My colleague Tarun eloquently summarized his perspective on how Facebook's $5.7 billion investment in Reliance Jio platforms will help Facebook monetize Whatsapp. This can be the 'eureka' moment for the Indian digital commerce sector to offer a mobile platform and services to the businesses which are still not benefitting from intersection of mobile, software and internet.
This is one of the biggest deals in India’s telco history and second biggest for Facebook after its Whatsapp acquisition.
While it is quite straightforward how Reliance Jio, which has grown to become the top Indian operator, benefits from this deal. The mobile giant gets the dollars to reduce its debt & have access to Facebook's technologies. However, the larger question here is what's in it for Facebook? Even though it can be considered a long-term strategic bet, what will need to happen for Facebook to reap a healthy ROI on this huge $5.7 billion investment?
We see the opportunity for Facebook to recover at least 5x on its investment over the next few years. This deal is much more than Whatsapp-Jio digital commerce solutions. Not certain if this is what Mr. Zuckerberg had in mind, but certainly the expectation is a substantial return on this massive investment. For understanding it better, let's deep-dive into the current capabilities of both of the tech giants and where there are synergies for deeper integration and who has the most to gain?
Privacy & Regulatory Hurdles Galore
Having said that, Facebook has multiple avenues to monetize this strategic investment but lot will depend also on how the government sees this (and potential competitors which will lobby hard against the deal). There will need to be high transparency on the data sharing agreements between the two giants. Further, the user data and platform cannot be misused for intrusive or targeted schemes similar to Facebook's scandalous history, as the trust factor is fairly low. Thirdly, Indian government could be concerned about the amount of data access Facebook will have.
Future of Telcos
It is said that data is the new oil. I would argue data is the new "crude" and what companies like Jio or Facebook or Google do with this crude converting into Big information is going to shape the future business model in the telco space as everyone is looking to become an end-to-end internet player rather than a telco. I believe if this trend continues, in the next ten years, we could see e-commerce, content, cloud and social tech companies replacing traditional telcos to sell end-to-end services from communication to content to commerce to cloud to collaboration services.