Home TOP STORIES Decoding the app ban: Growth plans go astray for Chinese firms

Decoding the app ban: Growth plans go astray for Chinese firms

The comprehensive ban on TikTok and 58 other Chinese apps leaves the flourishing app economy in a state of disarray in the midst of a heightened sense of nationalism following the India-China standoff.

The ban has wide-ranging implications for companies who own these apps; thousands of employees of these firms, besides an energetic breed of content creators and influencers who practically now suffer a ‘career setback’.

On a sticky wicket

Therefore, let’s begin with the legality of the ban and if the government has got all aspects covered. According to experts, in terms of legal and constitutional competencies, the government seems to be on a sticky wicket.

First, the Ministry of Electronics and Information Technology (MeitY) order issued on Monday doesn’t talk about specific evidence of violation in the order. It will have to be brought forward in case the ban is legally challenged, which is very likely.

The order talks about “misuse of some mobile apps on Android and iOS platforms for stealing and surreptitiously transmitting users’ data in an unauthorised manner to servers which have locations outside India.”

This issue is particularly tricky because India still doesn’t have the Data Protection Act in place which specifically deals with such issues.

The Privacy Question

Also, on the issue of privacy concerns raised in the MeitY order, there are no laws that specifically deal with it unless the government intends to refer to the 2017 order of the Supreme Court on the right to privacy.

“There are no proper laws in areas like data protection and privacy. To implement cyber laws, there’s no specific regulator. It’s under everybody’s jurisdiction, be it police, NITI Aayog, TRAI (Telecom Regulatory Authority of India), home ministry, and others,” says Virag Gupta, a cyber lawyer.

Chinese Investments

While the legality of the ban will take its time to unfold, what will be the immediate impact of the ban on the companies who own these apps, and Chinese investment in India?

The ban on these apps will not only impact the popularity of these apps but also the valuation of their parent companies. For instance, TikTok which is one of the most popular apps in India with more than 200 million users, has witnessed 30.3% of its total downloads from this country.

The parent company

ByteDance was also planning to invest $1 billion in India and hire 1,000 people. Additionally there are talks about an IPO for ByteDance that is valued at more than $100 billion. But, in the larger scheme of things, the ban will have very little impact on Chinese investments in India. That is because a lot of Indian startups operate on funds from big Chinese investors.

According to a report by thinktank Gateway House, as many as 18 of the 30 unicorns in India are backed by Chinese investors. Tech titans, the BAT companies – Baidu, Alibaba and Tencent – as they are called in China, are also a significant part of these investors.

Paytm, Zomato, Byju’s, Ola, Flipkart, Swiggy, OYO, Delhivery, Practo, Rivigo, MakeMyTrip, Big-Basket, Hike are some of the big home-grown companies to have Chinese investments. There are many others.

The Big Losers

Beyond the companies who own these apps, the worst hit due to the ban is the influencer community on TikTok. Influencers who were born on TikTok and didn’t expand their presence across other social media platforms are likely to be hurt the most.

However, those who had a presence across Instagram, YouTube amongst others, will be able to channelise their campaigns and continue to earn.

Content creators will also face monetary losses since brands have already started putting their planned TikTok activities in pause mode for now.

“The platform was used for influencer engagement. Given the massive fan following most influencers enjoyed, brands were engaging with them directly for promotion. I see those rates dropping down significantly now,” says Nimesh Shah, Head Maven, Windchimes Communications.

Industry experts believe that while there are no clear guidelines or clarity on the current situation, brands should quickly complete planned commitments with an additional post on linked channels such as Instagram.

Once the platform is not accessible, all the scheduled campaigns from the brands will be on pause until further clarity from the government.

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