Facebook + Reliance Jio — Unfolding
Many of you may have read about Facebook’s intent to purchase a stake in Reliance Jio through various news reports. While this has not been confirmed, it looks like Facebook is interested in a 10% stake in Jio.
Reliance Jio is truly the reflection of the smartphone internet wave of India. Publicly launched in 2016 — it quickly acquired 100 Million customers within 6 months of launch by giving freebies, which included unlimited data. This was one of the prime factors that bought Indians from several regions to the internet. Over the last three years Jio has built value added services (E-Commerce, Music, Movies, Payments, Ed Tech, Drive — Cloud services for SMBs in India) for mobile at throw away prices, including fiber-net, DTH services for cities in India and affordable smartphones based on KaiOS.
Jio is expected to have 400 Million users by March 2020 mainly driven by tier 2 and rural India users. India as a country is very diverse, through blogs and regular usage now the classification of India into three categories(India 1, 2 and 3) helps us to deep dive and understand what Facebook gets out of this deal.
Facebook and its family of apps have captured this market well, after all it is the most populated open internet market in the world. The DAUs and MAUs satisfy the product teams at the company. However it seems like Facebook wants more from India 2 and 3, where other apps such as TikTok are doing really well. India 2 and 3 have consumption patterns very different from India 1, India 1 is similar to that of US. India 2 can be compared to be similar to Bangladesh and India 3 sub-Saharan Africa. Jio is something that can help Facebook in this quest, Jio is big in India 2 and 3, they utilized existing network infrastructure of Reliance Infocomm (owned by the brother of the owner of Jio) and due to affordable smartphones, pricing, decent to good internet availability and 24*7 servicing Facebook should be poised to grow its family of apps and services here.
Facebook has not had the best relationships with government bodies in India, the classic example being that of Free Basics or internet.org (circa 2015) which failed in India despite a lot of $ spend on marketing, messaging and hiring public policy experts to convince governments. In contrast Google, which has several dedicated India specific apps and services enjoys a great relationship with government bodies. Google Pay’s performance in India has also defined and influenced lobbying for better payments infrastructures across the world including the United States, this is another reason what Zuck might want out of India other than building India specific products. Who better to partner than Jio, who’s owner Mukesh Ambani has established great relationships with most stakeholders involved in politics and government bodies.
Payments is a hot space in India since the launch of UPI and demonetization of 500 and 1000 INR notes in 2016, and the recent public launch of WhatsApp Pay on the messenger could be a driver of micro-payments in India. If Facebook is looking longer term at a super-app built on WhatsApp, Jio investment will get them a high ROI considering the value added services they already have as assets and potentially help get more small and medium businesses to use the Facebook family of apps in under-served regions of India. Jio too can benefit here mainly because their E-Commerce business isn’t as big (ajio.com) compared to the likes of Amazon, Flipkart and Snapdeal. Ambani has publicly spoken of how he wishes to compete with them directly and with Facebook having dedicated marketplace and now payments in India his dream could possibly be reality — this can be a driver of e-commerce in India 2 and 3 where largely Flipkart, Amazon and Snapdeal have not done so well.
Jio has been an active player in the startup ecosystem of India too through JioGenNext and has relations with bodies such as iSpirit/Product Nation and venture capital firms. They have made investments into early stage ventures in technology and some major acquisitions in India and from abroad. The two acquisitions that stand out among the rest in tech are Saavn — Music Streaming( similar to Spotify) and Haptik — a messaging app. Getting a piece of a pie of music streaming well you never know how it can turn out to be. Facebook has not been directly active in India though they have acquired companies like Little Eye Labs in 2014, and Chan-Zuckerberg has invested in the high valued ed-tech company Byju’s, this might make them pick their pace up considering India has been a hot bed for tech startups focusing on consumer and SaaS, though SaaS might not make direct sense to Facebook right now.
One factor that I might be underestimating here is Facebook Devices, i.e Portal. While it isn’t available in India yet, Jio as the launch partner could be handy in a price sensitive market where non — Chinese device makers have not performed great. Portal which utilizes WhatsApp video call as one of the core features with a GTM based on several factors including engagement of WhatsApp video, WiFi/Data from Jio in India 1,2 and 3 it might be able to outdo its performance in the US.
10% valued at multi-billion dollars may just be worth it in the long term including parties at Antilla and pavilion seats at Wankhede for Zuck.