Arattai's Unexpected Surge: Road Ahead for Zoho's Messaging App, Hard Lessons From Past Zoho's Arattai, touted as desi WhatsApp alternative, now has more than 1 million monthly active users.

Zoho finds itself under a rather unexpected spotlight for one of its products that does not appear to be fully baked, yet has gotten everyone talking about its potential as a WhatsApp alternative.

This came after Union Minister Dharmendra Pradhan endorsed Zoho's instant messaging app, 'Arattai,' citing India's efforts to push locally made products and services. The hype has been so much that new sign-ups on Arattai went up from 3,000 per day to 350,000 per day, along with a 100x growth in traffic in the first 72 hours of going viral.

Jeri John, Global Product Head at Arattai, tells Entrepreneur India that the platform has crossed 1 million monthly active users.

The bulk of recent sign-ups have come from India, which is where the surge originated after the recent endorsements, but the company is also seeing interest and registrations from outside India, he further disclosed.

John's disclosure follows Zoho efforts to ramp up its infrastructure to handle the unexpected surge in users. There are several posts that pointed out issues such as OTP delays with the app.

Earlier this week Zoho founder Sridhar Vembu said that the company was adding infrastructure on an emergency basis for another potential 100x peak surge.

"As we added a lot more infrastructure, we are also fine-tuning and updating the code to fix issues as they arrive. We have all-hands-on-deck working flat out," Vembu had said.

He also added that the company had planned a big launch in November with a lot of features, however, "it suddenly went vertical." He also sought more time with people and enthusiasts to roll out more features.

Separately, he disclosed that he had "initiated discussions with Sharad Sharma of iSpirt, the group that did the technical work to make UPI happen, to standardize and publish the messaging protocols."

"I am a huge fan of UPI and hugely respect the work the team did. Sharad is a good friend and he will guide us in this objective. These systems need to be interoperable like UPI and email and not closed like WhatsApp today. We do not want to be a monopoly ever. We are committed to that goal and we will work with iSpirt to make this happen," he said.

Roots back to Zoho Chat

Zoho's Arattai launched as a beta in 2021 and since then has received quite a few refinements.

John tells Entrepreneur India that the roots of the new viral messenger app go back to 2006 when the company had launched Zoho Chat, a basic cloud based instant messaging software later reimagined as Zoho Cliq as a Business Communication Platform.

"That experience sparked the idea of building a consumer-first messaging app — a very different challenge, since in B2B the company owns the data, whereas in B2C each individual owns their data. We also wanted to create a product built in India that reflects the country's unique needs, from linguistic diversity to accessibility," he said.

It's worth noting that Zoho Chat existed in an era when India did not have the high-speed mobile internet connectivity or modern smartphone ecosystem that we consider standard today. Back then, there were quite a few instant messaging platforms, primarily accessed through desktops, such as Yahoo Messenger, Google Talk, and Skype. BlackBerry did have its Messenger app, but it was limited to its own BlackBerry devices. Conventional SMS remained the popular way of messaging through handheld devices.

The WhatsApp phenomenon happened much later and got traction with the availability of 3G, and then 4G along with affordable smartphones as well as internet connectivity. Indians were quick to embrace WhatsApp for its simple-to-use interface. Even as WhatsApp has added multiple features and layers under the hood, the look and feel of the platform has remained the same through the years. With more than 850 million users, India is the largest market for WhatsApp.

Hard lessons from the past

Considering WhatsApp's dominance over the years, just being local or Indian is not a good enough proposition to keep users retained. If you recall, when India banned TikTok in 2020, there was a wave of Indian companies building short-video platforms. From MX TakaTak to Mitron, they all came and eventually lost out in the race to Instagram's Reels and YouTube's Shorts.

Moreover, it's not the first time a company is taking a shot at building a local social media app. One of the most recent examples is the Koo app.

Launched in 2019, Koo won the Indian government's Aatmanirbhar App Innovation Challenge in 2021, giving it wide attention and interest from users. A big push, however, came later amid the standoff between Twitter and the Indian government over the removal of certain posts and accounts. Several Indian ministers embraced the Koo app by opening their official accounts. At its peak the app had 2.1 million daily active users and nearly 10 million monthly active users.

Koo was also very well funded. It had raised a total of USD 70M in different rounds of funding from investors like Accel, Tiger Global Management, and 3one4 Capital, among others.

The firm, however, struggled to retain the user base once the standoff between Twitter and the government cooled down. Moreover, it also struggled to cope with high operational costs and was unable to find a sustainable monetization model. In April 2023, it laid off 30% of its workforce to cut down operational costs. Later, it explored potential acquisitions but evidently did not fall through.

"A prolonged funding winter which hit us at our peak hurt our plans at the time and we had to tone down on our growth trajectory. While we would've liked to keep the app running, the cost of technology services to keep a social media app running is high and we've had to take this tough decision," Koo founders said when announcing the complete shut down of the app.

Prior to Koo, Kavin Bharti Mittal experimented with Hike Messenger. A WhatsApp-rival, Hike had become popular for its unique features, including stickers. In 2016, it also became a unicorn, which essentially means the valuation of the company had gone past USD 1 billion.

Hike Messenger shut down its services in January 2021 as the company pivoted to web3 platform called Rush.

"Lots of love for Hike recently. No surprise. We shut it down with 20M+ actives. Just because we're very good at something, doesn't mean we can win. Network effect too strong globally. Would have to be a China like situation for us to reconsider," Mittal said in a post last month.

The keyword over here is the network effect.

"Social networks are inherently hard to build because it's hard to displace the strong 'network' effects that existing social products have. It's harder to build a substitute to a utility like WhatsApp unless there's a clear advantage, people will not move. Even the early adopters get disappointed and drop off once they realise their friends & family are not on the app," Rohit Krishna, General Partner at WEH Ventures told Entrepreneur India.

"In my view, the only way to succeed would be to create a radically new way to connect with people that is different from the existing products. This sector will also need a lot of patient capital as monetisation is not very straightforward," he said.

Road ahead for Arattai

Despite the unprecedented popularity, Arattai has work cut out for itself. As mentioned above, just being Indian has not been a strong enough proposition to retain. For starters, the platform has to improve its infrastructure to handle the surge of users as well as ensure the experience remains bug free.

John tells Entrepreneur India that the company is treating users' feedback as a top priority.

"The surge happened sooner than expected, so we've mobilised cross-functional teams from engineering, QA, infra and support to triage and fix issues in real time. Our immediate workstreams are fixing sync/onboarding problems, improving multi-device reliability, and scaling back-end capacity," he said.

Of course, there will also be eyes on how the app ensures privacy of users. To put things into perspective, WhatsApp provides end-to-end encryption, which means a message cannot be accessed by anyone else other than the sender and receiver. The E2E encryption gives some assurance to users that their privacy will remain intact.

On the other side, Arattai does not have the E2E encryption as of now. But, it's coming soon.

John said that the company's top priority is to add full message encryption. Some other features expected include smoother multi-device sync; richer group management features (for neighbourhoods/societies and other large groups); polls and improved file sharing; and payments/UPI integration. We are also working on APIs so other apps and services can integrate with Arattai.

"These are on the roadmap; stability and scale come first," he said.

Another apprehension is that whether there will be ads or some sort of monetisation efforts which may or may not mar the overall experience. While WhatsApp resisted this for the longest time, it too has begun experimenting with advertisements. Though these ads only appear in the Updates tab, which contains Status updates and Channels, and are separate from personal chats and calls.

Monetisation is not a priority for Arattai at the moment. John also makes it clear that advertising will never be on the roadmap and that the company will not sell user data.

"In future, depending on how usage evolves, we may explore premium or paid features, but right now our focus is on building trust, privacy, scale and product reliability. Being a privately held, profitable company allows us to take that long view," he said when asked about the possible monetisation initiatives.

Summing up,

Unlike previous endeavours to build a social media app, Arattai's riding on Zoho, already an established name in the global SaaS space. The sovereignty tailwind also gives it initial momentum and it can build on this through more unique features, language support, and by leveraging cutting-edge generative AI. Will it dethrone WhatsApp at some point? It's something we will keep an eye on.