The Strategy Behind Youtube Acquiring Simsim

YouTube has acquired Simsim, an Indian social commerce platform, said the Google-owned company on Tuesday. Neither of the companies disclosed the deal’s terms. However, according to sources of TechCrunch, the startup was valued at more than 70 million USD (1).

“We started Simsim with an aim to help users across India to shop online with ease, enabled via small brands showcasing and selling their products with the power of content by trusted influencers. Being part of the Google and YouTube ecosystem furthers Simsim in its mission,”

said the company’s co-founders, Amit Bagaria, Saurabh Vashishtha, and Kunal Suri, in a joint statement.

“We can’t think of a better ecosystem to build Simsim in terms of technology, creator network, reach, and culture. We are eager to join YouTube and are excited to create Simsim within the most admired tech firm worldwide.”

More About Simsim

Suri, Bagaria, and Vashishtha founded Simsim in July 2019. Notably, Vashishtha and Bagaria previously worked together at Paytm as senior VP, while Suri is MD and COO of Foodpanda.

The trio founded the company to help small businesses transition to e-commerce via influencer-based video. Simsim counts Accel Partners, Good Capital, and Shunwei Capital among its backers.

Before the acquisition announcement, the two-year-old company had secured about 17 million USD with a valuation of 50.1 million USD in its funding rounds, Seed, Series A, and B, since its launch (2).

The Gurgaon-based startup helps small retailers and businesses in India transit to e-commerce via the power of creators and video. The Simsim app helps connect influencers, local businesses, and customers connect.

“Micro-influencers can effectively build a targeted audience (growth), create entertaining experiences (retention), build trust (more value), and personalize messaging (conversion). Consumer social media platforms like YouTube, Facebook, and Instagram can’t meaningfully monetize via ad-financed models in India. It unlocks the opportunity for more deeply integrated transactional platforms. New internet users in the country require an interactive seller-led experience to replicate the offline e-commerce experience which the Indian market is used to,” said Good Capital’s Rohan Malhotra, an early investor of Simsim (3).

However, like everyone else, Rohan had also declined to comment on the deal’s size. There have been no comments from Simsim’s CEO about the acquisition.

How Does Simsim Work?

Creators of the platform post video reviews about the product from local brands, and viewers can purchase those products directly via the app. Simsim has videos presently available in three local languages, including Hindi, Bengali and Tamil, and English. It allows retails of all sizes to reach consumers via video in their preferred language.

Simsim competes against Trell, which secured 45 million USD from Mirae, LB Investment (4). The Bengaluru-headquartered firm is currently valued at 120 million USD. In the video commerce space, it also directly competes with EkAnek and BulBul. EkAnek had last secured 5.5 million USD in September 2020 in a financial round led by AWI, Alpha Wave Incubation. Meanwhile (5), BulBul had secured 8.7 million USD in a Series A funding round led by Info Edge in July last year (6).

The company competes with DealShare, Meesho, and CityMall, who have raised large funding rounds this year on the social commerce front. However, there have been no reports of investors backing any new video commerce company. There are anticipations among experts in the space that video commerce may see more consolidation in the upcoming future.

In March 2020, just before the pandemic-led nationwide lockdown, Simsim had launched its customized content product Rubaru, which allows users to send video messages and tips recorded by influencers and celebrities for their dear ones (7).

It is also worth highlighting that Simsim is the second acquisition in the social commerce space in 2020 after Shop101. Last month, Glance, owned by InMobi, acquired Shop101 in a cash and stock deal.

Notably, there would be no immediate changes to Simsim, and the app would keep operating independently, according to Google in a blog post (8). Youtube is working on ways to showcase offers of Simsim to YouTube viewers.

Why Google Acquired Simsim?

Google-owned YouTube has acquired Simsim to build the future of online video commerce in India. The merger will soon help viewers find and purchase products from Indian retailers via video.

In a blog post written by Gautam Andan, YouTube VP (9), he talked about how more people shop online. Video has an essential role in helping potential consumers find new products and expert advice they can trust.

“Every day, people come to YouTube to watch reviews, compare products, and find recommendations from their trusted creators. Today, YouTube, which has over 450 million active users in India, is taking another step to help them find and purchase products from local businesses. Google-owned popular video streaming platform has signed a definitive agreement to acquire Simsim and expects to complete the transaction in the upcoming weeks (10).”

“For about two decades, small businesses have used YouTube to expand their online presence, many of them also use it to reach consumers outside of their community, from Silk Saree sellers (11) to Interior Designers (12); by bringing YouTube and Simsim together, we aim to help small businesses, retailers, and brands in India to reach new consumers in even more robust ways. There would be no immediate changes to Simsim. The platform will keep operating independently while we work on showcasing Simsim’s offers to YouTube viewers,” read Anand’s blog post.

He further talked about how the announcement aligns with Google’s ongoing investments in India, like the India Digitization (13). “As we work with our allies to expand internet access in the country (14), we know online video will keep growing as the primary way to find entertainment, information, and connections in India.

“With more than 2500 YouTube creators, with over one million subscribers, and the success of YouTube shorts (15), which we rolled out first in India, we are committed to bringing the best of YouTube in the country and growing creator community by making it effortless for the new generation, mobile-first creators to get started.”

“We are inspired by the opportunity in India and look forward to working with Simsim to create the future of online video commerce in the country,” read the blog post.

While on the subject, it is also worth highlighting that Google recently announced that it would bring a 60-minute limit to Google Meet’s call (16). At 55 minutes, participants will get a notification that the call is about to end. Hosts can upgrade their Google accounts to extend the call, or the call will end in an hour.

However, users can still create a new link after the end of the 60 minutes if they wish to host a group video call with free accounts. Notably, the guideline is only for group calls as the one-on-one calls still have a 24-hour limit. The guideline is already implemented.

The Growth Potential of Social Commerce in India

Now, let’s come back to our bigger question, why is Google acquiring Simsim. What are its big plans?

We know social media platforms such as Instagram and Facebook are for social interactions, whereas e-commerce platforms like Amazon are for shopping. It is still a different model where one has to switch from social to commerce.

However, over the past few years, super apps like WeChat are used for shopping, social interaction, and much more. In platforms like WeChat, Alipay, Grab, and Go-Jek, commerce and social are intervened, and it is where social commerce is taking roots (17).

The second-most populous country, India, is the most varied market in the world. And considering its strong consumer and retail outlook, India is witnessing refining trends in the consumer markets, shaping the future of the ecommerce industry. We believe that consumer experience is the key focus area for the brands while technology facilitates the user experience enhancements throughout their shopping journey.

Social commerce is the next-gen trend, reshaping the future of commerce. In India, more than 50% of its population are accessing social media platforms in 2020, and according to Statista (18), the penetration would be 67% of its population by 2025. That’s more or less 500 million people we are talking about!

Moreover, social platforms and online product reviews form a critical part of millennials’ shopping journey as it influences their purchase decisions in India. More than 75% of millennials buy products because of social media recommendations and stay updated on brands via social media. That is the advent of social commerce.

According to PR Newswire (19),

• 60% Gen X prefers video to learn about new product or brand
• 52% of Gen X and 41% of baby boomers find video most helpful when making a buying decision
• 52% of Gen Z trust brands with videos about their products than brands without videos.

Clearly, it would be a shame if these tech giants are not taking advantage of such a vast network of potential consumers. And global companies have recognized this opportunity.

In October last year, YouTube had announced that it would make its video more shoppable (20). TikTok has forayed into the market in December via fashion live streams (21). Instagram also launched a shop tab for users to connect with creators, brands and find products (22). Undoubtedly we are witnessing the next big shift in commerce.

Every single platform, everyone that has media, is becoming a store today. Even media companies or anyone with an audience, including influencers, can build their ecommerce platforms. The only condition is if they successfully build an ecommerce store and retail logistics, the growth potential is tremendous. The scale of the opportunity is massive.

According to an earlier report from Sequoia India and Bain and Co, social commerce in India would touch 16 to 20 billion gross value over the upcoming five years and over 60 to 70 billion USD by 2030 from about two billion USD in 2020. It also predicted that the share of social commerce in the country’s ecommerce market, 38 billion USD in 2020, would increase from the present one to two percent to four to five percent of the projected 140 billion USD by 2025 (23).

Even though its adoption in the country has been gradual, the pandemic has led to quicker adoption of multiple online selling models. Today, social commerce is quite popular in India, with more people moving online and finding new ways to shop.

Drivers of the Social Commerce in India

• Increasing preference for online shopping: As per Forrester Research, Indian ecommerce sales increased by seven to eight percent last year. Moreover, the ecommerce industry also recorded growth as most people shifted to online shopping amid restrictions imposed by the pandemic (24).

• Increasing volume of online shoppers: The number of online shoppers would reach more than 250 million by 2022, as per RedSeer (25). And considering a high-level social media engagement, social commerce is likely to play a huge role in expanding ecommerce.

• Increasing investments: The industry is seeing increasing investments from global players. For instance, Facebook invested 5.7 billion USD in Reliance Jio, and Google poured 4.5 billion USD in Jio Platforms last year (26). 2020 also saw significant developments of local players; Reliance Retail acquiring the Future Group to expand its presence in the ecommerce space, for instance. Earlier this year, Udaan, a B2B ecommerce platform, secured 280 million USD and capital from new investors, Moonstone capital, and Octahedron Capital (27).

• Rising number of small retailers: Small and mid sized retailers in India adopting e-commerce as their distribution channel. In December last year, Amazon India reported that about 4,152 sellers on its marketplace crossed the one crore INR sales mark, while the number of sellers with more than one crore INR sales increased by 29% y-o-y (28).

• Increasing social media influencer: Ecommerce, as we noted, is becoming the next-generation tool for manufacturers in India, with more than 28% of millennials purchasing products through social media endorsements, while the remaining are regularly tracking trends and brands on social media platforms to stay updated on their favorite brands and products. Ecommerce players are making huge efforts to build their social media presence, adapt digitization, and promote products on these platforms to reach young generations (29).

Wrapping Up

The key is to build their presence on social media platforms, adapt to how you scale the infrastructure.

Google, for instance, generates over one billion shopping queries every day, yet the product that facilitates transacting in those Google properties, Google Shopping, and YouTube video is still in its early stages. The challenge is to leverage such a large audience. And its recent acquisition of Simsim indicates that Google is ready to tap into India’s market potential.

In short, it won’t be far-fetched to say that Instagram is popular among small businesses to sell products online, and the acquisition of Simsim seems like YouTube is planning to build online video commerce similarly.

Well, we understand what’s in it for Google but what we gain from the growth of social commerce is another interesting question. Well, for starters, it would enable consumers to shop instantly via brand-tagged, AI-driven, user-generated content, which would also create employment opportunities.

In addition, the “Atma Nirbhar Bharat” initiative caters to the ambitions of the local producers by empowering them to establish their online presence, thereby giving a boost to the industry and its over gains. Notably, retailers and wholesalers are adopting omnichannel models to meet the rising consumer demands.

Moreover, the social commerce growth would also drive associated industries like agri-tech, omnichannel sales, logistics, and warehouses (30).

In a way, it is a win-win industry for India if we overlook the possible threat of anti-competitive behaviors of tech giants. It means India would need further and more elaborate policy reforms to regulate the sector.