Good morning! A big hello to our readers who signed up this week. Welcome to The Intersection, The Signal's weekend edition, where we report a story on business, economy, technology, policy, entertainment and culture. With TikTok out of the picture, how Meta and Google are out to play. In today’s edition, we talk about how the two tech giants are bringing out their big guns as they bet on India to prop up their user base. Also in today’s edition: we have handpicked the best weekend reads for you.

Sanjana Ramachandran and Venkat Ananth

Sometime in late September, a curious call to action flashed in New Delhi’s Select CityWalk mall. Onlookers paused, watched, and moved. Some went with the flow and grooved. The call to action was an advertisement encouraging people to “Join the #ManikeMove dance challenge”. This was reminiscent of when TikTok was omnipresent in India—from smartphone screens to offline paraphernalia. Except, in this case, the ad belonged to the latest entrant in the short-video space: YouTube Shorts. 

In the more upscale DLF Avenue mall next door, a team of “creators” had just descended for what appeared to be a Saturday mission. One of them paced with a selfie stick, trying to get the perfect shot for what appeared to be a ‘Reel’, the TikTok copycat feature that Instagram—and by extension Meta—has hedged its future on. 

All of it was happening right outside a Korean bakery at DLF Avenue. That Saturday morning captured what was brewing in India’s hard-fought short-video space—a battle between YouTube Shorts and Instagram Reels for content production and user attention. 

A lot has changed since June 2020, when India banned Chinese internet giant ByteDance-owned TikTok—the dominant short-video app at the time—following a border skirmish with China. Overnight, a clutch of short-video upstarts emerged in India’s game of clones. InMobi’s Roposo, DailyHunt’s Josh, ShareChat’s Moj, and MX Media’s TakaTak thrust themselves into the race to win over the 650 million-odd people hooked to endless scrolling.

Two years on, Instagram has emerged as Meta’s secret weapon in India, both for user growth and dodging the constant policy puddles that come with also running the social media platform Facebook and messaging app WhatsApp. Instagram’s user growth from 80 million in July 2020 to over 400 million today, according to internal Meta estimates, is thanks to Reels, which was piloted in India barely a week after the TikTok ban. Ditto for YouTube, which launched Shorts in September 2020, again with India as a focal market. 

With most of their local rivals—now drying out of cash to splurge on creators, consolidation, or hard pivots to…well, web3—withering away, it’s down to Instagram Reels and YouTube Shorts. The former leads the segment but the latter is the canny, well-oiled, and hungry challenger, keen to win the $20 billion opportunity on offer by 2030.

By most counts, India plays a disproportionate role for both Instagram and YouTube in this short-video space. A third of their content is consumed by users in India, while two-thirds of it is produced in the country. Outside of the US, when these companies look at short videos, the market split is clear – India and non-India.

All of that sounds good, except that December 2022 seems a far cry from the short-video goldrush of 2020, no thanks to macroeconomic headwinds. The creator economy has been badly hit. Creator funds, the incentives that powered their growth, are being slashed almost daily, and the route to monetisation has grown steeper.

The Reigning Champion

Meta and YouTube parent Google have reasons to be excited about India. They’re the big tech platforms that occupy significant real estate on Indian smartphones. It’s hard to escape the duo for your online needs. Which only makes this battle for attention all the more intriguing and, in terms of sheer significance, global.

Instagram hasn’t merely taken India’s short-video space by storm but conquered it. Such was Reels’ impact that India accounted for 25% of Instagram downloads in 2020, which further grew to 36% in 2021, according to Sensor Tower data. That’s massive.

What it also did in the process was morph from being a ‘glossy’, upper-crust short-video feature once critiqued for being casteist to becoming what product managers refer to as the “long tail”.

“You can’t reach 400 million users without going deep into Tier 3 India. It is simply not possible,” says an industry expert on condition of anonymity.

As a result, India’s own TikTok clones fell by the wayside. The inability to match Instagram’s product and engineering was a key drawback. “In India, the local game is over. Their entire formula was to pay creators and muscle their way through,” adds the expert.

“Reels is what people across India and ‘Bharat’ use to express themselves, and that’s helping youngsters from the smallest of towns acquire a national following,” says Manish Chopra, Director and Head of Partnerships, Meta India, in response to The Intersection’s questions over email.

“@bihariladka aka Naveen Singh, for example, has had steep growth in the last two years, and was part of Meta’s ‘Reels Squad’ for collaborating with cricketers at the ongoing T20 World Cup in Australia,” Chopra adds, underlining that the aim is for a global icon to emerge from India’s Reels.

This dovetails with what Instagram did under Ajit Mohan, who recently quit Meta India to join rival Snap: shift focus to the creator. Indian TikTok stars were already cross-posting their content on Instagram and building a loyal, parallel following. “Unlike YouTube, which focused more on ‘fans’, Instagram put an entire generation of creators on the map, defining the creator’s market,” says the expert quoted earlier. 

Meta’s close ties with its creators are an integral part of its strategy and establish why Instagram is an aspirational destination for many digital creators. More than 500 Reels creators and influencers, including the likes of actor Ranveer Singh, gathered in October at Meta’s biggest Creator Day event in India so far.

And this is exactly what lured Sakshi Shivdasani into Meta’s universe. Shivdasani, who has over 350,000 followers on Instagram, primarily posts vlogs themed around fashion and lifestyle. Instagram’s more personalised algorithm and Explore feed are predictable for Shivdasani and enable her to better understand her audience. “Over time, through trial and error, I’ve gotten a very good sense of what will trend and what won’t,” she told The Intersection. 

The user interface is also built around recreating trending formats and music, a la TikTok. “You can see the lyrics. There are dots at the trending parts, and you can skip ahead and find things easily,” she adds. “But on YouTube Shorts, you can only use a song for 15 seconds, and it’s not as seamless to use.”

But Instagram’s only monetisation avenues are brand partnerships, which works for now but will be threatened in the foreseeable future.

That threat is YouTube Shorts.

The Challenger

YouTube Shorts may never have been a part of the mainstream short-video conversation a year ago. Much like Meta’s Reels, Shorts represents something existential for parent Google—if you lose attention, creators, and users to TikTok, you’ve likely lost a generation or two, which is also why it is doubling down on India.

At approximately 467 million users, India is YouTube’s largest audience. The platform’s approach to Shorts has been that of a push product, by which we mean YouTube nudges the end user to consume more Shorts each time they load the app or search for a video. Shorts has also been mocked for being a destination for watermarked videos from across the internet, TikTok or otherwise.

“The bulk of the creator economy was created by YouTube. There was no creator economy before YouTube,” says Ajay Vidyasagar. YouTube doesn't see Shorts as a new short-form play but as a part of its many evolutions. YouTube Shorts’ India goal is to “give everyone in India a safe space to create, while also celebrating the unique culture and diversity,” he adds.

In doing so, YouTube is essentially mimicking TikTok’s approach to “democratising” content or adopting a bottom-to-top creation funnel that powered the app during its India reign. Think languages, regions, and dialects. “Creators who represent the true flavour of their region are having their moment in the sun. This includes distinctive local quirks, which enables them to connect with the wider diaspora through relatable content, shared interest, and even nostalgia,” says Vidyasagar.

YouTube has a slim lead over Instagram on absolute numbers. While that may not be reassuring given Instagram’s momentum in India, YouTube has an ace in its pack: it’s present on nearly every single Android device in the country. Google’s mobile operating system holds a 95% market share in India.

For that, YouTube is going back to revenue sharing, its OG (or non-Shorts) monetisation machine. Starting January 2023, YouTube will share 45% of its advertising revenue with creators and end its $100 million creator fund.

For creators like Arun Prabhudesai, whose 28 channels such as Trackin Tech have over 36 million subscribers, YouTube has always been home. He earns through a combination of brand sponsorships and YouTube’s monetisation scheme. “Other platforms are coming up, but YouTube has the best monetisation opportunities,” he tells The Intersection.

Renuka Panwar, an Uttar Pradesh-based Haryanvi singer, echoes Prabhudesai. She is closing in on a million followers on YouTube and has a similar base on Instagram. “A small video can make you viral and change your life. Earlier, you didn’t have so many options,” she says. “But YouTube se main monetisation aati hai (I can monetise on YouTube). Instagram is just good for bloopers and BTS updates.”

For the creator, Shorts is also a growth funnel to the long-form video platform, again a source of bread and butter.

“People who watch are intent-based, because search is baked into YouTube,” says Prabhudesai. This enables advertisers to target audiences who look for certain keywords, whereas “the other platforms are discovery-based, infused with dance, comedy, and entertainment, so you don’t know what will come next.”

But here’s where we take a pause and ask: what about the algorithm, which is integral to short video discovery across platforms? The industry expert quoted earlier has this to say: “One of the things TikTok did so well was that it picked winning content and delivered it to the user beyond the algorithm. And Instagram is doing just that.”

The not-so-zero-sum Game

Who among Reels and Shorts is best placed to win India’s short-video wars? The answer isn’t easy, because these are bleak times for Silicon Valley.

At Meta, there is a feeling that India is a market win for Reels, pointing to an inclination to focus energies on markets such as the US. This is also driven by Meta’s existential crisis that drove its all-in pivot to short video, besides the ill-timed strategic metaverse problem. For context, Reels in the US is a laggard compared to TikTok. Monetisation on Reels is just about getting started, with its annual recurring revenue (ARR) crossing $1 billion last quarter. 

What that could mean is that India may eventually feel the squeeze of Meta cutting costs and downsizing its workforce, translating to lower payouts for the very creators who helped turn Reels, and by extension Instagram, into the rare bright spot in Meta’s nightmarish quarterly earnings.

Chopra of Meta India is bullish about India’s role in the larger scheme of things. “India has been a testbed for a lot of features for both platforms (Instagram and Facebook). Take Reels, which was first tested in India. Eventually, the Reels tab got launched first in India. India is a lighthouse country for Reels globally.”

For YouTube, there’s a different kind of squeeze, one where India becomes consequential to its global story. YouTube’s Vidyasagar frequently cites India’s intrinsic and ancient storytelling traditions, and YouTube’s success in getting local creators across regions and dialects to produce on the platform. 

But there’s also a likelihood of YouTube becoming the “new cool again” and fending off competition because of the creator monetisation opportunities, something Google CEO Sundar Pichai briefly alluded to in a recent earnings call:

“First, improving the monetisation of Shorts. This is a big deal for creators and for our business. We’ll introduce revenue sharing on Shorts early next year. This update makes YouTube the only platform where creators can monetise their content across short, long and live formats at scale.”

All of this only makes this space worth watching. And worth the endless scrolling.

Sanjana Ramachandran is a techie turned marketer and writer based in Bengaluru. Her articles on business, tech, and culture have appeared in The Caravan, Fifty Two, ThePrint, The Ken, and Raiot. She tweets at @ramachandranesk.

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