Joining of giants: On Facebook-Jio deal

Facebook’s decision to invest ₹43,574 crore for a 9.9% stake in Reliance Industries Ltd.’s Jio Platforms marks a rare coming together of two giants who have a reputation for market domination. The focus of their combined might is the India retail sector, a difficult terrain as large parts of it are still unorganised. But then for the same reason, it holds potential for huge disruption. In recent years, the retail space has been an ongoing battlefield for behemoths such as Amazon and Walmart, themselves globally dominant players. The other interested parties in this are payment services companies such as the Softbank- and Alibaba-backed Paytm, and Google, which runs Google Pay. But the combination of Facebook and Reliance will be difficult to beat — they seem to have both the marketplace and the payment solution sides covered. For Facebook’s WhatsApp messaging service, India is the biggest market with over 400 million users. It currently awaits regulatory approval for its payment solutions. Jio is now India’s No. 1 telecom brand by user base, less than four years after it launched its service. And then, JioMart is a recently-launched commerce marketplace, which seeks to connect local retailers with consumers. And this is why, “the largest investment for a minority stake by a technology company anywhere in the world” (as a Reliance Industries press release put it to describe the Facebook move) has been notably accompanied by an agreement to “further accelerate” business on the JioMart platform using WhatsApp.

In short, it is a win-win deal for both players. While its social media services and messaging services have been extremely popular in India, Facebook has however struggled to get past regulatory concerns in India over some of its ambitious projects such as its free limited Internet offering Free Basics and digital currency Libra. While it stays blocked in mainland China, Facebook now gets to participate in a stronger way in one of the world’s fastest growing markets for e-commerce. Reliance can rely on the popular messaging service to accelerate the building of its marketplace. It has also received handy money to reduce its debt. The deal, coming as it does at a time when the world is fighting the coronavirus pandemic, is a thumbs up to India’s potential. It is noteworthy that this is the largest foreign direct investment in the technology sector in India. But will the deal that brings together the world’s largest social media company and the group that is a leader in everything from oil to data lead to more consolidation and fewer players, as it happened in the telecom sector? It is a big question mark, and the deal should not be passed without closely scrutinising this. For, the future of India’s Internet economy is at stake.

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Printable version | Oct 25, 2020 7:39:15 PM | https://www.thehindu.com/opinion/editorial/joining-of-giants-the-hindu-editorial-on-facebook-jio-deal/article31427757.ece

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