Facebook has announced it will invest $5.7 billion (INR 43,574 crore) in Jio Platforms Limited, part of Reliance Industries. This deal will make Facebook its largest minority shareholder and also make it the largest FDI in the technology sector in India, assuming the deal is approved.

For Reliance, it will help it resolve mounting debts; Reliance Industries Limited (RIL) has consolidated net debt and liabilities of $46.2 billion, which it wants to get rid of by 2021.

For Facebook, teaming up with the largest telco in India hints at a different path to scale-up its India footprint.

These are the key areas we think this partnership will have an impact on:

Powering JioMart and scaling it across India

With its recent announcement of JioMart, Reliance had made its ambitions clear in the field of commerce. JioMart is a Reliance attempt under its “new commerce initiative” to launch an O2O model (Online to Offline) which will connect the local grocery retailers directly with the consumers and replace the cash rich business model.A deal with Facebook means that connections with consumers can be stronger.

Beyond metros, WhatsApp is the only familiar name for a lot of merchants and consumers when it comes to social interactions. Millions of small merchants use WhatsApp as a primary medium to receive grocery orders – but it’s an inefficient medium for e-commerce. Various studies show that most grocery retail in India is poorly organized and Jio is looking to empower over 30 million local kirana stores across the country.

Let me illustrate by way of recent experience. I am currently in a small district of Northern India where users are unfamiliar with online grocery websites like Grofers or Big Basket. However, due to social distancing amid the COVID-19 crisis, the local kirana guys are already proactively calling users to submit their orders on WhatsApp for delivery outside the gate. This highlights the potential scale of the opportunity for Facebook and Jio; WhatsApp brings the familiarity and Jio enables connectivity to even rural parts of India. Other synergies are likely to be explored related to payments like Jiopay or WhatsApp Pay and localized POS machines for Jio, making buying ads more valuable for Facebook.

Social + Commerce = Social Commerce for SMB (Small Medium Businesses)

There are more than 60 Million SMBs in India. A lot of businesses are selling their products in India without even having a website. Many are relying on platforms like online marketplaces, Facebook pages, WhatsApp and Instagram to promote their products and services. These businesses are likely to grow to become the mainstay of the e-commerce sector in India in the coming years. In fact, Facebook was already eyeing this space to monetize WhatsApp in its recent attempt to invest in Meesho, an online marketplace that connects sellers with customers on social media platforms such as WhatsApp.

We believe that e-commerce will change in India when the next 300 million connect to the internet for the first time over the coming years. E-commerce will demand a more localized approach and help niche sellers in the discovery of their products, as both companies can leverage their expertise through AI-based solutions and connect directly with consumers.

Everyday millions of products are listed on Facebook/Instagram pages. Facebook has long been working to enable e-commerce with Instagram Shopping and Facebook Marketplace, but the initial response has been modest. We believe a big advantage for Facebook lies more in facilitating commerce than taking a native e-commerce route, at least in India. During the last earnings call, Mark Zuckerberg highlighted some important points, including mentioning SMB as a top priority.

“Beyond WhatsApp Payments, we're working on several other efforts to help facilitate more commerce, from Facebook Marketplace to Instagram Shopping to our work on Facebook Pay or our work on Libra. This is such a big space and it's important for empowering people so we're taking a number of different approaches -- ranging from people buying and selling to each other directly, to businesses setting up storefronts to people engaging with businesses directly through messaging, and a number of things on payments, ranging from using existing national systems like India's UPI to creating new global systems”

This sums-up Facebook’s ambition and, in an ideal world, this is how it should be for Facebook; control the platform from discovery to payments to delivery. This will eventually give Facebook an important metric to support advertising, tying directly to a transaction.

WhatsApp Pay, Facebook Pay and Jio Pay will get major push

Additionally, as Facebook’s and Jio’s e-commerce ambitions take off, it will be their payment platforms that will get a push especially when Jio has not been entirely successful with its Jio Money and Facebook’s WhatApp Pay, which has been waiting since 2018 for permission to roll-out its full-fledged services,, despite the platforms having 388 million and over 450 million subscribers, respectively. This is where using WhatsApp’s reach and entrenchment will catalyse digital commerce initiatives.

To summarize, Facebook and Jio will try to leverage each other’s user bases by driving synergies between the two platforms to target over 500 million users which they might currently share among both the platforms and target the next 300 million new internet users over the coming few years. Of Facebook’s assets, we expect it will be WhatsApp that will take center-stage; this may turn out to be Facebook’s attempt to finally monetize WhatsApp.

The biggest area of contention is likely how the data-sharing will happen; both companies are sitting on a gold mine of data. Roles and responsibilities are currently unclear. Facebook will look forward to strengthening its ad engine by working closely with an operator like Jio and Jio’s attempt will be to further strengthen its ecosystem led approach and scale its e-commerce ambitions that were, so far, missing.

The paths of internet giants and telcos have been converging for several years, with various steps being taking globally edging them closer. Both have much to gain, but also considerable legacy positions to protect. We expect this deal will be seen as a major step in this convergence.