The social media giant apparently seeks to catch up on mobile commerce after its WhatsApp Pay failed to make a mark
Pavan Lall Last Updated at April , : 823 IST
Social media giant Facebook is no stranger to large acquisitions. It bought Instagram for $ 1 billion in , Whatsapp for $ billion in and virtual reality company Oculus VR the same year for another $ 2 billion. In all three instances, however, the common denominators were obvious. The deals were all control-majority transactions and threw up technology that the world’s largest social network either did not have or saw as prime bolt-on acquisitions.
Facebook’s latest investment of almost $ 5.7 billion into Reliance’s Jio Platform for just about 17 PE rcent, then makes the deal an aberration. “This is the single largest minority investment by a technology player into India and it signals to the powerful possibility with the combined market share and user groups of both the
companies combined, “said an investment banker who’s worked on large inbound deals. “But its important to study who gets what out of the deal.”
India is among the largest communities in the world for the company with approximately 400 million users. Then, Instagram has millions ofaccounts in India and messenger service WhatsApp announced in that it had 823 million users in India making this its biggest market outside of the US.
Not lagging, Reliance Jio
recently announced that it had the largest subscriber base with around million million users. “Seen in the big picture, with everything going on in China which in any case is closed to Facebook, and the growing reluctance to engage with business there, India would then be one of the the largest ‘user-base population in the world that has not been fully harvested, “said one technology analyst.
But given that the user base of low-cost telecom users and Facebook and Instagram may not overlap, Facebook could be vying for other targets. “Payments on the phone will only accelerate in the future,” says Raja Lahiri, partner with Grant Thornton Advisory. “The Facebook-Jio partnership could create a gateway that serves commerce for the future.” Facebook India did not respond to whether there could be a brand new messenger system built out in the future.
According to a report by Credit Suisse partnerships between Jio, and and JioMart, which is a new commerce initiative by Reliance Retail the WhatsApp messenger service would be a multiplying enabler.
Facebook’s entry into India has seen the company do things differently from other markets. The model flipped here because users first accessed Facebook on a phone instead of a desktop, making the mobile the cornerstone of their strategy.
In 2014, Facebook rolled out in local languages such as Hindi, Gujarati, Tamil , Malayalam, Kannada, Punjabi, Bengali, and Marathi and more. Yet that hasn’t meant that the company has been able to monetise the market as much as it would like to.The digital advertisement pie in recent times is valued at Rs , (crore) ) with both Google and Facebook reaping some 70 percent of that. Industry executives estimate that Google earns the lion’s share of that slice.
Facebook which was exclusively advised by Bank of America for this transaction has not invested very much in India in the last eight years since it got here. According to the analyst quoted earlier, “There are no huge development centers in Bengaluru, nor a R&D office for cutting edge technology,” which make their sudden and large investment hint at some catching up that is being done. In the meantime, social media companies like the Chinese-owned TikTok which require its users to own nothing but a phone have logged billions of downloads with, over 20 million active users and more time being spent time on it.
Clearly, Facebook’s payment platform WhatsApp Pay, which has attempted a roll-out in the last year, and has had no success, would serve to offer immense business advantage when combined with the way retail is poised to operate if it gets clearances and permissions in the near future.
WhatsApp Pay has been struggling to get regulatory approval even as others like Google Pay have cleared similar hurdles and continue operation. It’s also no secret that some of Facebook’s early plays like Free Basics in 2020, which was a move at offering the Internet for free but went against the principles of net neutrality, and ran into a brick wall with the Government of India, ruling against it.
Facebook’s founder Mark Zuckerberg has been known to tell his managers to to either adopt “the hacker way” or “move fast and break things.” Time will tell if this is the big move that will lead Facebook to break new ground.