Facebook recently announced plans to buy a 9.99 percent equity stake in Indian technology company Jio Platforms for $5.78 billion. The transaction accompanies news that the social network will work with Reliance Industries Limited, Jio’s parent company, on a new e-commerce venture. Together, the two corporations will bring payment services to 30 million Indian mom-and-pop stores via WhatsApp.
According to Bloomberg, the Jio Platforms deal is Facebook’s biggest purchase in six years.
Why Facebook Bought Into Jio Platforms
Like its fellow Big Tech giants Apple and Microsoft, Facebook believes in the economic potential of the Indian market. Indeed, the firm’s WhatsApp subsidiary has 400 million users located in the Southeast Asian Republic. However, the firm has struggled with regulatory hurdles when trying to expand its footprint within the nation.
Four years ago, the Silicon Valley giant made a failed attempt to bring quasi-free internet service to India. The company wanted to launch a program called Free Basics in the region that would give locals no-cost access to websites like Facebook, Wikipedia, and BBC News. However, the offering excluded popular sites like Amazon, YouTube, and Twitter, which prompted Indian regulators to file net neutrality objections.
Notably, Facebook planned to work with Reliance to launch Free Basics.
For its second bite at the apple, the social media service is taking a different tact, starting with a significant investment in an Indian brand. By pouring nearly $6 billion in Jio, the firm has become the corporation’s largest minority shareholder.
JioMart and Monetizing WhatsApp
In addition to their new arrangement, Reliance and Facebook are developing JioMart, a new service that will allow millions of Indian corner shops to accept payments via WhatsApp.
Facebook will benefit from the co-venture because it provides a pathway to monetize its 400 million Indian messaging service users. Theoretically, the new offerings branding and connection to an established brand will please the region’s patriotic regulators.
The deal also helps the social media company turn a profit on WhatsApp, which it bought for $19 billion in 2014. Facebook recently revealed the service has 2 billion users worldwide, but it lacks a subscription fee or advertisements. JioMart gives the corporation the ability to earn money without risking the app’s popularity with a paywall or ad infusion.
Similarly, JioMart has the potential to have a transformational effect on Reliance. The conglomerate spent $32 billion launching Jio Platforms to bring networking services to India in 2016. Currently, the company provides free voice and minimally expensive data services to 380 million locals. But Reliance CEO Mukesh Ambani believes the firm’s new retail services will account for 50 percent of its income in a few years.
In a press release, Reliance stated it generated $5.7 billion in net profit in the year ending March 31, 2019.
Following its partnership announcement, Reliance’s stock rose by 10 percent, which made Ambani the richest man in Asia. If the deal can help the American corporation monetize the Indian market, it will likely add a few zeros to Mark Zuckerberg’s net worth as well.