India’s Ban on Chinese Apps – An Opportunity for Indian Tech Startups

In June 2020, the Indian government banned 59 Chinese apps operating in the country. This was just the beginning as more apps made it to the list, which currently holds 118 names. Although the ban was a result of the geopolitical tensions between the two countries, there was always an ambiguity about the security of the data being shared on these apps. Popular startups such as TikTok and WeChat have been accused of unauthorized collection and transfer of data to servers outside India in the past.

The government order banning the apps stated, “Chinese apps are reportedly engaging in activities prejudicial to the sovereignty and integrity of India, defence of India, and the security of the state and public order.” Chinese apps have managed to captivate people and build a strong consumer base because of their diverse offerings. From entertainment to financial services, communication, and gaming, these apps are present in almost every segment imaginable. Thus, this ban could be an impetus for Indian start-ups to develop better alternatives and lure the vast number of Chinese app users to their fold.

There are several Indian apps that present an alternative to Chinese ones, but they have not achieved similar levels of popularity. For example, in the entertainment space, TikTok ruled the market, but it faced competition from Roposo, BoloIndya, and Dubsmash. The well-known file transfer application SHAREit has an Indian alternative called SHAREall. Houseparty has replaced the video chat app Hago Play. On the other hand, fast-fashion company Shein is seeing its Indian customers flock to Myntra.

The parent company of TikTok, Vigo Video, and others like Helo and ByteDance may face revenue losses of about USD1 billion due to the ban. Their ad revenue has been severely hit. The user base of these banned apps also dwindled rapidly. In June 2020, the number of TikTok users went down from 2.0 billion to 1.3 billion,  SHAREit lost almost 200 million users while Helo lost 50% of its user base.

In contrast, revenue from paid apps in India, which stood at USD195 million in 2019, is expected to reach USD305 million by 2023. This anticipated growth reflects the opportunity for Indian startups and app developers to penetrate this market. The user base of Indian apps has also increased since the ban. Share Chat has added 15 million users in just 36 hours post the ban on Chinese apps, while Roposo’s user base swelled from 55 million to 80 million in the month of July 2020.

Technologies distinguishing Chinese apps

The main attraction of Chinese apps is its superior technology. Additionally, Chinese app designers focus first on scalability and then on defensibility. The Chinese also had the ‘first mover’ advantage in some segments. For example, TikTok was the first app via which the entertainment segment. It allowed individuals to earn their two minutes of fame. The crux of the Chinese app business model is to increase the number of users. These apps are known for the best software innovations, which are user-friendly, bug-free, and energy-efficient.

Chinese apps score over Indian apps in the following aspects.

• Machine Learning (ML)

The Chinese app developers use ML to create algorithms that determine an individual’s requirements and help them reach their goals via the app. Based on the data derived from users’ input the app developer segments (classifies) customers and offers tailored content. These mostly include interests, affordability, preferences, etc. This helps the app acquire and retain users.

• Regional language and content

Chinese apps are able to provide region-specific content in local languages. Therefore, users worldwide can easily navigate these apps. Region-specific content grabs user loyalty and creates lasting brand value. In India, most of the Chinese apps were available in local languages, thus building a strong fan base.

• Cloud acceleration and data compression technology

Cloud acceleration technology allows them to rapidly deliver content to end-users. It also optimizes devise capability and Internet connectivity. Meanwhile, data compression compacts the original data by recognizing and utilizing patterns. Chinese app designers use these technologies to enhance user experience.

• Monetary incentives during app launch

At times, Chinese apps offer monetary incentives to users to bring them on board. Users could redeem benefits after installing and using the app. The catch was in getting the users to make multiple transactions to claim the entire benefit. This ensured that the user downloaded and retained the app to claim the benefits.

• Instant inclusion of a tool

Since the outbreak of COVID-19, several new Chinese apps have entered the market. They offer features such as speedy medicine delivery, doctor locator, mask checks via QR codes, checks on available public transport, job postings, lists of COVID-19-ready hospitals, etc.

The banned Chinese apps held a significant share of the Indian market because of the stated factors, which they have now lost. Enterprising Indian startups can move in now and give Indian users an even superior experience.

Government initiative to promote Indian startups

The Indian government is encouraging startups to jump into the fray; it launched the ‘Aatmanirbhar Bharat – App Innovation’ challenge. In this challenge, entrepreneurs develop new apps in eight defined categories: health and wellness, entertainment, social networking, e-learning, news and games, fintech, agritech, and apps supporting the work-from-home (WFH) culture. The best development in each category would win prize money and a launchpad for the product.

The Indian startups' scene is not always encouraging. New entrepreneurs struggle to find financial support and have to battle anti-competitive practices by large tech companies. They also face stringent regulatory and legal loops to begin operations. Thus, they lose focus on developing the best software for their app. If government policies turn more supportive and funding options become available, then the Indian startups can focus on developing and deploying innovative technologies. This would enable them to beat Chinese standards.

COVID-19 continues to threaten India and the world at large. Thus a large proportion of the populace will remain indoors. Thus, the increased consumption of screen time since the start of the pandemic continues. If Indian startups are able to launch better offerings and more interesting apps, they stand to gain an instant, loyal, vast market.