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Facebook's alliance with Jio will help it unlock India

The Drum 12 May 2020 11:30
As Facebook gears to connect the next billion people, they expect 70% to come from Asia and nearly 337m from India alone.

Facebook’s recent $5.7 billion investment in Indian telecommunications behemoth Jio Platforms goes beyond the typical tech deal and will help the American social media titan finally unlock the world's biggest democracy.

On the surface, it's an e-commerce deal that aims to deliver incremental benefits such as better choice, faster deliveries and lower prices to entice consumers to buy more. But at a deeper level, the core of the Facebook-Jio alliance is about accelerating India's digital vision to change the lives of all Indians for the better, according to the companies.

Their ultimate purpose is to uplift the lives of all Indians to live better lives and plan to better access to education, healthcare and the ability to transact digitally when it comes to daily needs, with a particular focus on rural populations and micro, small and medium enterprises. And this can happen through services like Whatsapp Pay, which has struggled to take off on time, and the growing JioMart.

“Put in context, India’s 66% rural population means they have 890 million people underserved, which this partnership is trying to address. When you view this opportunity through this lens, you start to get a sense of how this might translate into an attractive growth opportunity for Facebook.”

Even with 630 million users, India's mobile penetration rate is currently at about 30%. And with data costs falling by 95% since 2013, rates are expected to rise to 750-800 million users by 2023.

Led by Mukesh Ambani, the richest man in Asia, Jio has played and continues to play a role in driving mobile penetration rates in India. It is by far the largest player in the market with a huge customer database and dominance in related consumer spaces such as retail, entertainment, and even social.

“Facebook has been seeking opportunities to monetise WhatsApp since acquiring it in 2014. The platform that now has over 1.5bn users worldwide announced a controversial plan to incorporate ads into the app in 2014. However, earlier this January, WhatsApp management decided to back away from plans to move this forward,” explains Leanage.

He adds: “Last year, Facebook announced that they had successfully launched the service and had acquired 5m active business users. This number is dwarfed in comparison to Ambani's plan to introduce 30m small grocery stores to its e-commerce platform JioMart in the short-medium term. As Facebook looks to scale its WhatsApp Business platform globally, the size of the opportunity the Indian market represents is staggering.”

Leanage says it is a given that Facebook knows a lot about a person. However extensive their data set may be, it could not tell that person about their purchasing patterns. Facebook has desperately tried to fill this gap with services like Instagram Shop or other shopping features, though they have not reached a level of scale that is needed to be attractive to advertisers.

“This level of data collection could be a potential game-changer for the social networking company. It will make the platform so much more desirable in the eyes of marketers who will no doubt pay a premium to access that information.”

For the longest time, Indian e-commerce has largely been dominated by Amazon and Walmart-backed Flipkart, which controls just over 62% of the market split almost evenly. Now, the Facebook-Jio partnership introduces a formidable third force into the mix.

Enabling rural Indian commerce means both Jio and Facebook will have unparalleled insights into purchasing habits, needs and challenges of an entirely new consumer class the world of e-commerce has known least about until now.

It was only in February 2020 that Facebook had been given permission to pilot with up to 10m users. Approval for the rollout of the service has been set for end-May in partnership with three banks, Axis Bank, HDFC Bank and ICICI Bank. It was also reported that the State Bank of India would join at a later stage.

That means through JioMart, Facebook is likely to get access to India’s massively unregulated and informal retail segment as India has over 30 million ‘Kirana’ (neighbourhood) stores and JioMart, in partnership with Whatsapp, could help digitize these neighbourhood stores by providing them with a digital storefront as well as a mechanism to collect digital payments via WhatsApp Pay.

“The partnership would give JioMart a customer acquisition and communication channel through Whatsapp’s 400m users and allow WhatsApp to finally legitimize and monetize its payment product in India, after the false start it had a couple of years ago, says Prantik Mazumdar, the managing partner at Dentsu Aegis Network’s Happy Marketer.

Leanage agrees, noting that Jio’s proposed strategy and model seems quite similar to Alibaba in China, where they, on one hand, play an enabler role to grow small businesses and on the other enable all consumers (rural and urban) consumers to transact digitally.

“The alliance also has an edge when it comes to integrating online and offline commerce onto a connected ecosystem. This would essentially allow customers to shop across channels but still be within the ecosystem, so receive one consistent experience. This leads to a level of lock-in that will make it hard for the incumbents to compete against,” he adds.

A bigger walled garden?

Facebook and Jio will together also have access to vast troves of personal information, even as India is yet to finalise a personal data protection law.

“There may be many more benefits on data transfer, which may impact innovation, and therefore, sufficient regulatory scrutiny will be needed to ensure that the conditions are made available to other third parties.”

“The telecom rivalry in India is supplemented by a larger rivalry of big tech companies like Amazon, Facebook, and Google also trying to establish a lead in tapping the biggest open market for Internet users,” he explains.

He continues: “Google has an existing investment in hyperlocal delivery startup Dunzo. Its attempt at mapping hyperlocal activity through Neighbourly didn’t quite take off with the app shutting shop last month.”

“However, Facebook and Facebook ads can support and provide some data. Jio is doing really well in the current Covid-19 scenario, access to further data and ad capabilities will help to boost its reach, and will provide Facebook with further data to support its growth,” he explains.

“Facebook would continue to collect massive sets of data around user demography, content consumption, purchase intent, transaction data and purchasing power,” he explains.

The battle for everyone as the world comes out of the Covid-19 crisis will not be about size alone, but will be about relevance, and interpreting the knowledge that best meets the needs of the consumers and brands.

That said, the large war chest, market access and the political clout that the Facebook-Jio partnership brings to the table will be a massive big wake up call for Amazon, Google and Walmart as they will also need to dig deep into their reserves and find suitable allies if they want to fight the Facebook-Jio alliance.

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