TikTok's efforts to dominate the Indian market just hit a major roadblock.
The Indian government this week said it will ban TikTok and other well-known Chinese apps, including messaging platform WeChat and mobile browser UC Browser, saying they pose a "threat to sovereignty and integrity."
The move follows a border clash between the two countries earlier this month that left at least 20 Indian soldiers dead.
TikTok has a lot to lose in the world's second most populous country. India has been the biggest driver of new TikTok downloads, generating close to 660 million installs since its launch in 2017, according to analytics firm Sensor Tower.
Parent company ByteDance could "miss out on another 100 to 150 million first-time installs of TikTok in India" in the second half of this year because of the ban, said Randy Nelson, an analyst with Sensor Tower.
The ban also presents a major complication for ByteDance and other companies that are trying to take advantage of India's internet boom, according to Akhil Bery, an analyst with the Eurasia Group.
"With only about 50% of Indian consumers online, India's market represents a massive amount of growth potential," Bery said in a research note on Monday. "Now, that has seemingly been cut off, and it is unlikely that the Indian government will walk back these restrictions."
It remains unclear when the ban will take effect and how long it could last. Bery noted that the Indian government has yet to clarify how it intends to enforce the ban, or whether it plans to ask the Google Play and Apple iOS stores to remove the apps. There is also no indication that the government plans a more sweeping effort, such as asking telecom operators to block traffic related to the apps, which would be difficult to implement, he added.
The ban means the potential loss of a lot of advertising revenue for ByteDance.
In addition to TikTok, the crackdown includes Helo, another app the Beijing-based startup has launched in India. That means ByteDance won't be getting a slice of the country's booming digital advertising market, which is forecast to grow 26% to nearly 280 billion rupees ($3.7 billion) this year, according to advertising media company GroupM.
"It's a tough slap in the face for ByteDance as they were growing 50% year-on-year in India," said Greg Paull, an analyst with consulting firm R3.
ByteDance had forecast over $1 billion in advertising revenue from India this year, most of it generated by TikTok, according to estimates from R3. It reached $280 million in the last quarter of 2019 alone.
That is a small portion of ByteDance's total advertising haul, which R3 estimates was about 140 billion yuan ($19.8 billion) in 2019.
When it comes to in-app revenue — money users spend buying virtual items in TikTok — India also makes up about $1.5 million to date, or less than 1% of TikTok's total, according to Nelson, of Sensor Tower. But growth there has been huge: Indian users spent about $520,000 in TikTok this quarter, up 277% compared to the same period a year earlier.
Spokespersons for TikTok and ByteDance did not respond to requests for comment for this story. A spokesperson said after the ban was announced that ByteDance "is committed to working with the [Indian] government to demonstrate our dedication to user security and our commitment to the country overall."
TikTok has exploded in popularity around the world. The app was downloaded 315 million times from January through March, according to Sensor Tower — an amount that the analytics company says topped any other app ever for a single quarter. TikTok now has over 2 billion downloads overall, more than doubling its total from a year ago.
But losing India could have knock-on effects for TikTok's brand, which is already suffering in the face of increased scrutiny from US lawmakers.
"In the battle for world domination, the India ban won't hurt them in terms of revenue as much as profile," Paull said.
The Indian government ban listed TikTok and 58 other apps, including many prominent Chinese ones. While the Indian government's statement did not mention China by name, it comes as military tensions between China and India continue to escalate following the deadly border clashes.
Many Indians have called for a boycott of Chinese goods and services, particularly from China's dominant tech industry. Beijing said Tuesday that it was "strongly concerned" by the app ban.