India’s TikTok ban undermines ByteDance

The Indian government said this week it will ban TikTok and other well-known Chinese apps, including the WeChat messaging platform and the UC Browser mobile browser, saying they pose a “threat to sovereignty and integrity.”

The move follows a border clash between the two countries earlier this month that left at least 20 Indian soldiers dead.

TikTok has a lot to lose in the second most populous country in the world. India has been the biggest driver of new TikTok downloads, generating nearly 660 million installations since its launch in 2017, according to analyst firm Sensor Tower.

Parent company ByteDance could “miss another 100 to 150 million first-time TikTok installations in India” in the second half of this year due to the ban, said Randy Nelson, an analyst at Sensor Tower.

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The ban also presents a major complication for ByteDance and other companies that are trying to take advantage of the internet boom in India, according to Akhil Bery, an analyst at the Eurasia Group.

“With only around 50% of Indian consumers online, the Indian market represents a tremendous amount of growth potential,” Bery said in a research note on Monday. “Now that has apparently been cut, and the Indian government is unlikely to remove these restrictions.”

It is unclear when the ban will go into effect and how long it could last. Bery noted that the Indian government has not yet clarified how it intends to enforce the ban, or if it plans to request Google (GOOGL) Play and Apple (AAPL) IOS stores to remove applications. There is also no indication that the government is planning a broader effort, such as asking telecommunications operators to block app-related traffic, which would be difficult to implement, he added.

The ban means the potential loss of a lot of advertising revenue for ByteDance.

In addition to TikTok, the crackdown includes Helo, another app that the Beijing-based startup launched in India. That means ByteDance won’t get a slice of the country’s burgeoning digital advertising market, which is forecast to grow 26% to nearly Rs 280 billion ($ 3.7 billion) this year, according to advertising media company GroupM. .

“It is a slap in the face for ByteDance as they grew 50% year-on-year in India,” said Greg Paull, analyst at consultancy R3.

ByteDance had forecast more than $ 1 billion in Indian advertising revenue this year, most of it generated by TikTok, according to R3 estimates. It reached $ 280 million in the last quarter of 2019 alone.

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That’s a small portion of ByteDance’s total advertising, which R3 estimates was around 140 billion yuan ($ 19.8 billion) in 2019.

When it comes to in-app revenue (money users spend buying virtual items on TikTok), India also represents roughly $ 1.5 million to date, or less than 1% of total TikTok, according to Sensor Tower’s Nelson. But the growth has been huge: Indian users spent around $ 520,000 on TikTok this quarter, up 277% compared to the same period last year.

Spokespersons for TikTok and ByteDance did not respond to requests for comment for this story. A spokesperson said after the ban was announced that ByteDance “is committed to working with the [Indian] government to demonstrate our dedication to user safety and our commitment to the country as a whole. “

TikTok has exploded in popularity worldwide. The app downloaded 315 million times from January to March, according to Sensor Tower, an amount the analyst company said outperformed any other app in a single quarter. TikTok now has more than 2 billion downloads in total, more than double its total from a year ago.
But losing India could have side effects for the TikTok brand, which is already suffering in the face of mounting scrutiny from US lawmakers.

“In the battle for world domination, banning India will not hurt them as much in terms of income as in profile,” said Paull.

The Indian government ban listed TikTok and 58 other apps, including many prominent Chinese ones. While the Indian government statement did not mention China by name, it comes as military tensions between China and India continue to escalate after deadly clashes on the border.

Many Indians have called for a boycott of Chinese goods and services, particularly of China’s dominant technology industry. Beijing said on Tuesday it was “very concerned” about the app’s ban.


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