Video Editors: Purnendu Pritam, Varun Sharma
Facebook has bought a 9.99 percent stake in Reliance Jio for $5.7 billion (Rs 43,574 crore). But what does it mean for both companies? How will the deal impact India's digital market? How will this impact competitors like Airtel, Google, and Amazon? The Quint's Editorial Director Sanjay Pugalia analyses.
The biggest thing about the Reliance Jio-Facebook deal is not that Jio will now do big business with platforms like Facebook or Instagram. Jio's biggest collaboration will be with WhatsApp.
Facebook currently earns advertising revenues in India, but the company does not have any transaction model yet. On the other hand, Reliance Jio has a huge subscriber base but has a lower value and a market share of 40 percent only. In such a situation, this deal can be called a masterstroke for both companies.
The Model Behind the Facebook-Jio Mega Deal
It is understandable that this deal is a plan to bring 6 crore small businesses on one platform together and create a bigger e-market than that of Amazon.
Right now Reliance Jio earns a revenue of around Rs 120 on every customer. The idea of the company was to do business in all spheres – groceries, electronics, apparel companies could do business. Reliance has a presence in the market but the transaction is not on a large scale. Now imagine if 3 crore businessmen are associated with the company, the company’s earnings will be huge.
Facebook-Reliance Now in Search of Big User-Base in India
Several Chinese companies have created platforms that are directly competing with Facebook-WhatsApp, like WeChat. WeChat is a complete operating system in itself. On it, you can pay, order, and track your business. Therefore, practically the whole of China is on WeChat. Many people wanted such a platform in India but nothing has come up so far.
To come up with such a platform is now a big challenge for Facebook-Jio. Overall, an Indian company and an American company have collaborated in search of a big customer-base in the Indian market.
Talking in terms of statistics, it is the largest FDI in India in the technology space. China has invested money worth $4 billion in 92 companies in India, and now Facebook has brought an investment of $5.7 billion (Rs 43,574 crore).
Amazon to Face Tough Competition
Now, these two companies are going to give direct competition to Amazon. Amazon is selling almost all products in India. But to work in the Indian market, Walmart and Amazon are not getting the same level of ease that other players are getting.
Going forward, a telecom company like Airtel may also have to fight hard. The story of Vodafone is even worse. Airtel has actually become a utility company. It has not started any value-added services. Reliance Jio will now try to become a service provider with value-added services, which will make this competition even harder and Airtel will have a lot of difficulty in protecting its customer-base.
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