Newsdog etc.: Chinese companies that are bullish about India.

Opportunities elsewhere.

As Chinese companies are increasingly facing challenges (largely due to but not limited to competition) in their home market, there is a trend of seeking opportunities outside their home turf.

In particular, India seems to have become a new battleground for Chinese companies. At Momentum Works we have observed this trend accelerating since the second quarter of this year.

Each day we see Chinese internet executives arriving in India to study the market – something that happened to Indonesia last year.

Giants such as Alibaba have been testing the Indian market for a while, with successes and failures. Xiaomi’s recent IPO brought a number of top VCs to renew (or simply start) their search in the Indian market – ultimately, Xiaomi built its overseas story largely on the success in India.

Aside from well-known names, many other Chinese ventures have gone in aggressively, particularly in the areas of content (e.g. NewsDog), cross-border e-commerce (e.g. Club Factory and PayTM Mall), and fintech (starting with KrazyBee).

The interest in finch was further ignited after the recent investment of Indian online lender SlicePay led by China’s FinUp Group, and also partially by Indonesian regulators’ recent strict enforcement of licensing.

In a recent talk in Shanghai organized by Momentum Works’ friends at The Passage Group, fintech was a key topic of interest that many in the audience were keen to discuss.

The new round of funding for both OTA Happyeasygo and news aggregator Newsdog are also shots in the arm for Chinese entrepreneurs keen to explore the Indian market.

Do Chinese companies have what it takes?

The latest US$50 million round into NewsDog was led by Tencent. The two-year-old startup headquartered in Beijing aims to be the Toutiao in India, dominating the free time of the majority of internet users.

But does the Chinese company have what it takes to compete in India? Yukun Chen, the Co-founder and CEO of Newsdog says: “What we can do is programming. So we looked outside China and saw there was a huge market fit”.

The popularity of smartphones in India opened up opportunities for news and entertainment apps such as the content aggregator. Newsdog enters the market with a customer acquisition strategy via clickstreams targets and plans to monetize the investment at a later stage. Statistics provided by Sensor Tower show that the app has 43 million installations and a 76 percent increase in downloads year-on-year in the first quarter of the year.

The difference between Newsdog and other local competitors is that the company turns domestic challenges into opportunities. According to a KPMG and Google publication, seven in ten Indians trust regional news more than English-language sources.

NewsDog combats this challenge by employing two strategies: (1) the content aggregator is offered in 10 languages, providing a polyculture and multiple-language content matching platform; and (2) it also provides a self-publishing platform, WeMedia, allowing users to create their own content.

Furthermore, Newsdog connects users to their site by paying content creators. Ultimately, Toutiao in China is more of a content creation factory rather than a pure content aggregator.

To further boost the story of a content ecosystem, Newsdog even created a blockchain-based network for creators and consumers of content to share spoils of content consumption.

Challenge of monetization.

Whether their investment will be monetized remains to be questioned. User retention, a key metric for any internet based business model, is not ideal. Whether the business model, which requires ads revenue, will turn out to be profitable, bearing in mind the small online advertising market size and the dominance of Google & Facebook (both absent in China), is hard to say.

Nonetheless, when Tencent invested, a long-term vision is created. Whether it takes five or eight years to start monetizing, Tencent has that patience. Other smaller shareholders can choose to sell their stake to more strategic investors along the way.  

Another key effect of NewsDog is that it shows the ecosystem what can be done in areas of traffic growth, aggressiveness and business model innovation. Whether Newsdog will eventually succeed or not, this legacy will remain.

Long distance relationship.

With data becoming less expensive and smartphone user bases experiencing continuous growth, media and entertainment seem to be an attractive sector for Chinese companies as well as investors.

As The Boston Consulting Group and the Confederation of Indian Industry estimate India’s media and entertainment sector to increase by 13–16% during the next eight years, this sector seems to be looking forward to a promising future.

What is more important than that research is the vast amount of time and internet bandwidth people gained thanks to the advances of Reliance Jio (and the response from other telcos). That would enable a lot of opportunities for content business.

And as mentioned above, the turning point of monetization is still a few years away – it could be faster than we thought, though.

Tencent Holdings’ investment is only one of many signals to growing confidence in the market and the Chinese companies are exploring it.