One challenge with writing about vast multinational corporations that have unfathomably large user bases is that they occasionally wade into subjects that I personally know nothing about. For example, the Indian telecom market, in which Facebook is now a significant player
. Late on Tuesday, the company announced that it had invested $5.7 billion in Jio Platforms Limited, making it the company’s largest minority shareholder.
If you live outside of India and are not particularly interested in who owns which piece of what mobile carrier, I understand why you may find your eyes beginning to glaze over here. Big companies invest in other big companies all the time. And we’ve got this whole global pandemic thing going on. Sure, this is the biggest check Facebook has written since it bought WhatsApp in 2014
. But why should we pay any attention to Facebook buying 9.99 percent of a mobile carrier?
One, India is one of the world’s biggest markets, and the extent to which Facebook succeeds there could determine much of its medium-term future. Two, Facebook’s history in India is complicated, as an effort to provide free Facebook access drew criticism from net neutrality activists
and led to complaints of digital colonialism
Finally, and maybe most importantly, the world is in chaos. And if you’re a chaos-is-a-ladder person, then it’s always interesting to see which bets companies make when everything around them is in flames.
Ben Thompson has a beautifully concise history of Jio at Stratechery
that helps to explain why Facebook would see it as a kindred spirit. Mukesh Ambani, the richest man in India, invested heavily in building a 4G network that leapfrogged existing 2G and 3G networks to provide dirt-cheap voice and data plans to hundreds of millions of customers. Thompson writes:
To put it another way, Jio was a bet on zero marginal costs — or, at a minimum, drastically lower marginal costs than its competitors. This meant that the optimal strategy was — you know what is coming! — to spend a massive amount of money up front and then seek to serve the greatest number of consumers in order to get maximum leverage on that up-front investment.
That is exactly what Jio did: it spent that $32 billion building a network that covered all of India, launched with an offer for three months of free data and free voice, and once that was up, kept the free voice offering permanently while charging only a couple of bucks for data by the gigabyte. It was the classic Silicon Valley bet: spend money up front, then make it up on volume because of a superior cost structure enabled by the zero-margin nature of technology.
This is also, of course, how Facebook is structured, though the company makes most of its money by showing ads to its customers rather than charging them subscriptions. But the result is a service that has brought hundreds of millions of Indians online — and, as Thompson notes, Jio has brought them the full internet, rather than the pocket version offered by Facebook’s old Free Basics plan. (Which India banned in 2016
for violating net neutrality.)
Stories about this deal all take a run at explaining how both companies will profit from it. Jio gets a lot money to lengthen its runway. And Facebook gets a powerful political ally in the well connected Ambani, plus some new options related to commerce. Much of the speculation focuses on how Facebook might use WhatsApp, which has 400 million users in India but doesn’t yet generate much revenue. Here’s Newley Purnell’s take in the Wall Street Journal
Access to the platform could be a boon for Jio as it pushes forward with an ambitious plan to dominate e-commerce in the rural regions where most Indians live and it is trying to partner with millions of India’s small mom-and-pop grocery stores. Consumers, for example, could use WhatsApp to purchase products from neighborhood shops, which Jio has been signing up
via low-cost point-of-sale machines.
“E-commerce will happen in a very localized way” in rural India, said Tarun Pathak, an analyst with research firm Counterpoint. It will happen not on PCs but on inexpensive smartphones and, “The familiarity is there for WhatsApp,” he said. “It makes sense.”
In Bloomberg, Andy Mukherjee and Tim Culpan speculate that a close partnership between a carrier and WhatsApp could turn the messenger into a WeChat-style “superapp” — long a dream of Facebook’s, and one that has so far gone unrealized. They write:
Customers in China and Indonesia have shown a preference for superapps, which allow people to interact with an umbrella brand for everything from chatting with friends to booking cabs and managing money. Ambani could be best-suited to try the model in India, especially if he gets to build it around the popular WhatsApp.
Earlier this week, I noted that Facebook had found new ways during the pandemic to push its core strategic message
: that its vast size and free-speech ethos are good for the world. With its investment in Jio at a deeply uncertain time, we find Facebook pressing its advantage in a whole new way.