As India-China
tensions continue to rise with so signs of de-escalation, India began a new
front in the digital space. India has banned on grounds of national security
some 59 mobile apps owned and operated and by the Chinese. These include the
popular Tik Tok, ShareIt, Weibo, Wechat among others. There might be an
expected reprisal from China but that should hardly deter India from taking further
steps. These are the baby steps in signalling India’s intent to hit where China
will feel the most. The biggest signal yet will be when India bans Huawei from
it building and managing the 5G infrastructure in India. Aside of the ban, it
would be interesting to see how China will feel the same. TikTok for instance
is very popular in India and was expected to be big revenue spinner or in other
words, a BCG star going forward. Digital apps function on a lock-in paradigm
and given the Indian use patterns of Tik Tok, some feel that it might boomerang
on India without corresponding impact on China. Yet this would hardly be true.
An analysis of the same would have to factor in multiple elements as one shall
in the subsequent paragraphs.
The revenues for
any app is a function of the use patterns. Secondly, the success of each app is
linked to the network externalities it generates. Without doubt, Tik Tok and
similar apps function on a similar paradigm. Furthermore, the revenue growth is
hardly linear. For good part of time, the revenue growth is in fact negative. In
other words, the costs are higher with very little revenues. When the tipping
point occurs, the revenue growth increases exponentially creating the market a
star to borrow from BCG parlance. Tik Tok was in the similar trajectory. The current
revenues might have come more from US or China or elsewhere but the market growth
in terms of customer acquisition and usage was definitely India. Indian market
was perhaps on the cusp of turning into a star given its popularity. The reasons
for using Tik Tok or similar other apps are multifold. There is without doubt a
dystopian element too.
To some users,
it might be a case of utilising the backward bending labour supply curve. Given
their trade-off between leisure and work, some switch to Tik Tok creativity
would be a reflection of their desire towards leisure. Implied would even a
Veblen good with those having enough resources to meet their basic needs turning
towards Tik Tok for needs of leisure or frivolity. Implied here would even be a
step above in the Maslowian ladder. Having met the basic needs and safety
needs, it is about the need of recognition that makes people go in for
demonstrating their creativity on platforms like Tik Tok. In the analytical framework
proposed by McClelland, the urge to perform on Tik Tok falls under the need for
achievement. It would be worth remembering many Tik Tok stars are from smaller
towns with the background that is not considered to be elite. They too have a
desire to have recognized, affiliated and manifest power which these platforms
offer in substantial measure.
Picking up from
the above, to many, it is more of a signalling than anything else. To each,
there is a desire to do well in a tournament wherein the winner takes all
pervades. The reward structure varies significantly for those at the top and
those in the middle and the bottom of the pyramid. In each, there would indubitably
be a keenness to build their career and occupy the upper spaces. In normal
course of time, the entry barriers are significant. It is not very easy to
progress in the tournament. Each player in the game has to start from the
bottom and progress gradually upwards. At each layer, there exists a glass
ceiling not very easy to break especially for the unconnected. The barriers are
broken by the very few and it is essentially Pareto at work in the way the
industry would operate. There needs to be platform which would significantly eliminate
the barriers and reduce the cost of entry and upward mobility in the pyramid. The
platform has to be granular and indivisible. With the advent of the smart
phone, new production models operating at the home level have emerged. These
commons based peer production models allow signals to travel in multiple
directions at virtually negligible costs.
It is this crowd
that seeks recognition, celebrity status in their own niche geodesic circles that
drives the popularity of these apps. The traditional and brick mortar model favors
the celebrity status attainment through the operation of Pareto’s law. There is
without doubt, celebrities at the local leve but the local is bounded by
geography. In the context of Tik Tok, the fetters of geography are broken and
the talent is unleashed on broader global scale. The super stars will continue
to reap the rewards but the long tail of celebrity and fandom that evolves
through these commons based peer production models or social production models
have their own spillovers. They as a cumulative command a high degrees of
popular status and fandom relative to any individual star. The platform once
evolved into its full potential, starts to gain rewards for its creators.
However, there
is a widespread criticism and with substantial merit in the same, the
technology seems to be dystopian. There is ample scope for misuse and that has
manifested in recent times. Yet, given the amplitude of it, the positive side
outweighs the other. There are enough legislative interventions possible to
overcome the same. With the ban, there is little doubt, that talent
manifestation and signalling will be hit for the short term. But the market
rarely functions in a vacuum. In fact, market abhors vacuum and the space will
soon be taken over by many other players. To Tik Tok this is the bad news. They
spent lot of time in market building, in an ecosystem where replication or
duplication is not very easy, a market where network effects thrive. Yet the
geopolitical equations override their market building considerations. The nationalist
sentiments will worsen their position as the contours of the gated
globalization take root. Tik Tok perhaps was on the cusp of a revolution in the
Indian market and has been deprived of the same thanks to the over-ambitions of
its masters back home. This is the most significant takeaway from the Indian
government ban on Chinese apps. They have been thrown out just at the time they
thought they had conquered.
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