Short Mobile Video Market in India

I love short videos. I was probably one of the early adopters of musical.ly in India and I still use the app once a day. I am one of the few people born in 80s who actually love snapchat. I also use Kwai, Dubsmash, Clips, Bigo Live, Ditty, Tribe and Scorp. That’s a lot considering I only have a 16BG iPhone! Because of the love I have for these products as a consumer, I am super excited about video creation / publishing / sharing tools for India. These are super interesting times to create companies in the space.

With the mobile data rates dropping over the last 6 months after the launch of Jio and the penetration of smart phones increasing, content consumption on mobile is beginning to rapidly increase in India. Hotstar has emerged as a leading premium content video platform (100 million MAUs). Youtube is estimated to have 200 million MAUs. All video content companies I talk to has seen 2.5x growth in last 6 months.

UGC video is also beginning to get traction. Outside Youtube (India is their fastest growing market), Bigo Live (based out of Jakarta — incubated out of YY — valuation ~$400m) launched in India this year and they have more than $500k a month revenue and 1M DAU. To begin with, its effectively a “dance-bar platform” where a woman is live to perform/talk/sing/etc and a man gives her digital flowers/dolls/stars/etc. They have grown bottoms up and are getting traction virally.

Looking at the China market, Live streaming and UGC short video are two major trends. The reasons for growth in the space recently are ubiquitous cameras, smartphone penetration and low bandwidth costs.

China has seen many live streaming startups last few years. Four public companies, YY, Tian Ge Interactive, Song Cheng (the parent company of 6.cn) and Momo recorded a combined more than RMB 11 billion (> $1.5bn ) in live video streaming revenue in 2016. The vast majority of the live streaming revenues was from sales of virtual gifts received by broadcasters. So effectively there is content creation cost as well. YY paid more than 40% of the total sales to content contributors. Meerkat, Periscope, Facebook Live started in US. There are multiple large live streaming companies and there is no winner takes all. While the services do become more valuable as more users join, broadcasters are not always loyal to one app. They’ll switch if another app offers more viewers, better tools, or higher payouts. Viewers move with broadcasters if its one broadcaster I am coming for.

On short video, Kwai is the leading player in China. Its a short video app + live streaming app now valued at $3bn (investment by Tencent). It is said to be the app “what life is like outside China’s biggest cities” It has 70 million DAUs. Majority of it is virtual gifts. It was created as a community of people doing everyday things or weird things. Unlike many other video companies, they did not use celebrities / KOLs to attract traffic. If celebrities start on the platform, then common man’s expression is suppressed on the platform. They started as and remained the common man app in China. They do not curate content and rely on algoithmic curation of UGC content. The other apps in the space are Tudou (part of Alibaba) and Meipai (part of Meitu). Despite there being Youtube clones in the China market, the reason short video apps companies propped up as you tube is just a publishing tool. Its not really a community. Short video platforms enables anyone to take and share a video of themselves and to be heard/seen. Monetisation of UGC short video is a challenge. Kwai is making $100m+ in revenues on live streaming in app purchases. So in between the short videos, they also allow live streaming. And people pay in app for it as gifts. A lot of people in the tier II towns in China for whom this app is geared to have a lot of time to kill. They upload short videos of doing daily things, funny things, etc — cooking food, eating food, changing nappy of kids, going to farm, etc. Not the best example, but its almost like Big Boss that because you are seeing someone doing routine things, you start considering them a part of your everyday life, and you want to know what they ate for lunch, etc.

Two business model challenges exist with a mobile video UGC platform: a) CDN costs b) monetisation of UGC content

a) CDN costs — CDN cost in US is less than 1 cent / GB. In China is almost the same. In India, at early stages it can be as high as 10 cents / GB. In addition to it, there are transcoding costs and S3 storage costs. CDN costs are not different for live streaming and video CDN. The amount of data transferred per unit time is higher for live streaming and hence cost per unit time of content delivery is higher in live streaming. For 1 hour of content of video, say data consumption is 400 MB (for netflix, its 250 MB per hour, for hotstar, its ~1.5 GB per hour). CDN costs alone become 3 INR. Not very sustainable. For 1M DAU, with expected data consumption per user be 100 MB, daily CDN cost is $10k USD.

b) Monetisation — Because of CDN costs, the companies in the space would be money guzzling as they scale. Indians paying online seems difficult, and ad rates and fill rates are poor. Monetisation continues to be a concern in the space. I hold an uninformed bias / hope that monetisation would be solved at scale over the next decade if the content is engaging. Note that monetisation is easier for high quality videos and high context — so it works well for Hotstar, Voot, Sony LIV, etc. But for UGC content, CPM is much lower.

Despite these challenges, I am sure many billion dollar companies should be created in India in the space in the coming years. Entrepreneurs who are thinking about building the community the right way, and not getting caught up in proving vanity metrics would eventually win. I am happy that I am getting to meet exciting entrepreneurs who are building interesting companies in this space and are creating this market. Thanks to ubiquitous camera, cheap bandwidth, smartphone penetration, the next door kid with a mobile can become a VJ and have a fan following. It will be so much easier for a Raju Srivastava to be spotted. It will be so much easier to keep in touch with friends and make new friends. The platforms which democratise entertainment or improve communication will capture so much value! Exciting times!

Checkout Musical.ly, Kwai, Dubsmash, Clips, Bigo Live, Ditty, Tribe, Scorp and lets talk there :-)