Sharechat to ramp up investments in algorithms to improve user retention

Homegrown social media unicorn Mohalla Tech, which operates Sharechat and short video platform Moj, will increase investments in improving its algorithms to suggest more accurate and personalized content for users, aiming to improve user retention, a top executive said on Tuesday.

The Temasek and Tiger Global-backed company has allocated most of its recent $65 million convertible debentures round towards algorithms for advertisement and content targeting, Manohar Singh Charan, chief financial officer at Mohalla Tech, told Mint.

“If you use a rudimentary algorithm to service content to a user, you will spend less money but will soon enough lose the user because they’re always looking for something more. Better and more personalized algorithms are crucial to retain users on the platform,” Charan said.

Read more: Delhivery is gradually finding its feet amid rising competition

Sharechat saw a 25% increase in its user retention rate in FY24 compared to FY23, Charan said.

However, social media companies including short video platforms need to figure out a concrete monetization plan to be able to consistently service users, he said, without disclosing investment figures.

In FY24, Sharechat saw its operating revenue grow by 23% to ₹718 crore from the previous financial year, helped by modest growth in its advertising and livestreaming revenue businesses. It managed to cut down expenses by more than half to ₹2,644 crore on the back of automation and server cost optimization alongside widening its user base, according to filings made with the Registrar of Companies (ROC).

However, losses stood at ₹1,897 crore, albeit narrower than ₹5,143 crore in FY23, indicating that troubles in scaling a homegrown social media platform remain.

Fresh valuations

The company raised $65 million in debt financing in the form of convertible debentures from Singapore-based fund EDBI, and existing investors Temasek, Lightspeed, and Moore Strategic Ventures earlier this year. It also conducted three rounds of layoffs in 2023, and mostly recently let go of 5% of its 700-strong workforce, in a bid to reduce operating costs.

ShareChat had also shut down its fantasy gaming vertical, Jeet11, and discontinued MX Takatak, the short video platform it acquired from Times Internet for $600 million in February 2022.

Moreover, mounting losses led investors to value the company at only $1.5 billion now, a steep 70% cut from its valuation in 2022, according to media reports.

However, Sharechat’s Charan said that there was no actual valuation reset and that it has simply not been priced after its last valuation discovery in 2022. “If we were to go public today would our valuation be $5 billion? I don’t know, it’s hard to say. Most likely not. But the valuation multiples have adjusted for everybody,” Charan said.

Sharechat isn’t alone. Rival short video platforms like VerSe Innovation’s Josh, Chingari, and InMobi’s Roposo have seen periods of waning users and monetisation struggles. Koo, once touted as the Indian alternative to global microblogging platform X (formerly Twitter), shut down earlier this year after failed merger or sale talks.

Road to profitability

However, Charan said that with the bulk of the major changes done, the company is now on the path to profitability with the Sharechat app being fully profitable as of October. Moj achieved operational profitability (effectively covering all costs except employee salaries) and is expected to be fully profitable by end of FY25, according to the company.

The company is tentatively planning to go public in the next 18-24 months, after it showcases two fully profitable quarters, Charan noted.

Read more: The fall and rise of fine jewellery startup BlueStone

The company is also looking to make acquisitions to widen its offerings, potentially looking white spaces in complimentary content formats like news and entertainment and live streaming.

Sharechat is also doubling down on its younger users as well as users in tier 2 and tier 3 cities, Charan added, noting that the “hunger” and “aspirations” are much higher among the two cohorts.