In this sizzling market for messaging apps, Hike, a home-grown Indian one, just orchestrated a major coup a few days ago by raising an impressive $65 million from New York-based Tiger Global. This well help it compete with rivals WhatsApp and Facebook, and other imports such as China's WeChat, Japan's Line, and Viber, which was recently snapped up by Japanese behemoth Rakuten, that have gained traction in the country.
Hike is owned by the same parent that Bharti Airtel, India's largest telecom player is — namely, Bharti Enterprises — as well as Japanese technology major SoftBank, in a 50:50 JV, which together earlier pumped $21 million into the messaging app. Having Bharti as one of its parents may come as no surprise, considering the meltdown in the world of SMSes and the subsequent enormous loss of revenue thanks to the largely free messaging app, something I wrote about here. "So if there’s anybody doing the disrupting, it might as well be us" is probably the thinking in the Bharti offices.
Since I last wrote about Hike, when I focused on what Hike's competitors are up to in India, and how the Indian app is attempting to differentiate itself and battle them, Hike says it has made significant traction, ramping up its user base to 35 million — impressive, considering WhatsApp is at around 60 million. Of course, keep in mind that this kind of numbers game is always a contestable one. For instance, a recent study of worldwide WhatsApp usage in India states that 41 percent of the 243 million web users in the country use the service that was recently acquired by Facebook for $19 billion.
Hike's most significant traction has come in the last two months, during which it has apparently registered 15 million downloads. The service generates 10 billion messages per month, with 90 percent of its users Indian and 80 percent of that figure under the age of 25. The reason for its success? A widely publicized "Hidden Mode" that allows these young users to conduct their activities without revealing them to prying eyes that belong to nosy parents. "Last Seen" and "Status" updates can be tweaked to remain visible only to a select user group. According to the company, 40 percent of users are hiding more than one conversation.
If this feature is indeed responsible for Hike's bump in numbers, then the company has cleverly leveraged the conservative nature of Indian parents, the country's globalized youth, and the cultural gulf between them. Mid-2014, the company launched the service with a marketing campaign that went like this: "What's that? A dirty joke?" read one promotion on Hike's website. "A secret sweetheart? Ooh, late night plans! Hey, we're not judging. But your mom and dad might."
There are other features made for the Indian market that the company feels distance Hike from the rest of the pack. Phones can communicate with each other also using free SMS, which could be a savvy strategy, considering that 70 percent of phones in India are "dumb" feature phones (although that ratio is declining fast in favour of smartphones, and will continue to do so as more inexpensive smartphones, such as Intex's $33 Cloud-FX with a Firefox browser-enabled operating system, flood the market). It also picks up the tab for messages that non-Hike users send to Hike users by paying telcos for bulk messages.
Other strategies to cater to the unique Indian market include keeping the size of the app low to cater to low-end devices, and accommodating the needs of prepaid customers who use 2G networks and are concerned about data usage.
Hike and its boss Kavin Mittal don't seem to be too worried about having a revenue model in place as yet. "We'll talk more about monetization around the 100 million user mark," he said. This could be a smart ploy: Leverage deep pockets to build the customer experience first before chasing dollars. With SoftBank as one of its parents, Hike is no doubt watching all of the many ways in which Asian apps are making money — through games, stickers, flash sales of electronics and other goods, ability to book taxis, and banking and wealth management services (although I'm sure the Reserve Bank of India will have an opinion or two about that). Mittal and BSB have consequently built a gaming studio called Tiny Moguls, where customized games for the Indian market have already been introduced.
If Hike plays its cards well and becomes the de facto choice for Indians, it could be a substantial strategic play. After all, there are 1 billion of us here who are very quickly going to be accessing the net from our phones, most of whom will never use a computer, or need to. To see what this potential could look like, you need only glance at our neighbour's home-grown app, WeChat, whose 2014 revenue is estimated to be $1.1 billion, with a 40 percent increase in the following year. According to Nomura, WeChat's average revenue per user is $7 — seven times WhatsApp's $1 per user, thus rendering its valuation at $30 billion as a stand-alone business. Others, such as investment firm Macquarie, pegs WeChat at a stratospheric $50 billion to $80 billion.
Not terribly shabby numbers to benchmark oneself on for a country that is going to witness the same boom that China has experienced already.