RelianceJio-Facebook deal - A high price for Facebooks inability to Indianise its strategy early?

It was announced today that Facebook will buy a 9.9% stake in Reliance Jio for Rs.43,574 Cr .( $5.67 bn) valuing the Indian telco at double the market cap of the next 2 telcos Bharti and Vodafone Idea Limited combined .

Reliance Jio's impressive user base of 400 mn is a result of a completely new playbook on how telco networks are designed for 4G on a different spectrum license, control over the device ecosystem and interface with the KaiOS phone and aggressive pricing bordering on predatory pricing.

India is now the biggest internet market after China and the 4G revolution that Jio unleashed has made internet super accessible and sent data consumption soaring as the slide below shows.

Facebook's India gameplan has been slightly iffy, since unlike Amazon, Google and Netflix from its FAANG peer group , it has not Indianized its strategy or used its technological and financial might to plug ecosystem gaps. Although its consumer base across its apps especially Whatsapp has grown rapidy organically, Facebook did not even call India a separate market till the appointment of Ajit Mohan as the MD of India a year back . So while it can boast of an user base, Facebook has done anything to blend into the Indian ecosystem thats now 600 mn+ and thrives on video and vernacular . It tried with Facebook Basics in 2016 , an internet gateway strategy that did not meet the regulators net neutrality requirements. Its competitors have done a lot more.

Twitter has the political establishment and Bollywood behind its strong following and is seen as a news platform after cleaning up a lot of fake profiles. Google did some serious work on adapting Google Maps to India with vernacular directions and mapping real nook and crannies of cities to suit bike riders. It also invested in brand building despite such great tech to build an emotional bond with India through its advertising .

TikTok has captured The 'new' to Internet India base with its ability to turn anyone into a video sensation .There are farmers and shepherds who post TikTok videos with ease and the stayathome lockdown has only accelerated its usage . Brands like Dettol have seen good adoption of hashtag challenges. Most celebrities are now moving fast to TikTok - and ' I am on TikTok' is the new vanity statement for celebrities like Deepika Padukone and Trisha Krishnan.

Facebooks had many missed opportunities. Facebook also missed out the payments revolution as more nimble companies like PayTM and PhonePe captured it followed by the other internet giants like Google Pay and Amazon Pay. It also could not plug the ecosystem gaps created by the ' Look on Insta , transact via Whatsapp' of influencers and entrepreneurs. This prompted a late stage investment into Meesho who saw the opportunity before anyone else .

Facebook also has not made a big splash on the media side with Facebook watch. The Indian broadcasters OTT apps led by Hotstar, Sun and Zee have made the global might of -Netflix and Amazon look ordinary in India with 20x more users .

Faced with a tough choice , Facebook has got itself the biggest battleship it could find - the unchallenged might of India's biggest corporate group. However with everything Reliance , what works for Reliance may not always work for the partner due to its hardball negotiating tactics. The deal is a sure win for Reliance since it can pare down the debt load and have access to Facebooks software expertise something that Jio lacks despite many attempts at creating new products to leverage its distribution . It allows Facebook to have a more favourable distribution if it wants to consolidate as a super app. It can embed itself into the Jio ecosystem to nurture its user base and access Reliance's broader retail strategy for an e-commerce play.

While the deal has strategic merits, it is a late entrant strategy for Facebook that needs to be backed with more execution on the ground. It will also need more investments in building a a tech backbone in India with engineering depth and localization of content and services. Now it seems like a deal that looks like Facebook buying India's most expensive calling card to make a simple connection with its users.