Hike wants to be a contender in India's messaging wars

Do Indians crave a messaging app that is 'uniquely Indian?' Can an 'Indian app' equipped with emoticons and in-app purchases that leverage Bollywood or cater to its youth culture give a behemoth like WhatsApp a run for its money?

It's still too early to pass verdict on any these questions, but Kavin Mittal, the son of Sunil Bharti Mittal, founder of India's largest telecom operator Airtel, certainly thinks so. He jumpstarted Hike, an indigenous instant messaging service in April 2012 that claims to be the most popular service amongst young Indians today and just a few days ago hit a reported 15 million followers.

The real ace up the younger Mittal's sleeve is access to two of the biggest names in venture capital as well as telecom—namely Japan’s Softbank and India’s Bharti which owns India's largest telecom operator Airtel—who both decided to invest in a 50:50 joint venture dubbed Bharti Softbank that has plonked the junior, 27-year old Mittal in the driver’s seat.

A few years ago, this kind of enterprise was probably thought of as an interesting but ultimately insignificant entrepreneurial opportunity, the perfect kiddy pool for the purported heir of a telecom giant to wade in. The US$19 billion acquisition of WhatsApp has suddenly transformed that kiddy pool into shark infested waters where the right kind of sailing ship can bring home an unparalleled amount of silver which would make even daddy’s telecom empire puny by comparison.

In just a few months, the world has woken up to the realization that the messaging app is king. In the West, messaging apps are largely used for—well, messaging. In Asia, which has generally been leagues ahead of the rest of the world in online adoption, apps are the 'gatekeeper to the consumer.' China’s Wechat, known as Weixin in its home country, allows its users to do all sorts of things using its app, including invest in wealth management products and conduct banking in addition to the more mundane stuff like book taxis, play games and re-charge their phone credits.

It is also a storefront par excellence. Xiaomi, China’s sizzling smartphone company apparently sold 150,000 of its latest model in under ten minutes on WeCat. Similarly, Naver Corp’s Line has launched several successful flash sales, especially in Thailand, where over 5 million users snapped up  L’Oreal lipstick and other beauty paraphernalia.

Of course, much of this hasn't happened in India as yet and things like online banking may take years to get approval from the Reserve Bank of India. However, investors—especially that of Hike’s—probably can't help but get inspired by all the action in apps in the rest of Asia, and more importantly, the tremendous spigot of cold, hard cash that they are turning out to be.

WeChat may not yet be a goldmine but if it continues at the rate it is going, it will soon be exactly that. Apparently, parent Tencent recently revealed figures of 355 million WeChat monthly active users at the end of 2013 and income from the online app worth between $32 million to $49 million in revenue for the fourth quarter of 2013 out of the $1.9 billion made by parent Tencent in the same quarter.

This is just the beginning if you consider estimates that the chat service will rake in US$1.1 billion in revenues in 2014 and 40 percent more the following year. According to Nomura, WeChat’s average revenue per user is US$7—around 7 times Whatsapp’s US$1 per user, thus rendering its valuation at $30 billion as a standalone business. Other’s, such as investment firm Macquarie pegs WeChat at a stratospheric $50-80 billion. This makes WhatsApp the scrawny kid at the beach getting sand kicked in its face by its beefy Asian rival. So, it isn’t all that surprising that Hike’s investors decided to give it a US$14 million boost in March, a month after it touched the 15 million user high point.

So, how different is the Indian messaging app from the rest of its global peers?

Mittal says that Hike's big differentiator  is an India specific feature that allows its users to connect with those without smartphones using a free SMS function, crucial in a country where feature phones still account for more than three-quarters of the overall phone market (but rapidly declining in terms of growth rates). Other additions are a 'last seen' feature that only friends can have access to and push-to-talk voice messaging when typing gets tiresome. However, its bread and butter still remain peddling stuff like emoticons and stickers which the company says is uniquely Indian. Or is it?

A peek at giant WeChat’s offerings is not very reassuring for any Indian outfit that thinks that it is the only player able to tap into the Indian zeitgeist and come up with local offerings. These include animated stickers for festive occasions like Diwali, Halloween & Christmas, special commemorative Master Blaster stickers for cricket fans, and integrations with popular Bollywood movies and celebrities. Big brands like Café Coffee Day, PVR Cinemas and Hungama use WeChat for their official channels. The Chinese export also offers a unique voice messaging feature, free voice and video calling and location based friends discovery. WeChat's CEO says it is the second-most downloaded app in India (numbers are hard to confirm in this game since every messaging app trumpets large numbers as well as its superiority over others) 

All of the other biggies with humongous global user bases are here too and have already racked up some big numbers in India. WhatsApp has around 40 million users here to Hike’s 15 million, Viber (recently snapped up by Japan’s Rakuten for US$900) claims 17 million bodies while Line garnered an astonishing 5 million users in just 3 weeks last year and a total of 10 million in their first quarter in the country. Both WeChat and Line have spent astronomical amounts in advertising campaigns.

So, considering all of this, it comes off as a little silly to officially designate yourself as the 'Creator' of Hike as Kavin Mittal has done, something which even his big-ego heroes Elon Musk and Steve Jobs would balk at. Of course calling yourself 'Creator' may have more to do with trying to impress upon the world that you are one smart fellow and not just some rich kid with a very expensive toy (his company) to play around with.

Still, the way to show the world that you're smart—apart from building a revolutionary product that speaks for itself like the Tesla Model S or the iPhone—is by being self-effacing on the outside and 'showing, not telling,' to borrow a film school parlance, especially when your product isn't really all that fantastically different from all the others that proliferate the world.

That said, Mittal is no slouch. While the world is filled with scions who have pissed away fortunes on good times, Mittal chose to slave away at Imperial College in London towards a degree in both Engineering and Management. He then designed and developed 'Movies Now'—called 'One of the 10 Essential Movie Goer Apps' for the iPhone, which is no mean feat.

Kavin Mittal's other big bet, apart from developing Hike, is in building a gaming outfit called Tiny Mogul which has come up with two mobile offerings—'Shiva,' a Subway Surfer clone , where the constantly running character called Shiva (God of Destruction in Hindu Mythology) kills his enemies with a variety of weapons, and Song Quest, a quiz game styled on India’s most popular quiz show (Kaun Banega Crorepati) that uses songs to ask music-related questions from Hindi movies, Tamil movies and Western bands. You can challenge your friends, compete with them for a high score and even buy some of the songs or albums with your winnings.

While gaming hasn't taken off in the India of the past, the India of today offers a very different landscape with broadband and smartphone revolutions taking place in the country at the same time, making Tiny Mogul a potentially smart bet. After all, South Korean mobile messaging service KakaoTalk booked game revenues of more than $300 million in just the first half of 2013. WeChat was the main gateway through which Tencent made over US$5 billion in revenues just from mobile gaming, attracting 570 million users in just 3 months. According to estimates, mobile games could be the jet fuel for the gaming industry worlwide, driving US$60 billion in revenue (along with other online devices) out of a US$100 billion pie. 

With Indian voice revenue growth flat and data becoming the undisputable future of Indian telecom, it may well turn out that Kavin Mittal’s outfit will one day supercede perhaps even the market cap of his father’s telecom outfit. But for that to happen he will have to fend off rivals, many of them with far deeper pockets, and surround himself with people who are smarter and wiser than himself.

As Steve Jobs himself discovered in his early years at Apple before he was unceremoniously ousted by John Sculley and the Apple board, hubris can be a terrible thing. 

In his road to potential riches, Mittal may just have to drop the 'Creator' thing for starters.