The Indian Messenger

The messaging app company had zero users around January 2013. It crossed 35 million users in August 2014 and in January this year claimed over 100 million users. That is a mind-boggling number for any start-up.

By Goutam Das  
Wednesday, July 13, 2016

At Hike's new office designed by employees in Delhi's Aerocity, there is a meeting room called 'Leaky Bucket'. There's a history to it.

The messaging app company had zero users around January 2013. It launched a referral campaign, and bang - the number of users shot up to five million in two months. Its servers collapsed and the messaging stopped working. The start-up had grossly underestimated the infrastructure required. It was geared for 100,000, not five million. About 90 per cent users left the app.

Leaky Bucket is a reminder to its 250 employees that in the social media space, battles are fought every day. Some mistakes can be costly, the fall steep.

 

Hike, over the next one year, learnt from that mistake and climbed back. It crossed 35 million users in August 2014 and in January this year claimed over 100 million users. That is a mind-boggling number for any start-up. The users were on average spending 120 minutes a week on Hike, exchanging 40 billion messages a month. The company does not disclose the number of active monthly users but these numbers, by itself, are no mean feat. India's mobile messaging landscape is dominated by multinationals. Whatsapp, owned by Facebook, is by far the most popular - while Facebook doesn't disclose the messaging app's numbers, it does say that India is the largest Whatsapp using country. Globally, it has over a billion active monthly users. Hike is the story of an Indian company breaking into the big league; today, it is among the top three messaging apps in the country (Facebook's Messenger is another rival) with its own demographic positioning and differentiation. It is innovating at a fast clip, in a market that is still nascent. There are less than 200 million active mobile Internet users in India today. Hike must make it simpler for the mobile newbies to communicate and access the Internet.

Aayan Kasana, 20, a student of computer applications at Indira Gandhi National Open University, Delhi, has been a Hike user for two years. "I like using Hike's timeline, where I post photos and status updates. I do most of my chatting on Hike," he says. "I also like the news service and the free SMSes that I can send to my friends when they are not online." He doesn't use WhatsApp much, but does use Telegram, a Berlin-headquartered messenger launched in 2013. "My developer friends are on Telegram," he says. "On Telegram we can transfer files with size up to 1.5 GB. Hike's file transfer limit is 100 MB," he says.

Kasana is in the age bracket Hike is targeting - 15 years to 25 years. He alludes to the app's many features. In fact, Hike is not just a messaging platform. It is an app with many micro-apps - chat, aggregated news, cricket scores, games, jokes, and coupons. The timeline feature is similar to Facebook's. The free SMS he is referring to is a feature called Hike Direct and one that differentiates the company from Whatsapp. It was built specifically for India where data rates are still high on a purchasing power parity basis; people, often, switch off data connection or exhaust their packs. Hike detects if a 'friend' is offline and then sends an SMS text instead of the Hike message to make sure that the conversation is not interrupted. Hike Direct also allows users to chat, exchange stickers and transfer photos, videos and heavy files of any type without the Internet. Two mobile phones can connect directly within a 100-metre radius using Wifi Hotspot technology. Users can chat and share files up to a speed of 40 Mbps.

Mankiran Kaur, a 22-year-old user from Chandigarh, is a fan of the free SMS feature. "I began using Hike because of the free messages," she says. "Over time, I discovered more features. Now, I use it because of the interesting stickers." Stickers, with cultural nuances are, in fact, a huge differentiator - on Hike, you can send stickers symbolising popular swear words or exclaim Aiyo if you are in the South. The company says it has more than 10,000 stickers that capture 40 language nuances.

"Stickers have been a monstrous hit. They help users get past language barriers," says Kavin Bharti Mittal, the Founder and CEO of Hike. "A lot of people who find inputting on keyboard difficult use stickers to communicate, especially in the South. These are not sensible conversations. These are funny, expressive, sarcastic responses," he says.

As the next step, Hike is working on algorithms that will help a user, based on the emotion, figure out the "amazing response" to any sticker that he gets. What's more, Hike's user interface is available in Hindi too. Also, while chatting, users can opt for 'hidden mode' for privacy. "Our goal is simple. If you want simple text and photos, go to WhatsApp. If you want a world with your friends, come to Hike," says Mittal. A large number of people use both. "People get five-six close friends on Hike and chat, post intimate photos on the timeline, play games and share videos. Group chats with your mom and dad are on WhatsApp," he says.

Kavin, 28, is son of Sunil Bharti Mittal, the founder of India's largest telecom company, Bharti Airtel. This partly explains his obsession with building a company that rides on telecom networks but disrupts how people access the Internet from phones. He views messaging as a neo-operating system. "We are building social messaging as a new kind of operating system for mobile," he says.

How is That?

A mobile operating system today is nothing but a collection of apps. In India, it is difficult for most people to download more than a few apps due to limited space in the phone - for instance, in Android, Google bundles several apps that are rarely used but which eat up the space in the phone. What if there is one dominant messaging app with other micro apps within it? Hike's aim is to be that dominant app, one that facilitates easy communication as well as content discovery.

Many investors, some of whom have built successful digital businesses, have bought into this vision. Hike has raised $86 million in three rounds from Tiger Global, Bharti Softbank and a group of investors that includes Adam D'Angelo, the Founder and CEO of Quora, Aditya Agarwal, the Vice President of Engineering at Dropbox, Ruchi Sanghvi, the Vice President of Operations at Dropbox, and Matt Mullenweg, the Founder and CEO of Automattic Inc and Co-Founder, WordPress.

Bharti SoftBank, Hike's first investor, is a joint venture between Bharti Enterprises and Softbank Corp, set up in 2012 to incubate mobile Internet ideas, one of which was Hike. Kavin Mittal is part of the joint venture's management.

It is a good set of investors to have as most of them know that scaling up messaging products takes time and making money from them takes even more time. WhatsApp and Facebook Messenger, for instance, don't make money. Facebook, in a 2015 annual disclosure, said: "In October 2014, we acquired WhatsApp Inc, and we have invested significant resources in growing Messenger. We have historically monetised messaging in only a very limited fashion, and we may not be successful in our efforts to generate meaningful revenue from messaging over the long term." Messenger products have to wait for a critical mass of active users and the so-called network effect to kick in before they can make money.

Hike, therefore, is at least two years from thinking about making money. But when it does, it will be on three pillars. "Messaging will play a large role in e-commerce," says Mittal. "Flipkart and Snapdeal may get access to 100 million users overnight. We have a big app problem in India - app uninstall rates here are twice the global rate. Hike can become a default platform. They can build on this platform," he says. Brand channels, where consumers get to interact with brands, could be the second pillar, while sale of stickers and games could be the third.

The challenges include building a big network of active users. "The biggest challenge for any Indian messenger firm is enhancing downloads/usage and building a network," says Sreedhar Prasad, Partner, e-Commerce at consulting firm KPMG. "It could mean targeting existing network clusters - students, professionals, friend circles, etc. In Bangalore, for instance, airport taxi drivers are on multiple WhatsApp groups. They communicate through the messenger for pick-ups and WhatsApp, in this case, enables their daily business. Breaking into such clusters is a challenge for a new messenger app," he says. The second challenge would be monetisation - 20-40 years is the ideal user age group that can be offered to brands for monetisation, says Prasad. Hike is targeting a much younger audience.

Nevertheless, Mittal's immediate priority is to make the app easier to use. "It takes seven steps to post a photo on the timeline. What if it is one step?," he says. So, he is in the middle of "cutting the fat". This is necessary because as Hike kept adding features, it started becoming more and more complex. Hike 5.0 (the next version) will be both lighter and cleaner.

Employees at Hike's swanky workplace are asked to swear by "Hike Codes", the company's operating principles. Code No. 9: "Obsess to simplify".

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