Indian TikTok Clones are likely to FAIL: 6 Reasons, Why?

Originally written on Medium, upon requests for ease for reading, sharing here. https://medium.com/@satyaprem007/indian-tiktok-clones-are-likely-to-fail-6-reasons-why-6c56f7474040

Govt banned 59 Chinese Apps:

• Indian Government banned 59 Apps (all from China) for National data and security reasons, which also had TikTok in it.
• Millions of Consumers started searching for Indian alternatives on Google & Playstore.
• Considering 15 Sec Short Videos was a success from engagement perspective, hence with the ban it looked like an empty space to Capture.
• Lot of Indian Entrepreneurs started building TikTok’s clones to chase the Downloads & VC money.

But is this the right move???

Let’s unpack — why it is most likely the road to Failure.

6 reasons why Entrepreneurs should not build Indian TikTok

1. Building a TikTok like product will take TIME & CAPITAL

Let’s first understand, what TikTok is — as a Product:

• It was not just vertical Short video.
• It was not just music library for lip-syncing, dancing music.
• It was not just filters, and tools for people to create funny Videos.
• It was not just millions of funny Videos put together.
• It was not just high performance Video delivery — without buffering, even in slow networks.

• It was aggregating supply side brilliantly (both the Celebs and Common man) — to express their creative side.

(Supply was the Core Moat why Bytedance bought Musically for $1 Bn)

• It was recommendation engine perfected over last many years — to match the demand. (Matching efficiency is the most important for any 2 sided product)
• It was strong Network effect between Creators & Consumers, built over the years.

Building TikTok Clone means:

• Building Team in Machine Learning, Tech, engineering of that scale to build the recommendation engine, video delivery in a low network, Content Moderation + multiple other things.
• Building triggers and motivation for creators to create original quality content and slowly the external triggers will transform into internal triggers.
• Time: It is learning consumer insight, building product — everything TikTok was — in short window of time, before Consumers write you off, and move to Instagram.

It is not that Indian entrepreneurs can’t learn/build like TikTok, but it will take TIME & Capital.

2. Cluttered & Competitive Market.

Short Funny Video Market will become cluttered with Low Quality Products & no differentiation.

In the Next 3–6 months we will have 10–100+ TikTok clones.

People with Deep Pockets are eyeing the same Apple as You.

• Instagram is launching reels in their product.
• Indian companies like ShareChat, Daily Hunt — have already launched.
• Gaana has also launched TikTok like product within their product. Short Videos could eventually become a “feature” , much like Snapchat’s Stories.
• Jio could enter the space.

No, point entering a Machine gunfight with a Knife, where your knife is also a MVP.

3. Growth will require burning money

• Last week we saw massive advertising spends by a lot of startups to get millions of downloads by burning CASH.

Throwing money at the problem is not the Solution.

• Many startups who were building Lifestyle, Knowledge Video platforms with different consumer insights have changed their positioning to TikTok’s alternative to gain Downloads.

• Burning Cash to acquire users, who eventually will uninstall, because the current products are not even 10% of TikTok. Eventually moving back to Instagram and waiting for TikTok to come back.
• In the Consumer business, especially social / content, it takes years to perfect the recipe.

Retention >>> Acquisition.

Let’s do some math:

Unless Your Network effects or Virality is strong to bring CAC lower either today or at scale, you will have to think a method to make more than 100 Rs (or 500Rs ) per user to make +Ve ROI on Acquisition alone.

4. Fundraising could become Narrow funnel, with China’s Investment in India <undefined> today.

• Basis the last circular by Govt, Indian companies will have to take approval by govt if they raise capital from an entity sharing land (means China)
• With China’s Investor sentiment in Indian ecosystem shaky at the moment.

1. Quantum of Capital flowing-in might decrease.
2. Funnel at A/B/C/D and beyond could get narrowed.

• Growth, Team, Tech — all areas in this business requires capital. A lot and a lot faster. Hence one Founder will always have to just focus on raising Capital.

5. Advertising Business Model will require — Massive Scale, High Engagement, Massive Capital & Time

• CPMs in India is low. Few Indian companies at scale sell at 100–250 Rs / 1000 Impressions.
• You might have a unique audience from India’s tier 2, tier 3 — but that is the only difference — unless there is some other recipe for Awareness and Conversion for advertisers.
• Even if you have scale, building Sales Team, Cracking Media Buying agencies and brands — will require heavyweight lighting. It could take 1–2 years between building Scale and making advertising money.
• Few Indian Companies even with 20–60 Mn+ MAU haven’t been able to crack advertising piece and sadly they use Google Ads.

Harsha from Lightspeed has done the math very well, it is worth a read:

https://twitter.com/kumarharsha2212/status/1280452217657417728

6. High Probability that — TikTok will come back

Hard to predict if it TikTok will come back or not, possible scenarios are:

• Scenario 1: TikTok does not come back
• Scenario 2 : TikTok comes back after <some undefined> time. Apps who could justify data/security issues, or when political tensions calm down.
• Scenario 3: TikTok’s financial opportunity in India was (is) massive, so they could do sale or JV to another Indian company too, and let them run the platform but only for Indian Market. < it has own pro/con of sharing secret sauce>
• Scenario 4: or any other possible methods

Building TikTok for India is based on only the 1st scenario only, which has low probability. Even if TikTok comes back after 1 year, it will have better product and larger capital to defeat any Indian Rival.

Opportunities for Indian Entrepreneurs.

Even with #1 Scenario that TikTok doesn’t come back is say 10% probability, the other 5 factors decrease the probability of success for building Indian TikTok to 0.01%.

YES! Good artists borrow, great artists steal.

But they too, do not copy without thinking — how much time/capital/risk it will require and if I reach there, how will I make money. Not everyone has resources and risk appetite like Gio (take the hint)

1. Let’s Copy Low Risk Utilities | Let’s Copy their Insight

• If we want direct success, then easier is to copy utility apps. (e.g Cam Scanner like products). It has Low risk
• Let’s copy their leanings from product, business model, GTM.

2. Enough Market GAP

This is an internal chart we created while building Nojoto to rightly find opportunities. Each Block in the chart below can be both:

• Horizontal platform based on the format (or)
• Vertical platform based on a content category and User Segment.

Moreover, each block could also have multiple opportunities both horizontal and vertical.

Simple point of any business is:

• High Frequency Product <> Low Margin/User
• Low Frequency Product <> High Margin/User

3. Business Model Innovation:

Copying Facebook, Twitter, Insta, Tiktok with an advertising business model is not the only method to build large businesses. Example, let take Subscription & Micro-payment as the business model:

Subscription / Micro-payment:

As per KMPG’s M&E Report:

• In 2019 — 21 Mn people spent 1000 Rs / month on Content totalling up to $328M.
• As per them by 2021, it is expected that 53 mn will pay for content online with $750 Mn Market Opportunity.
• Extending paying user growth by 30% Annually & keeping the ARPU / Year to be 1000 Rs — we will have 90 Mn people spending $1.3 Bn on Content itself.

On Startup front: To do $100M Revenue, you would need 3 Mn Monthly paying users with monthly subscription of 200 Rs

• With this math by 2023 a startup in India needs to capture 3 Mn out of 90 mn users, which is 3% of market size — to do $100 M in revenue.
• Which means, if a subscription + micro-transaction layer on Content is built, with CONTENT VALUE of Rs 200 for a user / month = you are Game. <Think what Value, Pricing, Why they will pay>

4. Look Out & Think

Build market networks for a particular Category.

https://techcrunch.com/2015/06/27/from-social-to-market-networks/

Don’t Replicate Someone’s Success | Build Your Own Story

I am Co-Founder & CEO at Nojoto, A Storytelling Platform. Back in 2017, when we started building Nojoto every time I use to go to my hometown, I use to hear interesting comments.

• People said “Why don’t you build Dream11 or TikTok”? A lot of buzz is there in the market about it.

Interestingly, as human beings we consider success what we read is “Trending today”. But is it?

• What we celebrate today as Netflix, was mocked at some time.
• Amazon was considered a small market, with no margin, and was thought that it won’t make money by extremely smart students at a prestigious <not name basis> business school
• Bytedance was mocked for being a news aggregator, but if they wouldn’t have created Toutiao, they wouldn’t have cracked the secret sauce behind “Tiktok”

Unless, you are a son of a famous Bollywood celeb, a Oil/Telecom Giant, or got an epiphany of an apple falling on your head and discovering gravity

Life = Hard work ^ (Luck X Opportunity)

Harsh reality about building Businesses is “Great businesses do not get built overnight”. What we see as TikTok, Netflix, Spotify — is at least 3–10 years.

Failure of your experiments — is the most important part of Your Story.

And that’s what I respond to people when they say build Tiktok:

• No, We won’t!
• Padmavat, Gadar, Lagan — all were great films, but I am not them.
• We will build our Rang De Basanti and chances are we will.
• Each product, each business has its nuances and insights — don’t build something which is Cool, pick up your insights & build Bahubali and set new records.

At Nojoto, we are building a Video Storytelling Platform

It is based on the strong internal trigger to talk and tell your Story.

Storytelling is the act of narrating a fact, opinion, or judgement through a narrative to entertain & educate the audience. https://en.wikipedia.org/wiki/Storytelling

Storytelling as an expression for was born before Writing and is similar to Podcasting for Audio or Blogging for Writing.

With the massive scale of YouTube enabling people to upload edited Videos, Storytelling (or Vodcasting) never got enabled for a Common Man using Mobile.

Hence, the idea is to Un-bundle Youtube for Storytelling & capture “Core Storytelling behavior of millions of people” and enable Storytellers to make money, which is getting launched in a week ?

It has been a humble beginning. We have learnt, unlearnt & again learnt for the last 3+ years, and as I see it is just the start.

• We are at ~2 Mn MAU / ~1 Mn Storytellers / ~7 Mn Stories.
• We focus very hard on retention / aha moment / which actions makes someone stick and hence have decently good retention for Engaged Users on both Supply & Demand Side — even after 10 months of Install.
• Our engagement each month is increasing with more Content being created & recommendation engine getting more data to optimize.

In case I can be of anyone’s help building UGC for India, feel free to reach out at [email protected], would be more than happy.

Special thanks to @Kabir Kochhar @Rishab Malik for the idea & reviewing the story.