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Unicorn's four big bets

India's home-grown instant messaging platform is riding high but its real challenge - revenue stream - begins now

Sangeeta Tanwar 

India's home-grown instant messaging platform Hike appears to have hit the sweet spot by raising $175 million led by the Chinese internet giant Tencent, the company credited with pioneering messaging with WeChat. The Series D round values the four-year-old start-up at $1.4 billion, making it the country's latest technology unicorn. Having ticked all the right boxes towards its journey to becoming a unicorn, the big question now is, can Hike emerge as a formidable competitor and break the monopoly of Facebook-backed WhatsApp? Going by the enthusiasm and well chalked out business plan of the company's founder and Chief Executive Officer Kavin Bharti Mittal, the likely answer for the long term appears to be "yes". Without getting drawn into talk about WhatsApp's unassailable lead and the battle for the numero uno position, Mittal says, "WhatsApp has grown and so have we tremendously over the last few years. We are actually building a very different application than our competitors are." His bet is that there would be two messaging apps in every market - one that's simple messaging and another that's more than that. And Hike is that second app in India. Since its inception in 2012, Hike has focused on four broad templates while building the app. First, its team has been spending a lot of time building Hike to ensure it not only works with people who have smartphones but also with those without one. It resulted in the launch of Hike SMS, Hike Offline and Hike Direct - three services that let people chat with one another without the internet, and encouraging people to use Hike. Its second big bet revolves around content. Hike offer users stickers, emojis etc. With stickers, users need not type or text as they can simply communicate by picking up an appropriate sticker. Stickers are very powerful in a market like India where mobile keypads lack uniform and standard layout for Hindi. The stickers help in trumping input in local languages, and are available in 20-plus regional languages. Third, Hike is serious about protecting user privacy. It is wooing the young generation, which has been raised on an internet diet, by offering them options of hiding their updates from friends and family. The fourth pillar on which Hike stands is that the messaging platform is fashioned into a gateway that helps people change the way they interact with content and services. Users can access cricket scores and games on the app. Currently, usersbrowse 1.5 billion news stories per month on the app. With these offerings put together, Hike turns out to be more than a mere messaging platform. It targets users in the age group of 15 to 24. But has Mittal and Co. got the product positioning bang on target to attract a critical mass of users? "The app's positioning is a little fuzzy except for the fact that it's India's answer to WeChat. With emoticons and emojis, it appears to be a version of an all-encompassing vanilla chat. From a marketing perspective, Hike has not done anything unique. So there is no difference between a Hike or a WeChat," says Pratik Seal, chief marketing officer, AGS Transact Technologies. Seal points out that Hike is popular among college goers, holding an appeal to them with emojis and stickers. However, such a positioning brings challenges in terms of expanding the user base. By comparison, the working population user base is significantly larger in India and presents greater expansion possibilities. "The No. 1 and No. 2 spots in the app messaging business are held by WhatsApp and Messenger powered by the same parent company (Facebook). Since the market is expected to expand, there is definitely a place for a No. 3 player," explains Seal. Monetisation, too, remains a key challenge for messaging app platforms including Hike. However, Mittal appears unfazed. At the moment, revenues are not even on the company's radar. "We have two people transacting with each other on our platform and that engagement has to go up per person and across the larger consumer base.

We have to have the critical mass of people engaging with the platform to make us comfortable to taking some time off the product and focusing on the business model," he says. The company will start looking at earning meaningful revenues from 2020. Without providing details of the potential revenue model, Mittal says messaging on the platform will always be free. Also, the company is not sold out on an ad model because it's very intrusive. So what are the options for opening up the revenue stream? Mittal responds that in the East, business models in the messaging app space are built on users transacting on the apps. Tencent makes $5 billion in net profit in a year. Then there are models in the West, where companies earn profits by serving ads. The question is which of the two proves to be apt for a messaging app. So, what's next for Hike - a unicorn high on confidence and flush with funds? With India expected to move from text-based communication to sight- and sound-led communication, the company is planning to double up investments in areas such as machine learning and computer vision - that will help it bring the sound and sight alive for users. Secondly, it will be employing funds to hire quality talent. Mittal hopes to grow his team from 250 people to 450 over the next couple of years. The biggest challenge to any company is getting the execution right. The difference lies in, whether you can execute the grand vision better and faster than competitors? For Mittal, all of this comes down to people. Secondly, it's all about the way a company is organised. Hike has 10-12 teams that constantly work on improving the app. These are cross-functional teams which have a product engineer and designers. Such a structure ensures ideas flow from the top to bottom and vice-versa. Smaller teams mean people move faster and make decisions quickly. This keeps the culture transparent, the people accountable and drives ownership and decision-making down the line. Monetising the app is a key challenge: Vishal Tripathi In the messaging app space, WhatsApp which is a global player is miles ahead of its competitors. At the level of product offering, it has already solved the communication problems for users wanting to text, chat, share photos and videos. For any other app to break WhatsApp's first mover advantage, it has to either better the experience developed by the former or offer users a new compelling product proposition. And in doing so, Hike faces the following challenges: nA critical mass of users is using WhatsApp which has already captured a larger chunk of the market. There is no compelling need for users to access another app. Therefore, the focus has to shift from the number of downloads that Hike or any app enjoys to the communication (engagement level) happening on the platform. nHike has put the best features of all the chat apps in one product. Its functionality is very similar to the Facebook Messenger. So far, the only difference between Hike and other app platforms was that the former lacked the marketing muscle that WhatsApp enjoyed. However, with fresh funding coming in, Hike is expected to make investments in marketing and product improvisation. nMonetisation will continue to be a challenge for messaging app platforms including Hike. This is because messaging is free and the moment one makes it a paid service, the user base will take a hit. Another potential source of revenue is serving users advertisements. But again pmce you start selling ads people will become averse to the platform. Vishal Tripathi Research director, Gartner

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First Published: Mon, August 29 2016. 00:10 IST
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