebook which are exports from developed economies, may not understand the issues that are very India specific.
WeChat, with its one-app-rules-them-all, has been a major success in China. Such a strategy has not worked in the US, and that is primarily because China is a mobile-first economy, while the US is evolving to be there.
As India becomes mobile-first, taking inspiration from WeChat thus made more sense than Facebook.
ShareChat’s rocketship would continue to coast unabated for most of 2017 and 2018. In 2017, the company had grown 10x again, to 4 million active users. This would result in another fundraise of $18MM. The growth would continue into 2018, where the company would raise a mammoth $100MM and truly announce itself as the poster boy for the ecosystem.
At a $300MM valuation, with no “questions about monetization“, the question obviously would be monetization.
Most social networks, like Facebook or Instagram, monetize using advertisements. While importing WeChat’s philosophy, the “acquire first, monetize later” is a Silicon Valley import that ShareChat still sticks to.
But the real question is – can this user base be monetized well?
Since CK Prahlad’s seminal book “Fortune at the Bottom of the Pyramid“, gold seekers have come looking for fortunes. This has largely been an exercise in vain because it is so difficult to actually acquire this fortune.
The capital investment needed is incredible, because service delivery and acquisition of these users is expensive. Additionally, the paying capacity of these users is very limited to make this profitable. I believe the Bill and Melinda Gates Foundation is well poised to monetize this, but that is ofcourse an aside.
India is a developing market, with a per capita income of ~$2,000. The top 10%, which mostly speaks English, is not ShareChat’s market – and it is the one that can pay the most. The rest of the 90%, which largely lives on an income of $2K or below, spends a lot lesser.
To show the contrast, you could generate companies of similar scale if you acquire the top 10% (100MM) of the economy or the bottom 80% (800MM). Will advertisers pay for ads to the bottom 80%? If yes, how much?
For ShareChat to really succeed, it is clear that it needs to scale dramatically.
The scale seems to be hitting choppy waters with competition from where ShareChat should expect competition – China. With deep pockets and product market fit established in China, startups giants like ByteDance, the world’s largest unicorn, are entering India. Notice the top 5 apps – and you’ll find both TikTok and Helo – ShareChat is at #7.
Chinese social networks, having seen growth flatline, because (evidently) human beings are limited, are now looking at India. Not only are these networks fighting each other in China, but they are also now fighting each other in India. Caught in these crosshairs is ShareChat, with an erstwhile “massive” $100MM war-chest that pales in comparison to ByteDance’s $3Bn.
The addition of Chinese competition is going to result in consolidation of the space, as Indian players team up together to fight Chinese competition. Guess who wants to back ShareChat in its fight with ByteDance?
WeChat’s Tencent, of course.
Not only does ShareChat need WeChat’s inspiration, but it also needs its strategic guidance and capital to take on a well-funded competitor. Tencent would love to battle ByteDance in India, after worrying it in China. ShareChat could well be the “proxy” between Tencent and ByteDance, as each seeks to win or redeem itself.
While it looks like an uphill battle, I would truly want ShareChat to win.