India – Radio Free Mobile

BharOS – The Bollysystem 3.0

RICHARD WINDSOR — Tue, 14 Feb 2023 07:30:14 +0000

A schizophrenic OS that no one will want to use

The new Indian OS for smartphones doesn’t really know what it wants to be, but I think it will appeal to government entities and enterprises with very little interest coming from consumers who have long since sold their digital souls to Google.
BharOS is a new OS based on Android that has been developed by a government-backed start-up (JandK Operations) that is being touted as India’s answer to Android when in reality it is nothing of the kind.
Furthermore, the way that this OS will be managed indicates that its creators have not really decided whether this is a super secure OS or if it is an attempt to go after the consumer digital ecosystem in India.
For example, the best way to make Android secure is to lock it down completely with no installations or updates beyond those made at the factory being permitted.
However, BharOS will focus on rapid OTA updates and will ship with nothing set by default with users being allowed to decide what to use for each of the Digital Life services where they live their digital lives.
These apps will be provided by organisation-specific Private App Store Services (PASS) which have been curated and vetted to ensure that they are both secure and private.
PASS appears to be an enterprise or government service where the entity issues devices to its employees who then install the apps that they need for the work that they do.
It does not sound like anything that will remotely appeal to users in India, although a recent ruling will mean that Google will allow forked versions of Android to be built in India (see here).
Hence in theory it is possible that we will see the Google Play Store appear on BharOS, but in practice, I suspect it is unlikely.
In order for the Google Play Store to run properly, it needs all sorts of extensions not present in the base Android OS that form part of Google Mobile Services.
Furthermore, app developers expect these extensions to be present on Android devices meaning that apps not specifically designed for BharOS that are installed may not work properly.
The demands of users are also not going to help the case for BharOS as Google has India in an iron grip when it comes to the digital ecosystem.
Six or seven years ago, Indian users were demanding Android devices but with the increase in penetration and use of Google services on Android, this has changed.
Now users demand Google services and if a device does not have them, it is very unlikely that users will buy it.
This is very similar to what happened to Huawei when it was no longer able to install the Google Ecosystem on its devices.
Despite fantastic hardware at a good price, its share still fell off a cliff.
Hence, I think that the only real chance that BharOS has is to become a secure and completely controllable OS that is used by government or companies to ensure the security and integrity of their services and data networks.
Entities will also be able to ensure what is and what is not installed on their devices which will further increase BharOS’s appeal in the government and enterprise segment.
However, this means that volumes will be low as I suspect that this will go nowhere with the consumer.
This is because it is already much too late as Google has already conquered this market and users will not move unless they can take Google with them.
Shots at the Indian consumer digital ecosystem have already been taken a couple of times (see here) and realistically only Jio Platforms has any chance of success with the consumer.
This strategy involves using Meta Platforms’ and Google’s capital to increase penetration using Google and Facebook services but to then offer other services that they do not offer alongside them to entice usage, differentiation and revenues for Jio Platforms.
Hence, I think BharOS will disappear into the world of enterprise software and I don’t expect to hear very much about it from here on.
I do not see any threat on the horizon to Google’s dominance in India and should its share price continue to be hit with ChatGPT speculation, I would look to pick some up.

India Tech – Unicorns and canaries

RICHARD WINDSOR — Wed, 01 Jun 2022 06:14:36 +0000

Indian unicorns sing like canaries.

India is a few months ahead of the USA when it comes to dealing with the fall-out of easy money as its once highly sought after “unicorns” are scrambling to conserve cash sending a clear sign of what is to come next in the ongoing SPAC crash.
44 companies in India managed to achieve a valuation of more than $1bn last year as excess liquidity chased limited equity but now the market has turned a full 180 degrees.
Swiggy, a food delivery company, which raised money last year at $10.7bn is shutting some of its divisions and laying off staff stating a need to get to profitability (read positive cash flow).
Both Cars24 which raised at $3.3bn and Meesho which raised at $4.9bn are also cutting staff in an effort to stem the red ink.
Unacademy and Vedantu both in online education are also cutting hard with Vedantu admitting that cash will be hard to come by going forward.
The list goes on and on but it is always a story where companies have raised at ridiculous valuations, gone on an expansion spree to then be hobbled by liquidity drying up and the need to raise more money.
This is not a new story and I have seen this happen a number of times over the last 26 years.
Inflation and rising interest rates have undoubtedly hurt demand as Indians focus their spending on the essentials.
Furthermore, the investment mood has soured with prospective investors now demanding to see profit multiples when they invest as opposed to the revenue multiples that were commonplace last year.
This is the problem with raising money at a nonsensical valuation because if things go wrong, one may have great difficulty in raising any more.
This is why the golden rule of raising money based on a narrative and hot air is to raise enough in one go to see one through to cash flow break-even so that one does not have to come back for more.
Unfortunately, most of the SPAC crowd have not done this, meaning that most of them are now in dire trouble and are likely to follow the Indian companies down the same route.
Even the companies that have something like Lucid Motors are in trouble as this company needs to raise another $6bn or so before it will make a single $1 in cash flow.
Fortunately, despite falling hard, Lucid is still above its IPO price and so it will have far less difficulty in raising money than many of its peers.
Rivian, Faraday Future, Nikola, Embark, Wejo, Otonomo and so on are all trading more than 50% below the price at which they issued, meaning that raising equity will be difficult and very dilutive for existing shareholders.
This is why I expect that the agonies of the SPAC crowd are only just beginning and that as they begin to run out of money we will see them start to cut back staff just as the Indians have done.
This is unlikely to be enough and I suspect that it will then be followed by a round of brutal consolidation ending finally with a number of these companies being acquired by larger vehicle makers in search of good EV technology.
In this scenario, the acquirers are likely to pay a tiny fraction of the original IPO price to acquire these assets and so I am not thinking of hunting through the SPAC wreckage for acquisition targets.
Instead, I am interested in companies that have financed themselves to cash flow break-even and can therefore survive, regardless of where the market pushes their shares.
Ouster, which makes solid-state lidar and has real revenues is one of these which is why it is the only EV / autonomous-related company that I hold in my portfolio.
For the rest, the worst is far from over.

Sea – All at sea

RICHARD WINDSOR — Tue, 15 Feb 2022 06:49:53 +0000

Sea is in for further rough weather.

Sea has taken a big hit as India has banned its most popular game, Free Fire, creating the concern that the growth of the company could evaporate meaning that its valuation should be far lower.
Sea is Southeast Asia’s biggest digital ecosystem covering both the Gaming and the Shopping segment and derives the majority of its revenues from Southeast Asia of which India is a part.
As a result of its founder being born in China (now a Singapore citizen) and Tencent holding an 18.7% stake in the company, it is being treated by the Indian authorities as Chinese.
The company itself is incorporated in Singapore and is listed on the NYSE meaning that its connections with China are pretty tenuous despite many of its executives being of Chinese origin.
This is not a big surprise as 76% of Singapore’s population are ethnically Chinese and so, all things being equal, one would expect a similar percentage of its executives to be of Chinese origin.
However, the Indian government can do what it wants, and it seems to have decided that Sea should be considered Chinese resulting in a ban of its popular game.
This will certainly hurt revenue growth but not nearly to the extent that the share price reaction is pricing in and so I suspect that there is a lot more going on here than just India and China issues.
At its peak, the company had a market capitalisation of $200bn with forecasted revenues for 2021 of $10bn meaning that it was trading on around 20x 2021 revenues.
This has since come back to a “more reasonable” 9x revenues, but this still looks high to me.
This is especially the case when Tencent is trading on closer to 7x revenues and Alibaba is on 3x revenues.
Both of these companies are very profitable which, at the end of the day, is really the only driver of the fundamental value of equity.
Sea, by contrast, seems to lose more money the bigger it gets which raises real questions around just how big it would be if it stopped spending all of its profits and more on sales and marketing.
A company with 700m+ users is already a giant digital ecosystem and should be making money hand over fist.
Sea is in a position to do this as its gross margins in Q3 2021 were 37% but it will have to stop investing for growth or, as the cynics put it: buying revenue.
India is a source of long-term growth and the risk that its businesses there get closed down will have an impact on the levels of growth that the company is able to record.
This uncertainty combined with the return of the buy value and sell growth investment trend is going to keep Sea on the ropes for a while.
This company could get very interesting as I suspect that it will manage to distance itself from China and it has a very strong position in Southeast Asia.
However, I think it has further to fall as its fundamentals compared to others are still far from compelling.
I would prefer Alibaba over Sea and am also beginning to have a think about Pinterest again which has fallen substantially despite its improving fundamentals.
This is one to keep an eye on.

Crypto – Another outlaw

RICHARD WINDSOR — Wed, 24 Nov 2021 06:30:07 +0000

India forgoes a great opportunity.

The Indian state’s desire to control its currency is so great that it is willing to forgo the huge opportunity granted to it when China outlawed cryptocurrency.
India is reintroducing the Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 which creates a framework by which to create a Central Bank Digital Currency (CBDC) and bans all private cryptocurrencies in India.
This issue did raise its head earlier this year, but it was uncertain whether or not it would see the light of day.
That uncertainty has now passed, and the Indian state hopes to pass this into law during its next session which runs from November 29^th to December 23^rd.
This time the excuse is that cryptocurrency is a danger to the country’s youth but India’s real reasons for banning cryptocurrency are exactly the same as China’s.
- First, control: Cryptocurrencies run on the blockchain which is a decentralised ledger-keeping system that no one controls.
- Hence, if Bitcoin and other cryptocurrencies become a widely accepted medium of monetary exchange, then governments and central banks will have lost control of the money used within their domains.
- The ability to print money and control interest rates is fundamental to the state’s ability to finance deficit spending through money printing and quantitative easing.
- If it cannot print money, then its ability to borrow money is greatly curtailed as its lender of last resort, the central bank, can’t create the money to lend to the government.
- This is especially the case when the interest rates are so low (like they are now) that no rational investor wants to lend the government money.
- Hence, any cryptocurrency is deeply threatening to centralised control which is why this was always going to happen, it was just a question of when.
- El Salvador is only backing cryptocurrencies because it (and many other economies in Latin America) have long been effectively based on the dollar having completely debased their own currencies through excessive spending and money printing.
- All government and central banks, not just emerging markets, fear cryptocurrencies for this reason and while emerging markets will neuter them by outlawing them, developed market countries will do it through excessive regulation.
- Second, digital Rupee: A CBDC offers the Indian government more control over financial transactions and its participants than it has ever had or could have ever dreamed of in the past.
- The digital Rupee will be completely under the control of the central bank and will provide the central government with complete transparency on all transactions that use it.
- It will be able to tell where each Rupee has gone and where it came from making money laundering and other criminal enterprises very difficult.
- The digital Rupee will also provide the government with the ability to cancel Rupees held by any person or entity that it does not approve of.
- This is the equivalent of having US$10,000 in banknotes in one’s safe where the Federal Reserve knows the serial numbers and can set fire to them remotely should it so desire.
- This means that if the Indian government decides that a certain person or entity owes it tax revenue, then it can confiscate the digital rupees or simply cancel them and worry about the legality later.
- This is why I think that no one both inside and outside of India will use it unless they are forced to do so.
- There will be some who are compelled to use it but beyond that, no rational person or company is going to want to use this currency.
I think that India is passing up a huge opportunity here.
Instead of banning cryptocurrencies, it should be embracing them and welcoming all of the entrepreneurs and innovators who just got booted out of China onto its shores.
Failure to do this means that these entrepreneurs and innovations will go elsewhere meaning that India, like China, becomes an also-ran in financial innovation.
This, along with automotive, is the next big sector to be disrupted by digitisation, and outlawing it will mean slower economic development and ultimately lower tax revenues for the Indian state.
Like China, this is a self-defeating exercise in the long term.

Jio Platforms – The Bollysystem 2.0 pt. II

RICHARD WINDSOR — Fri, 23 Jul 2021 08:17:59 +0000

Jio and Google fragment the Android platform.

Jio Platforms is redoubling its efforts to capture the Indian market for new digital services while ceding the traditional ecosystem to Google and Facebook.
The real loser here is Kai OS which was the software and ecosystem that was on the original Jio Phone but it has now been replaced with an optimised version of Android 10.
The new device is called the Jio Phone Next which is believed to be targeted to have a price point of less than $50.
The only way that it is possible to make this price point and still offer a decent user experience is to “optimise” Android which in reality means to fragment the platform.
Essentially what Google has done with Jio is create a slimmed-down version of Android that will run very well on lower-cost hardware in a clear contravention of everything it forces the Android handset makers to sign up to when they license Android from Google.
Support for high-end hardware, features, and so on will reduce the memory, storage, and processing power required to run the device with an acceptable level of performance which is how one can achieve the price point.
I suspect that the switch from KaiOS (which was non-android) with a KaiOS app store to Android is all about Google maintaining the means of app distribution.
This makes Jio phones proper Google Ecosystem devices as opposed to KaiOS ecosystem devices that can also run Google apps.
Being Android-based means that the much wider range of apps on Google Play will also run on the devices although a large number of them will have very poor or no performance given the constrained hardware that they are running on.
This is the foundation upon which Jio intends to build with its content, commerce, and messaging services which I suspect will soon become much more.
When one looks at what Jio offers and what I suspect it is planning to offer, none of it competes directly with either Facebook or Google.
This makes sense as both Google and Facebook have invested substantial amounts of money in Jio Platforms which they would have been less likely to do if Jio Platforms was going to compete directly with them.
The closest competition is YouTube and Jio Cinema / TV+ and while these are both aimed at Media Consumption, the nature and monetisation of the content in both instances are very different.
In fact, I do not expect Jio Platforms to compete very much on the Digital Life Pie at all and instead, I think it will concentrate on other services where Google and Facebook do not really operate.
This will include things like content sales, e-commerce, financial services, e-health, education, and so on.
These are services where the usage of the device for Digital Life services opens the door to offering other uses of the smartphone to the user.
Using Android rather than KaiOS will make it easier for Android developers to ensure that their services are also available on Jio Platform’s devices.
This will eliminate any disadvantage real or otherwise that Jio Phone owners might have felt that they had in using a KaiOS device upon which not all Android apps were available.
Creating low-end Android devices has been tried many times before and it has never worked, but this time Google is much more deeply involved and it is only on one device initially.
Hence, the aim now will be to entice feature phone users (such as KaiOS) to become smartphone users which will enable a better user experience and also open up the possibility of Jio Platforms expanding outside of India.
Jio Platforms currently has 426m users which is more than enough to create a thriving ecosystem supported by Facebook and Google but large numbers of these are inactive and the ARPU is very low at $1.85 a month.
This looks encouraging on the surface but the real issue is going to be the price of the device as Android devices with this kind of price point have historically offered awful performance.
This is where fragmenting the Android platform may help as the software can be optimised for this price point but if it breaks too much compatibility, the ecosystem will suffer.
This is the balance that Jio Platforms needs to strike but seeing as it now has Google in its corner helping it to fragment the Android platform, perhaps this time cheap Android might work.
Given the $58bn valuation ($145 per subscriber) at which Google and Facebook invested in Jio Platforms, it needs to be a smashing success.
If things stay the way they are, Google, Facebook et al will be waiting for 350 years to break even.

China vs. India – Warning shot pt. II

RICHARD WINDSOR — Wed, 25 Nov 2020 07:19:05 +0000

The smartphone market is the elephant in the room.

India has continued to express its unhappiness with China in a dispute which could end up hurting Chinese companies a lot more if India continues to follow the US down this path.
India has banned another 43 apps for what it calls “engaging in activities which are prejudicial to sovereignty and integrity of India” and these will now be blocked with immediate effect.
How AliExpress, which provides a route for Chinese merchants to sell products to customers outside of China is prejudicial to the sovereignty and integrity of India was not explained, but the message is very clear.
India is concerned that allowing China to take over large parts of its digital economy will increase China’s influence over domestic Indian affairs and the lives of its citizens.
This has been heightened by a border skirmish where 21 Indian soldiers were killed and have given the Indian government the political capital to take a much more protectionist stance when it comes to its economy.
With almost all of the Chinese digital ecosystem now blocked in India, the local players are jumping at the chance that they have been given to fill the void.
Local players like Roposo, Chingari and Mitron are racing to fill the vacuum and the more apps that India bans, the easier it becomes for them.
The problem here, of course, is that with less competition, the overall quality and therefore utility will be lower and it is likely that the long-term value creation could be lower as a result.
To be completely fair to the Chinese, they are really good at creating compelling digital life services which users love and the local players have so far badly failed to match that quality.
Now that these have been removed, the bar for success will be lower, leading to a degradation of the overall user experience.
With increasing hostility to China, the big question now becomes what is going to happen with smartphones?
Chinese companies dominate the market for cheap smartphones and India is no different.
In Q3 2020 Counterpoint Research (see here) estimates that after Samsung on 24% market share at least 2/3rds of the market is held by Chinese vendors.
Should the relationship continue to deteriorate, it is quite possible that action against Chinese brands in the local market may be taken.
There have already been some signs of this sentiment from consumers, but this appears to have been rapidly quashed through the use of aggressive pricing to overcome patriotic instincts.
Consequently, I think that it will take action by the Indian government to alter the face of the smartphone market as it is so price-sensitive and the Chinese are very keen to hold onto it.
This could be done on the basis of data security raising concerns regarding the private data of Indian citizens ending up in the hands of the Chinese state but it would still represent a big move and escalation.
There is no shortage of players waiting in the wings to take up the slack but once again it does come down to quality because the Chinese are very good at making cheap smartphones at a good standard of quality.
This is a significant area of risk for the Chinese vendors as the emergence of the Indian smartphones market has led to India making up a significant portion of their overseas revenues.
This is especially the case for Xiaomi, which has been investing heavily in India for years and until recently held the No. 1 market share position.
Hence, there is risk for the Chinese players should India get more aggressive but there are no clear signs of this yet.
Xiaomi is the key stock to assess here and its share price performance and 2020, 2021 PER ratio of 44x and 32x are not pricing in this risk.
Hence, I would be cautious of getting involved here.

Huawei – Nowhere to run pt. XXI

RICHARD WINDSOR — Fri, 28 Aug 2020 06:18:27 +0000

India is a blow upon a bruise.

India’s move to stop Indian operators from using Chinese telecom equipment vendors looks bad for Huawei but it is quite possible that the latest move by the US (see here) has already put the company into its death throes.
India is a big loss for Huawei.
Firstly, because it is the world’s no. 2 telecoms market and secondly because Huawei has enjoyed a strong position at 3 of the 4 Indian operators in 4G.
However, moving away from Huawei and ZTE in the home market will be far more problematic for India than it is for Western Europe.
This is because it is a very price-sensitive market where tiny changes to the price of a good or service can have a substantial effect on demand.
Hence, Indians will likely be required to pay more for 5G than was initially hoped and I suspect that this will cause a delay to the roll-out of 5G in India.
However, India has far greater problems at the moment as the pandemic is raging out of control with India now reporting more than 70,000 new cases a day.
Consequently, if 5G is delayed for a year or more, this will not be considered a big problem at the moment.
This will be exacerbated by the indebtedness of many of India’s operators who will need time to sort out their balance sheets before being in a position to but a licence and roll out infrastructure.
I do not see any reason why this delay should incrementally hurt the Indian economy as there is still no real use case for 5G that can not be economically and commercially supported by using 4G (see here).
This latest restriction to be placed on Huawei looks bad but it is nothing compared to the latest iteration announced by the US Commerce Department.
The new US regulation states that any company that uses US equipment or software to manufacture its silicon chips must have a license to sell to Huawei.
The world of silicon chip manufacturing is a series of mini-monopolies where the supply of equipment for each stage of manufacturing is often controlled by one company.
These companies are predominantly from Japan, The USA and The Netherlands but because it’s a linear process, no one can make a silicon chip without using a piece of equipment or software from a USA company.
This means that everybody needs a licence from the US to sell silicon chips to Huawei putting every single product it sells both inside and outside of China at risk.
Hence, if no licenses are issued, it is not inconceivable that Huawei goes out of business entirely.
The big question that remains unanswered is how willing will the US Department of Commerce be when it comes to the issuing of licenses to sell to Huawei?
It has previously stated that applicants should assume that the answer will be no, but that has not really played out in practice and many USA companies have been able to supply Huawei with products.
In light of this restriction, the move by the Indians may be moot as there soon might be no product to sell.
The consensus seems to be that Huawei has enough stock of silicon to last it until early 2021 setting up a difficult 2020 in terms of revenues and a catastrophe in 2021.
The outlook is for Huawei to lose a lot of market share where I think Nokia stands to be the biggest beneficiary.
This is because Nokia’s own internal issues have prevented it from enjoying a recovery (like Ericsson) meaning that there is a lot of upside if the new management executes on its promises.
I like Nokia and am inclined to take a position in it.

Jio Platforms – The vacuum.

RICHARD WINDSOR — Tue, 28 Jul 2020 06:14:17 +0000

Jio has a window to fill the void left by China.

The banning of Chinese apps in India has created a convenient vacuum for which there is a great opportunity for Jio Platforms to fill.
The Indian government is serious about blocking Chinese apps and has moved to block another 47 apps that were little more than mirrors that were attempting to get around the blockade.
This means that my original view that the blockade was created as a bargaining chip (see here) was too dovish and that in fact, India means business.
This move to block any workarounds is a sure sign of that and this creates a great opportunity for the local players to finally get in on their home market.
Back in 2014, companies like Micromax (see here) tried to create their own suite of Digital Life services in order to capture the sudden wave of first time Internet users on cheap Android phones.
Unfortunately, they did not execute well at all, leaving the door open for Google and Facebook to spread their own ecosystems widely through the Indian market.
Today, this battle is largely over with Google and Facebook controlling most of the Digital Life services that users enjoy on their devices.
However, behind this, there is another opportunity which the Chinese refer to as O2O or offline to online services.
These are offline services that move online and include things like commerce, health, agriculture, education, transport and so on.
The example of Tencent and Alibaba demonstrates that emerging markets are far more fertile ground for these sorts of services than developed markets.
This is due to the quality of the offline experience in emerging markets which is way below that which is on offer in the developed world.
This means that a mediocre digital experience in emerging markets offers a vast improvement over offline (and will be very popular) which is not the case in developing markets.
This is why QR codes have worked for payment in China but have been a total failure in the West.
This is what the Chinese were aiming at because their own experience shows that O2O can be a larger revenue opportunity than the Digital Life services that drive usage on smart devices.
This opportunity is currently closed off to the Chinese and I think it is exactly what I think Jio Platforms is aiming at.
Google and Facebook are major shareholders indicating that a replication of Digital Life services in India is not the plan.
Having Facebook and Google onboard will help Jio Platforms as the services will be optimised for the devices that Jio offers with its services making a better ecosystem experience all around.
Services like WhatsApp and Google Pay will also be used to facilitate the transactional elements of the services that it offers.
The trick now is to come up with the O2O services that Indians will adopt in droves and this is where the risk lies.
I suspect that Jio Platforms will be taking most of its cues from China where this has succeeded
Now that China is effectively blocked from the Indian market, there is a window of opportunity for Jio Platforms to ensure that a regulatory barrier becomes a market barrier.
Jio is in pole position to dominate the O2O market in India, which is what the investors have paid for, but now it is all down to execution which is always the most difficult bit to get right.
This is one to keep an eye on especially if there is a separate listing outside of the large Reliance Industries group.

TikTok – Ticking clock.

RICHARD WINDSOR — Mon, 20 Jul 2020 06:48:25 +0000

Any move needs to happen fast.

The fact that TikTok is not that difficult to emulate shows that its real asset is its network of users which is why it has to restore confidence soon or see an erosion of its user base that could prove fatal.
ByteDance, along with Huawei is one of the few Chinese technology companies that have gained traction overseas which makes them vulnerable to being used as pawns in the escalating rivalry between the US and China.
Australia, the UK and now India are also becoming increasingly hawkish on China which most recently has led to a blockade of Chinese apps in India (see here).
India is a particular problem as many Chinese companies such as ByteDance and Xiaomi have established a significant presence there and won substantial market share.
Furthermore, TikTok’s service is a very good cultural fit for India and in a fairly short space of time, it has attracted 200m users.
These users are not generating much if any, revenues yet but India has great potential for offline to online (O2O) giving ByteDance an opportunity to monitor the usage it is getting in other ways.
However, this will be dependent on its ability to hold onto that engagement which is looking increasingly under threat.
Following the ban on TikTok in India, users have been flocking to rival apps like Roposo which stated that it has been adding as many as 500,000 users per hour during its peaks and expects to have 100m users by the end of July.
Prior to the ban, TikTok had 200m users and unless something changes it looks likely that these users will quickly migrate elsewhere leaving TikTok with nothing in India.
The one advantage that TikTok has is its recommendation engine which is very good at surfacing videos that individual users will like and I very much doubt that its local rivals have anything close to this level of performance.
Hence, when the ban is lifted, there is a chance that users flock back to TikTok as a result of this feature, but the longer this takes, the less likely this will become.
This is due to the power of the network where when an online location has become the go-to place, it becomes very difficult to dislodge.
This is why the blockade of TikTok and the other Chinese apps represents a rare opportunity for the homegrown developers to take back their home market.
However, TikTok is not standing still and I suspect that the company has seen this coming.
This is why it has recruited a senior Disney executive to be the CEO of TikTok which I think will be followed by its spin-off as a separate entity.
In addition to India, the US is also weighing whether or not to ban TikTok and a rapid move to extricate itself from Chinese control would go a long way towards mitigating these decisions.
This could involve a separate entity with data centres outside of China where ByteDance has only an economic interest in the company and no say over how the operations are run or how the company is governed.
I suspect that this would require an IP licence between ByteDance and TikTok because to keep the service competitive, the recommendation engine will be needed.
This needs to happen fairly quickly as the example of India demonstrates that users could quite quickly move over to rival services should TikTok no longer be available.
There are no shortages of innovative apps waiting in the wings to fill any gaps left by TikTok should it not move fast enough to prevent a ban.
Instagram and Snap are two that leap immediately to mind but there is no shortage of others.

Jio Platforms – The Bollysystem 2.0.

RICHARD WINDSOR — Thu, 16 Jul 2020 03:59:45 +0000

Google investment clarifies intentions.

Jio Platforms now has both Facebook and Google as investors indicating that Jio’s strategy is not to create a digital ecosystem of its own, but instead to offer a series of India specific services to take advantage of the shift to digital.
Google will invest $4.5bn for a 7.7% stake in Jio Platforms bringing the total raised to date to around $20bn representing a sale of approximately 33% of the company.
The investor list now includes Google, Facebook, Qualcomm, Intel, Silverlake and a series of other financial investors all of whom have invested at a valuation of around $58bn.
This price values each of Jio’s 400m subscribers at $145 which given that India is a low GDP/capita market will take some time to earn a return on.
In the financial year to March 2020, Jio Platforms generated $9bn in revenues from 387.5m users ($1.96 per user per month) and around $1.9bn in EBIT or around $0.41 per user per month.
These figures indicate that the new investors in Jio are counting on massive growth in new services in order to earn a return because at this rate they will be waiting for 350 years to break-even.
This raises the question of the market’s capacity to pay more to Jio Platforms, given the low GDP per capita and I think the answer is to be found in what the Chinese refer to as O2O.
These are offline services that move online and include things like commerce, health, agriculture, education, transport and so on.
The example of Tencent and Alibaba demonstrates that emerging markets are far more fertile ground for these sorts of services than developed markets.
This is due to the quality of the offline experience in emerging markets which is way below that which is on offer in the developed world.
This means that a mediocre digital experience in emerging markets offers a vast improvement over offline (and will be very popular) which is not the case in developing markets.
This is why QR codes have worked for payment in China but have been a total failure in the West.
India with its 1.3bn population and 400m middle class offers a similar opportunity to China albeit at a smaller scale given that its GDP per capita is only just over 1/5^th the size of China’s.
Given that Google and Facebook are now major shareholders and between them, they cover 90% of the Digital Life Pie, it is not Search, Media Consumption, Instant Messaging and so on that Jio Platforms will be going after.
Instead, it will be focused on the other things that Indian users can do with their phones over and above the digital ecosystems that have driven them to adopt digital in the first place.
This is not really about increasing economic activity but instead is focused on making exiting activities easier and more enjoyable creating a shift in value from the offline economy to online.
Between them, Alibaba and Tencent have a market cap comfortably over $1tn and if Jio Platforms can create just 1/5^th of that, it will offer its shareholder a very nice return.
Having Facebook and Google onboard will help Jio Platforms as the services will be optimised for the devices that Jio offers with its services making a better ecosystem experience all around.
Services like WhatsApp and Google Pay will also be used to facilitate the transactional elements of the services that it offers.
The trick now is to come up with the O2O services that Indians will adopt in droves and this is where the risk lies.
I suspect that Jio Platforms will be taking most of its cues from China where this has succeeded far beyond anyone’s expectations.
Jio is in pole position to dominate the O2O market in India, which is what the investors have paid for, but now it is all down to execution which is always the most difficult bit to get right.
This is one to keep an eye on especially if there is a separate listing outside of the large Reliance Industries group.