Hike Messenger: A Case Study in Failed Ambition

Although India’s largest messaging app was close to reaching its goal of 100 million users, Hike Messenger’s founder and CEO, Kavin Bharti Mittal, decided to throw in the towel and sell his company to rival Tencent Holdings Ltd., having struggled to compete with Facebook Inc.’s WhatsApp and Google Inc.’s Allo . It might have seemed like a good deal on paper; Tencent’s $1.4 billion offer at first appeared to be a 50% premium over Hike Messenger’s valuation last year, according to PitchBook data.

Introduction

In the span of three years, Hike has established itself as one of India’s most popular instant messaging apps. In April 2016, it raised $175 million from Tiger Global and SoftBank to reach a total funding amount of $225 million. It has been growing faster than Facebook, Whatsapp or Skype and is one of the top 5 downloaded apps in India. With this level of success, it is worth looking at what caused Hike to fail. 

The first sign that something was wrong with Hike came last year when Bharti Airtel acquired all rights to sell the company’s prepaid data services for a period of five years for about $160 million. For an app developer whose revenue comes primarily from advertising, Bharti Airtel’s deal represented a significant change in their business model. In order to maintain growth levels and avoid running out of cash before the deal went into effect, Hike needed more money but its investors were not willing to provide more financing. Without other options available, Hike turned back to its original investors for additional capital. As part of the agreement, Bharti was given priority over existing shareholders should they want to make an investment. They used this leverage by making an offer that valued Hike at less than half its peak valuation while still requiring existing shareholders (including Tencent) take on some of the risk associated with keeping the business afloat post-acquisition.

The Idea

Hike, a messaging app from Bharti Enterprises Limited, was launched on 16 December 2012. For the first five years of its existence, it did not make any significant impact on the market. However, by December 2017, it had grown to approximately 150 million users and boasted of being India’s most popular mobile messaging service. In the last two months alone it had added around 100 million more users to its user base. The company also planned to monetize their offering with ads that were targeted at customers who use Hike for work purposes and provide access to an array of information services (such as employment listings). 

While the company continues to add users at a rapid pace, there are reasons for concern about its long-term viability. There is intense competition from global giants such as WhatsApp which dominates the Indian market with 240 million active monthly users, Facebook which owns WhatsApp with 210 million active monthly users (and 130 million monthly active WhatsApp Business), WeChat owned by Tencent Holdings Ltd., Google’s Hangouts Chat/Allo chat service as well as others like Line and Telegram.

The Execution

It’s always a shame when a promising app crashes and burns. Hike, an Indian messaging service, saw its popularity grow and then decline just as quickly thanks to a few mistakes. Here are the three most important lessons from Hike’s story.

– Focus on user experience – it is what drives growth – Focus on user experience – it is what drives growth 

– Improve your product before you release it to the public or else you will be playing catch up – Improve your product before you release it to the public or else you will be playing catch up – Stick to one clear use case (messaging) instead of trying to do everything

The Result

In 2014, Hike Messenger was launched with a goal of reaching 100 million users by 2017. Although the messaging service was initially well-received, it began to struggle as people increasingly turned to other social media platforms and apps such as WhatsApp, Facebook Messenger, and WeChat. The company had to make a number of changes to its business model in order to stay afloat including switching from ads that generated revenue to sponsored chats that did not provide any income. Ultimately the company failed, announcing its shutdown on March 1st 2019 with over one billion dollars in losses. Another factor that led to the downfall of Hike was a lack of advertising strategies and their dependence on advertisements rather than customer engagement.

Too Many Features

I believe that Hike’s downfall was the company’s insistence on adding new features at a breakneck pace. My guess is that all the features added by Hike made it more difficult for consumers to get used to and understand how to use the application, which led to a decline in usage. In order for an app like Hike to succeed, it has to be very easy for users to understand and use. This means that there should be no superfluous features or functions, because they will just confuse potential users who are trying out the app for the first time. It’s also important to focus on one thing and do it really well instead of spreading your resources too thin and being mediocre at everything you do. One of the things that WhatsApp does extremely well is their messaging service. They have made it very easy for people to chat with others and make video calls from within the app; other apps, such as Hike, have failed miserably at this because they’re not focused on doing this one thing exceptionally well.

The Aftermath

What happened to the Hike messenger service? The answer is pretty simple. It ran out of money and its founders couldn’t find another investor to keep it afloat. For a company that was valued at more than $1 billion, that’s saying something.

The company tried to raise $175 million from SoftBank Group Corp. (OTCBB:SFTBY) but the talks fell through when it became apparent that there weren’t many willing investors left for Hike, which had been losing money for years. Investors were starting to see how hard it would be to turn around a business that never made any money. The main problem with Hike was this – people might like chatting on their phones or computers, but they don’t want to pay up-front charges. You can charge people after they use your chat app, but who wants that?

It turns out that people didn’t want an internet chat app where they needed to buy coins before they could talk and all the services were available only if you had enough coins, so no one used it.