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Boost for small sellers, beyond chats on WhatsApp: What Facebook-Jio deal could mean for India

Facebook investing in Jio is probably not just about the social media network. In fact, it will be more about WhatsApp, the secure messaging platform that Facebook acquired. We explain what the deal could be about.

Written by Nandagopal Rajan , Edited by Explained Desk | New Delhi | Updated: April 23, 2020 8:26:59 am
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Facebook and Reliance Industries (RIL) on Wednesday announced that the social network will invest about Rs 43,574 crore to pick up a 9.99 per cent stake in Jio Platforms ($5.7 billion), RIL’s wholly-owned subsidiary that works on digital apps, digital ecosystems, and the popular mobile service. The investment by Facebook put the value of Jio Platforms at Rs 4.62 lakh crore.

Why is Facebook investing in an Indian Internet service provider?

Facebook has been trying for years to get its finger in the Internet pie. In 2015, it had experimented with Free Basics, which provided free access to basic Internet services as a partnership with service providers. But it was criticised for being a walled garden, and the social network soon pulled out of the idea.

It had even looked at the possibility of beaming free Internet from the air using a solar-powered drone called Aquila, and enabled low cost high-speed Wi-Fi in some remote parts of India with something called Express Wi-Fi.

But those were the days when data was expensive, and free access to the Internet was envisioned as the easiest way to bring the next billion users online.

Then, Reliance Jio happened. The new Indian Internet service provider launched with data rates that were so low that they became the industry standard in one of the largest online markets in the world.

Jio alone helped bring 388 million users online, well over a third of what Facebook wanted to. And this is why Jio is interesting as a partner for the largest social network in the world.

But Facebook investing in Jio is probably not about Facebook itself. In fact, it will be more about WhatsApp, the secure messaging platform that Facebook acquired in 2014.

About 20 per cent of WhatsApp’s 2 billion-plus users are in India. WhatsApp’s growth in India has coincided with the growth of Jio, and the two would have a very large overlapping user base. To a lot of Indians, the Internet is still limited to a few apps like WhatsApp, Facebook, and YouTube.

In their statements announcing the partnership, both Facebook and Reliance Industries have talked about enabling “new opportunities for businesses of all sizes, but especially for the more than 60 million small businesses across India”. This is where the big opportunity lies for this new alliance: the emergence of WhatsApp as the new super app, one that caters to much more than just your chatting needs.

Also read | RIL shares zoom over 8% after Facebook deal

The model has been very successful in other Asian markets like China, Korea and Japan. Apps like WeChat, Line, and Kakao Talk offering everything from gaming to retail commerce. And this is where WhatsApp sees an opportunity to become the marketplace of the future, especially in a market like India, where it reaches almost as many users as the Internet itself.

With almost every Internet user being familiar with how to use the app, there is hardly any friction on executing the next level of use cases.

So what will the collaboration entail?

The only announcement for now is that the two entities will collaborate around JioMart, Jio’s e-tailing business. WhatsApp could easily enable access for millions of mom-and-pop stores across the country, helping them to show up on the e-tailing platform. Jio can use the location data to curate local businesses, while WhatsApp will enable hurdle-free connection and orders between the customers and traders.

The only hurdle, a big one at the moment, is that WhatsApp pay has not yet been cleared by the Indian regulators.

The feature, which has been in testing in India for a while now, allows users to send money from one WhatsApp account to the other using the UPI backend. Once that is enabled, users will be able to order groceries from their nearby shop, or perhaps a sari from a vendor in another part of India, by just paying inside the app itself.

It is the simplicity and the ubiquitous reach of WhatsApp’s payment feature that makes it ideal for India. In January, Facebook founder Mark Zuckerberg had announced that he expects WhatsApp Pay to be live in six months in countries like India. Till then, the collaboration could be enabled by JioMoney.

The winner here will be the small traders who will get an easy opportunity to connect with customers old and new, as well as sell online using a platform they understand.

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And what does Jio gain from the deal with Facebook?

For Jio, this could mean users staying within its products for most of their online time, and thus emerging as a destination and not just the medium. No other service provider has really be able to do that so far, though they all have tried.

Also, it gets to empower million of small business across the country to enter the e-commerce space without a website or a payment gateway. All they would need is the WhatsApp for Business app to reach out to customers across the country.

Transaction value also helps with valuation in case Jio wants to go for an IPO in the future.

Will WhatsApp then be limited to Jio?

No, since this is a minority deal, Facebook is not bound in any way, and both sides will not be offering anything exclusive. So while on Jio it does a certain set of collaborations, it could well look at similar partnerships on other platforms — or within WhatsApp itself.

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