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FACEBOOK’S $5.7 BILLION BET ON INDIA THROUGH JIO - PART III

PART 3

How the dynamics will work?

This acquisition benefits both companies. For Reliance, the equation is simple. The money is vital for fulfilling Mukesh Ambani’s goal of making Reliance Industries debt free by 2021 and For Facebook, the deal comes close on the heels of the nod from the Reserve Bank affiliated National Payments Corporation of India (NPCI) to allow WhatsApp Pay to operate in India, and its decision to comply with the data localization guidelines.

WhatsApp could leverage Jio’s Payments Bank as a sponsor bank to power its UPI-based payments. The deal will open up WhatsApp’s entire user base for Reliance Jio, including the customers on rival telecom partners. The power of content, commerce, and community supported by the mobile network can be unleashed for these services at scale, making the impact widespread from e-commerce to telecom to mobile payments and potentially even healthcare and education. Through this deal, JioMart could become a one stop shop for e-commerce, social media consumption, instant messaging and digital payments. The network effect also helps in creating an ecosystem that disincentivises users from leaving.

The cryptocurrency community in India is upbeat about the deal between Facebook and Reliance Jio. Last year, Reliance Jio announced its plan to build the largest blockchain network in India. The Indian cryptocurrency space recently got a boost when the supreme court quashed the banking ban by the central bank, the Reserve Bank of India (RBI). Since then, the crypto sector has been growing and attracting investments from abroad despite the global coronavirus pandemic and the nationwide lockdown. Meanwhile, Facebook’s Libra project has undergone a major change.

Notwithstanding its minority share, the fact that Facebook now has a seat on the board of Jio Platforms might mean that its voice will be given greater importance in policy deliberations. This could mark a shift away from Chinese investments and prove to be a boost for Indo-U.S. trade and investment relations. This deal comes on the heels of a change to India’s Foreign Direct Investment (FDI) norms that make it more difficult for Chinese companies to continue investing in India. These norms certainly act as fetters to the Alibaba-Paytm alliance to compete with Jio Mart.

Facebook constellation is sitting on a huge pile of data which they were not able to monetize. The vast quantities of data generated by users of online services can now be processed into valuable information for commercial and strategic gains by leveraging Jio Mart’s reach. In reverse data sharing, WhatsApp, through its commercial agreement with JioMart, could end up providing deeper and richer data to Facebook which will provide more intense, localized insight into the consumption patterns of Indian customers. This new perspective on Indian consumers will add to Facebook’s already formidable advertising revenue stream.

Just as a firm’s competitive advantages are shaped by the strategy and resources of the firm, so it goes with platform-based advantages. When the platform yields synergy, each member can be thought of as adding something to the network-based advantages. As a platform scales, its costs per unit sold decreases logarithmically in comparison to linear business. A platform grows not by buying more assets, but by acquiring more users, which has a near-zero cost. This costs the platform next to nothing.

Credits: Ravi Agarwal, Sam Shead, Akshat Kashyab, Debasish Sarkar, Casey Newton, Arindrajit Basu, Amber Sinha, Kevin Helms, Nick Wood, Ruchi Gupta 

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