The TikTok Ban: Why does it matter?

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What is TikTok and why was it banned?

TikTok is the world’s most popular short video sharing platform. Despite its peculiar niche, TikTok took the world by storm through the lockdown, reaching 800 million monthly users and 1.5 billion downloads worldwide, and a valuation of 50 billion dollars.[1] India comprised around 30% (over 200 million) of those users until the Indian government banned 59 Chinese apps a few weeks ago.

Why were some Chinese apps banned in India? Rising border tensions between the two countries prompted the Modi government to ban popular Chinese apps like TikTok, CamScanner and websites like Shein, but did they pose a threat to our national security? Chapter VI, Article 77 of the Chinese State Security Laws obligate Chinese companies to assist the Chinese government in matter of national security.[2] This means they can force companies like ByteDance (the owners of TikTok) to share the personal user data of Indian citizens.

What do other countries think of TikTok? India is not the only concerned country. Donald Trump has given ByteDance till the 15th of September to either sell TikTok USA (only the US app) to an American company or risked being banned. Microsoft has planned a record deal with ByteDance, the world’s largest startup, to purchase TikTok in the USA, New Zealand, Australia and Canada for an estimated 15-40 billion dollars. ByteDance believes TikTok USA alone is worth 100 billion dollars.

Why is this ban significant for Indian companies?

The ban on TikTok offers a unique opportunity for Indian startup companies. The Prime Minister’s ‘Atmanirbhar Bharat Abhiyan’ or ‘self reliant India mission’ is encouraging Indian companies to create an indigenous (home grown) technology sector and to replace Chinese apps like TikTok with Indian apps. Mitron and Roposo, two Indian apps based on TikTok’s model, are already capturing the ready market of 200 million users created by TikTok. Mere hours after TikTok was banned, Roposo launched an ad campaign with the slogan “India ka apna video app.” The advertisements appeal to anti-China sentiments, encouraging Indians to use Indian apps. Mitron reported that its user base has grown by 11 times since TikTok’s ban. Mitron’s pledge to store data on Indian servers alone is a big selling point.

How do these apps and their users make money?

TikTok’s revenue came through advertisements and in-app purchases (buying coins on TikTok). It is estimated that TikTok earned close to 7 billion dollars in just 6 months of 2019.[3] Mitron has adopted the same model while Roposo focuses on advertising alone.

More importantly however, content creators or popular TikTok stars can use these apps to earn a living. TikTok stars are directly sponsored by brands like Nivea to advertise their products while other brands like Myntra, Zara and Snapdeal had their own TikTok accounts to launch ad campaigns. Mitron and Roposo are at the forefront of these new marketing avenues and are well poised to profit from the ban on TikTok.

What lies ahead?

India’s technology startups can avail of this huge opportunity, but still face monumental challenges. India’s smartphone users are predicted to reach 800 million by 2022 but the average revenue per user is one of the lowest in the world.[4] This means that average smartphone users in India are not likely to spend money on apps like TikTok, making it difficult for Indian companies to earn. However, the future looks promising for Indian apps which can compete on an international scale using the Indian market.


Written by: Krish Munim (20 years old, undergraduate at King’s College London, reading history)

References:

[1] https://www.businessofapps.com/data/tik-tok-statistics/, accessed 30 July, 2020

https://www.reuters.com/article/us-bytedance-tiktok-exclusive, accessed 30 July, 2020

[2] Forbes India, July 31, 2020

[3] https://www.businessinsider.in/tech/news/tiktoks-parent-company-reportedly-saw-5-6-billion-in-revenue-during-the-first-three-months-of-2020/articleshow/76434254.cms accessed 30 July, 2020

[4] https://www.business-standard.com/article/news-cm/number-of-smartphone-users-in-india-likely-to-double-to-859-million-by-2022-119051000458_1.html, accessed 30 July, 2020

Forbes India, July 31, 2020

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