Take a Hike: Why Kavin Mittal shot the messenger

Kavin Mittal, Founder and CEO, Hike messenger. New Delhi.

The Hike website opens to a quote from Walt Disney: “It’s kind of fun to do the impossible.” After its core service shut down, that quote is today wrought with irony. Impossible indeed is how many viewed Hike’s plan to become a messaging giant in India. And it looks like they were right. Hike has peddled a different narrative — that gaming and other apps will now be its mainstay — more on that later — but  it is undeniable that Hike’s fundamental idea, valued at $1.4 billion in 2016, just did not have legs.

And while it came as a surprise to many when Hike decided to shut down the messaging app, those tracking the company were expecting it. “The writing was on the wall for a few years now. They were teetering on and had lost relevance in the market. It is probably good they shut down and want to focus on something else,” said an investor tracking the space, requesting anonymity.

In August 2016, Chinese internet giant Tencent led a $175 million round in Hike, valuing it at $1.4 billion and making it India’s fastest to unicorn status (private billion-dollar firms), in four years. Other investors included SoftBank Group, Tiger Global Management and Bharti Enterprises. Hike’s founder and CEO Kavin Bharti Mittal is the son of Sunil Mittal, Chairman of telecom giant Airtel. That was Hike’s biggest moment, and arguably its last big moment.

Billion-dollar company or not, Hike was always up against fierce competition, primarily Facebook-owned WhatsApp, and in fact every messaging and communications app in the world, of which there are dozens. Beyond the valuations, there were always questions around Hike. It had a revenue of Rs 26.5 crore on a loss of Rs 205 crore in FY19, its last available filing. It is also incorporated in Singapore. That revenue on that valuation simply doesn’t hold up. But early on, social media firms and their investors don't look at revenue; active users are the key metric.

Hike had 37 million Monthly Active Users (MAUs) and 18 million Daily Active Users in late 2016. This fell to 23 million MAUs and 8 million DAUs in a year and a half, according to data from App Annie. While Hike Hike had a niche — college students — for a few years, this did not stick, and did not pay off.

Social media apps thrive on virality and network effects, which Hike never had on a large scale. And as WhatsApp expanded its reach further, becoming India’s app for messaging, calls and more with nearly 500 million users currently, Hike couldn’t —  for that matter no one else can — compete. Other messaging apps such as Viber, Telegram, Line and Signal dominate in their respective countries, and have a respectable share even if they don’t dominate. WhatsApp dominates very few markets like it does India.

Users falling rings alarm bells for any startup, where growth is everything. And it did at Hike. In search of its next hit for more than two years, Hike has been promoting gaming and stickers.

Seeing the monetisation dilemma, Hike created localised stickers. It launched the Hike Sticker Chat in 2019 with 30,000 stickers in over 40 Indian languages and dialects. These gained significant traction. Subsequently, the company also launched a web app for the Hike sticker chat. These stickers are open to any platforms that can use it. Stickers by Hike is a separate app and can be used, for instance, in Telegram and WhatsApp.

‘New focus: Rush and Vibe

As the chat shuts down, the company will focus on Rush, a gaming app and Vibe by Hike, a networking platform. Vibe emphasises safety, kindness and respect in meeting people and making friends, avoiding creeps. It sounds a lot like Bumble.

It also focused on gaming, another industry that the entire startup ecosystem has woken up to the last few years. In July 2019, Hike invested in esports platform WinZO Games. On January 6, it also launched Rush, a real money gaming platform for carrom, quizzes, etc. And there could be a larger strategy there.

Bharti Airtel in May last year partnered with NODWIN Gaming, South Asia’s leading esports platform. Hike could leverage similar partnerships, and attract investments for the same, one person familiar with the matter said.

In response to Moneycontrol’s queries, a Hike spokesperson simply confirmed the messaging app’s closure with Rush and Vibe’s launch.

“So by closing the chat application, what Hike did was smart by focussing on aspects like gaming, where the monetisation opportunity is huge. These could have been in the works for a while,” said Siddarth Pai, founding partner at 3one4 Capital, an early-stage venture firm.

In August 2016, Chinese internet giant Tencent led a $175 million round in Hike, valuing it at $1.4 billion and making it India’s fastest to unicorn status

The China dilemma

It has been an unfortunate perfect storm in some ways for Hike. While its user numbers were getting clobbered and it was considering a pivot in any case, the ban on Chinese investments last year, and an anti-China stance across sectors, does not help Hike. Its largest investor is Tencent, and that goes beyond just money. Tencent, which owns WeChat — China’s messaging superapp — carefully picks companies in sectors it understands — sectors that have worked in China, and whose recipe for success can be replicated in India.

“Tencent wanted to replicate WeChat’s success with Hike. Build gaming and other functions into it. But the India market is fundamentally very different and anyone trying to do a superapp has found that out. For any social media company, Chinese connections can help tremendously. They’ve seen the market closely and seen huge outcomes. So, that (anti-China sentiment) certainly doesn’t help,” said an executive at a content company, requesting anonymity.

More than four years after it became a unicorn, it is harder than ever to justify that tag. But for those watching closely, the signs were always there.