How ShareChat’s Short Video App Moj Lost Its Mojo

ShareChat is gasping for breath. The Bengaluru-based social media unicorn’s financial state tells a sad tale of cash burn that has not brought in the expected revenue bump with a slew of failed monetisation models, questionable strategies and failed acquisitions.

Against a revenue of INR 540 Cr in FY23, ShareChat posted a whopping loss of INR 4,064 Cr led by increased finance, server costs, employee payouts and other expenses.

Part of the loss is also because the company wrote off its investment in the short video platform MX TakaTak, which it acquired from Times Internet 2022. While reports initially suggested the deal value to be around $700 Mn, however, as per ShareChat’s filings, the deal was valued at around INR 1,838 Cr ($221 Mn).

While TakaTak was eventually merged into ShareChat’s short video app Moj for a combined user base of 250 Mn users, the acquisition seems to have had no positive impact on ShareChat.

TakaTak’s acquisition was aimed at strengthening Moj’s position in the burgeoning short video app landscape, but since then, many of the platforms (such as Trell and Chingari) have pivoted to other models. Instagram and YouTube cornered the short video market share after TikTok’s ban and exit from India.

However, two years after the deal, ShareChat reported INR 816 Cr as impairment costs for its investment in FY23. This amount was paid as a cash consideration during the TakaTak acquisition, while the remaining consideration was in the form of convertible debentures.

This is yet another dud acquisition for ShareChat which has suffered the same problem on its primary social media business.

The write-off indicates that TakaTak has lost most of the value that ShareChat paid to acquire it. And sources tell us that Moj’s fate also hangs in the balance as the core advertising revenue stream has seen a massive decline.

Moj’s user retention has also hit a wall as seen by plummeting engagement data and as indicated by multiple sources with knowledge of the development.

Inc42 sent a detailed questionnaire to ShareChat pertaining to the recent write-off of TakaTak acquisition, Moj’s revenue challenges, the dwindling user base and its strategy for survival and profitability ahead. The company declined to comment.

Funding Crunch Bites Moj

Times have been hard for ShareChat since early 2023 when it saw a number of key exits (more on this later).

Last year, we reported that ShareChat is in the process of raising $60 Mn through convertible debentures at nearly half the valuation ($2.8 Bn) of its previous round in 2022. Sources now tell Inc42 that investors are negotiating an even lower valuation of about $1.5 Bn for this round.

Whatever the valuation, this infusion will be critical for ShareChat to salvage Moj, and without this infusion, the short video app is on life support, sources told us.

“As far as Moj is concerned, ShareChat nearly spent $500 Mn-$600 Mn in building its short video platform. However, Moj’s valuation is not even a tenth of what was invested into the company. The TakaTak merger has proven to be another huge failure,” one source claimed.

In a video podcast with India Quotient partners in December 2023, ShareChat cofounder and CEO Ankush Sachdeva said daily active users (DAUs) and user retention are critical for any social media platform to scale up and eventually outperform the competition.

In this regard too, ShareChat is slipping, but first let’s put the company’s claims on revenue to the test.

ShareChat’s Revenue Conundrum

In the podcast, Sachdeva claimed ShareChat and Moj have seen revenue growth thanks to advertising income and in-app transactions or virtual gifting. However, the FY23 financials paint a different picture, and show that ShareChat had to spend plenty of money to extract more revenue from these streams.

A large part of this inability comes from how India’s short video consumption has changed since 2021 and 2022. During this time, Indian short video apps made hay from VC money and in the afterglow of 2020’s TikTok ban.

ShareChat and Moj’s parent Mohalla Tech raised $1.5 Bn, whereas VerSe Innovation (Josh and DailyHunt) raised nearly $1.7 Bn, besides the likes of Chingari, Trell and InMobi-owned Roposo. But as Inc42 reported last year, these platforms have hit a wall three years after TikTok’s exit, and most Indian short video apps had lost DAU and download momentum.

Thereafter, Instagram and YouTube threw money at the short video proposition to acquire the biggest creators and cater to billions of users. Short video content on these two big tech platforms is also more localised today with regional language influencers, which poses an existential threat to the likes of Moj, Roposo, Josh and other short video apps.

As a result, Indian short video apps have to spend considerably higher on user acquisition, content creation costs and have to pay more to lure influencers. TikTok left a hole, but Indian short video apps just have not been able to fill it.

Sharechat and Moj’s revenue growth has been slow, given the big tech competition, and there were no monetisation avenues except ads. Other monetisation models, such as social commerce or live commerce failed.

Besides users, Indian platforms also lost influencers to the competition. As venture capital for social media platforms dried up and with uncertain monetisation models, Moj and others found it harder to scale up their creator bases after 2022 as we mentioned above.

Revenue Model Crumbles

To be clear, its focus on micro-influencers in the early stages earned Moj a fair share of the user base from Tier 2 and 3 towns. Moj acquired users rapidly with VC money, but the company has not created a sustainable source of advertising revenue for the platform.

Although Mohalla Tech hasn’t reported ShareChat and Moj’s revenue separately, sources claim that ShareChat app largely relied on in-app purchases or virtual gifting, while Moj app has stuck to ads for revenue.

On ShareChat, users pay to buy virtual coins and gift creators. However, there is a cost associated with driving up this source of revenue, since platforms have to shell out a lot to retain influencers as well. Any drop in creator output or engagement sets off a vicious cycle where platforms have to fight and spend to retain users.

Redseer data, for instance, points out that micro-influencers on short video platforms get paid anywhere between INR 2,000 and INR 7,000 per month as of November 2023, while larger influencer payouts range from INR 20,000 – INR 1,00,000 per month. Going by the recent statements of ShareChat’s CEO, Moj has an influencer base of 3 Mn, even though it’s not clear how much the company is spending to sustain and retain this creator base.

But a back-of-the-hand calculation based on the industry payout rates shows that ShareChat would have to spend millions on influencer retention every month.

Ad Revenue No Longer Enough

In the case of the Moj app, the revenue primarily comes from ads which are interspersed with user-generated content. Even though Mohalla Tech’s consolidated revenue grew to INR 540 Cr in FY23 from INR 332 Cr in FY22, ad revenue saw a drop. Moj has the highest share of the ad revenue at Mohalla Tech.

Advertising income contributed 46% to Mohalla’s FY23 revenue or INR 248 Cr, whereas this was INR 265 Cr in FY22 or 80% revenue contribution. So it seems that Moj is no longer an attractive space for brands.

The inability to see beyond advertising has almost created a ripple effect, and while many have touted their microtransactions and in-app models as the solution, it’s not yet panned out.

A Redseer report from November 2023 also spoke about half-baked monetisation on short video apps in India. The report added that in FY24, advertising revenue will show muted growth for short video apps, considering many of the primary advertisers are also struggling with cash flows.

Real money gaming startups, for instance, which used to frequently advertise on short video apps like Moj, are reeling from the revenue hit caused by the clarification on the 28% GST rule. Other popular advertisers, such as D2C brands, are looking at offline retail for growth and diverting marketing resources towards omnichannel efforts or focussing on larger marketplaces instead of spending on Indian short video apps.

Political ads could, however, become a positive factor for ShareChat and Moj, given the General Elections in India this year. But even here, it needs to show stable growth over the past few months to get these ads from networks and distributors. In this regard, ShareChat and Moj do not have a great track record.

ShareChat And Moj Go Haywire

When it comes to engagement too, the Tiger Global-backed startup has seen better days than currently. So ad revenue is not a guarantee.

First, ShareChat cofounders Farid Ahsan and Banu Pratap Singh quit in 2023 which further derailed the monetisation drive. The parent company was also forced to shut down its fantasy gaming platform Jeet11 around this time.

Besides the cofounders, Ajit Varghese, who was responsible for driving sales and monetisation of both ShareChat and Moj, quit in 2022. He was replaced by Udit Sharma in June 2022, who also quit in November 2023.

“These exits left a big vacuum in Moj’s ability to create monetisation avenues beyond advertising and even the tie-ups with influencer agencies,” a former Moj employee revealed.

Gaurav Jain, who was earlier the head of emerging business, has been elevated to chief  business and revenue officer, a ShareChat spokesperson told Inc42.

In early 2022, ShareChat had some capital to burn and it set up an AI/ML lab in the US to figure out critical things such as the algorithm and the social media tech stack. It hired expensive engineering talent overseas and acquired TakaTak in the hope of capitalising on the scale. It’s unclear how this investment is paying off. The data doesn’t show a big boost due to AI investments.

According to data sourced from app analytics platform Data.ai, the monthly active user base for Moj has fallen by nearly 23% from over 72 Mn in January 2023 to 54 Mn in December 2023.

ShareChat maintains that Moj has 160 Mn MAUs, which is in sharp contrast to the data above.

Similarly, Moj’s daily active users across all apps have gone from just over 16 Mn at the beginning of September 2023 to around 13 Mn in January 2024.

Moj’s biggest homegrown rivals Josh and Roposo do not have impressive numbers either. Josh’s MAU has declined from 40 Mn in January 2023 to 26 Mn in December 2023, while InMobi-backed Roposo’s had 500K MAUs in December 2023 from about 1 Mn in January 2023.

Instagram’s MAUs in India, on the other hand, have increased from 500 Mn in January 2023 to nearly 600 Mn in December 2023. This shows that the appetite for social media content is not declining, but it’s actually the Indian apps such as ShareChat’s Moj and Dailyhunt’s Josh that are losing traction.

End Of Indian Short Video Apps?

In the aftermath of the TikTok ban, Indian short video platforms such as Josh, TakaTak and Moj enjoyed a sort-of first-mover advantage and rapidly secured VC funding.

But this has not translated into business success and now ShareChat’s Moj is staring at a greatly uncertain future. Plus, this is likely to have a ripple effect on the ShareChat app as well.

It’s not just ShareChat and Moj that are seeing a decline, but the startup is considered by many to be the poster child for Indian social media. Despite an open field to run and millions in funding, ShareChat could not figure out monetisation, which was always the biggest fear when it comes to Indian social media platforms.

Will cofounder and CEO Sachdeva manage to secure funding and a lifeline in time for ShareChat and Moj to stay in the short video race and justify the company’s rich valuation?

[Edited by Nikhil Subramaniam]