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TikTok, Chinese App Ban: Where things stand – ETtech.com


Illustration: Rahul Awasthi
Illustration: Rahul Awasthi

On Monday evening, India banned 59 Chinese apps citing threats to the country’s “sovereignty and security”. This included popular apps like TikTok, WeChat, UC Browser, Club Factory, Shareit and CamScanner.

The ban was imposed under Section 69A of the IT Act and came amid rising tensions between India and China following the military standoff on the country’s northern borders, which triggered a violent face-off on June 15.

The government said the apps were engaged in activities “prejudicial to sovereignty and integrity of India, defence of India, the security of the state and public order.” It also cited complaints about data of Indian users being transferred abroad without authorisation.

The Ministry of Electronics and IT (MeitY) said that it had received complaints from various sources, including several reports about the misuse of some mobile apps for stealing and surreptitiously transmitting users’ data in an unauthorised manner to servers outside India.There was already trouble brewing for apps like TikTok prior to the ban, with the short video app bearing the brunt of anger from Indian internet users due to intensified hostilities between India and China and a sustained push or campaign to uninstall Chinese apps. The military standoff on the country’s northern borders that led to a violent face-off was likely the trigger.

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What’s at stake?

Chinese internet companies dominated the Indian smartphone app usage until the ban earlier this week, outpacing its local counterparts, especially in tier-2 and tier-3 cities. These apps had an estimated 300 million unique users in India, which essentially meant that two-thirds of about 450 million smartphone users in India use at least one Chinese app.

Short video apps like TikTok, Likee, and Bigo Live likely faced the biggest impact of this ban. India is one of the largest markets, if not the largest one, for several of these apps. TikTok has 200 million users in India and about a third of its overall Android downloads come from this country.

How did the ban unfold?

ByteDance voluntarily took down its apps TikTok and Helo from Google’s Play Store and Apple’s App Store on Tuesday, hours after the ban, following which TikTok also took its app offline in the country and said it has been invited by the concerned government stakeholders for an opportunity to respond and submit clarifications.

On Friday, ET reported that TikTok has offered to set up an engineering centre to design and develop products in India while reiterating its plan to establish a local data centre in a letter to the Indian government

The ban was a major setback to Indian TikTok creators, although it was more an emotional one rather than a financial setback. Tiktok still lags significantly in monetisation than its rivals Instagram and YouTube, although it beats them hands down in reach and user engagement.

TikTok, Chinese app ban: Where things stand
Prior to the app going offline, several TikTok creators also urged their audience to follow them on Instagram, leading to the sudden spike of tens of thousands of new followers on their Instagram accounts overnight

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While advertisers are not expected to be impacted much by this ban, they will likely seek out other alternative digital avenues like Instagram and YouTube for their campaigns.

Almost all other 59 banned apps including WeChat, UC Browser, Shareit and Club Factory were also temporarily booted out by Apple and Google on Thursday.

Government probe

A government panel will conduct a detailed inquiry into the data-sharing practices of these apps, with members including officials from the Ministry of Home Affairs, Ministry of Electronics & IT, Ministry of Information & Broadcasting, and Ministry of Law & Justice along with CERT-In Director General.

Representatives of the banned apps are now expected to be called before the committee over the next week to discuss the issue and explain their stand

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TikTok, Chinese app ban: Where things stand
Growing demand for local startups

Indian startups and tech companies are racing to fill the void created by the ban of these apps as well as cash in on the unprecedented demand generated by people looking for local replacements of such apps, especially in tier-2 and tier-3 cities.

Vokal recently launched Koo, a microblogging platform in Indian languages that allows users to express themselves on the internet while ShareChat forayed into short videos with Moj. Flipkart is also piloting an influencer-led video commerce platform with 2GudSocial while Zee5 unveiled its short video platform HiPi.

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Emerging companies like Chingari, Roposo, Mitron, Trell, and Bolo Indya also witnessed a sizable growth in its user base during this period.

Local companies also received a boost from Union Minister for Communications, Electronics & IT Ravi Shankar Prasad who said on Thursday that the ban on Chinese apps is a great opportunity to build and promote “Made in India” applications, in line with the government’s clarion call of Atmanirbhar Bharat.

Prominent Silicon Valley-based angel investor Balaji S Srinivasan and AngelList founder Naval Ravikant also announced their intentions to back Indian technology companies who stand to gain from this app ban.

Srinivasan, who was formerly a General Partner at Andreessen Horowitz, actually termed this development as “Indian Sputnik moment — a time to show the world that India can build apps on par with anyone”, while InMobi co-founder Naveen Tewari said that India has an opportunity to build the fourth tech ecosystem apart from the United States, China, and Russia.

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Chinese VCs eye exit

On the flip side, Chinese investors with small holdings in early- to mid-stage Indian tech companies have started talks with portfolio founders to explore a quick exit, since they believe their presence in the capitalisation table of Indian companies will only hurt business optics including future rounds, and not result in any significant long-term benefit during exit even years later.

Investors have also become skittish about their future investments in India, following the introduction of new FDI rules for Chinese capital. This has led to Indian startups seeking advice on whether they should even pursue Chinese investors going forward.

Read: Some Chinese VCs looking for a quick exit

(Illustrations and graphics by Rahul Awasthi)





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