Jio, large markets, geopolitics, and the zeitgeist
Why is everyone interested in Ambani's Jio and where this might be headed
When Facebook invested in Jio (quick notes if you are not familiar with Jio) back in April, I wrote in my weekly newsletter on May 4th:
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Let's forget Corona for a split second here. Facebook Invests $5.7 Billion in India's Jio Platforms
India’s largest mobile internet carrier. This is big news:
From the article:
India is a special country for us. Over the years, Facebook has invested in India to connect people and help businesses launch and grow.
Remember this isn’t FB’s first foray into india. Over the years, Facebook has tried to buy its way into India completely ignoring neutrality. That didn’t work and in retrospect that might have been a good thing (for Facebook purely from a monetization stand ONLY since ads don’t monetize very well and even if they do they are much lower in terms of how much they make. But then Facebook doesn’t want to lose out on a tech friendly market, the 2nd largest after China, which by the way they can’t operate in.
So FB spends $5.7B to:
Access ~400MM Indian customers (pre-seeded facebook apps + marketplace apps on the phone)
Experiment with WhatsApp monetization via marketplace/commerce
Experiment with “Super-apps” similar to what the Chinese tech companies such as WeChat have done - payments, delivery services, micro monetization via articles, content etc
Retry WhatApp payments (has run into regulatory roadblocks) since at this point it has business clout which does buy political clout. They have only spent ~60MM lobbying in America over the past 6 years. And this quarter in the US
The official line is that “ Jio Platforms, Reliance Retail Limited and WhatsApp have also entered into a commercial partnership agreement to push JioMart, Reliance Retail’s small business commerce platform, on WhatsApp. JioMart brings small merchants and kirana shops (what are Kirana’s?) to the Internet” and the pilots have already started.
All this in a week. Either that was superfast or this was pre-planned. My money is on the latter!
The other interesting point is of course of that Amazon has partnered with thousands of Kirana stores so the commerce war in India will be fought by Walmart (Flipkart), Amazon (amazon.in), Facebook (Reliance + Jio)
BigTech is starting to rule the world’s largest democracy
Partnerships in general fail; lets see how this ones goes
(Edit Jul 15th) And today it looks like Google has also invested $4.5B, I decided that it makes sense to think a bit more about all this interest in Jio. From Bloomberg, here is the list of companies that have invested and there are some interesting companies on the list:
This list has a few PE/Investment companies which I don’t want to cover (Catterton, TPG, ADIA, Mubadala, KKR, General Atlantic, Vista, Silver Lake). The ones that are interesting are Facebook, Qualcomm, Intel, and Google. However each player has a slightly different vested interest in the market.
The best way to think about this would be a digital value chain:
Telecom Equipment + Networks → Physical Devices/Phone → Services ← ₹₹₹ (INR) ← [CONSUMER]
Why India? Why now?
There are many interesting things happening in the market today. The world is in a unique situation with COVID-19. India banned Chinese products - after the disputed India-China border clash. Huawei and 5G concerns worldwide - Jio uses Samsung - and in general a WHOLE LOT of untapped opportunity now that Reliance Jio has successfully placed a phone (and now smartphones) in the hands of ~400MM people.
Accelerated Digital Commerce
Digital commerce has obviously accelerated in India and JioMart, which has run into problems with delivery will once these challenges are taken care of be a competitor to Flipkart (Walmart) and Amazon.in. The big winner here is obviously Facebook who has been trying to get into eCommerce both in the United States and India as well as Payments in India. JioMart (which to be clear may not succeed) was one of the last entry points into e-Commerce in India. Especially given today’s geopolitical climate with Indian people being more “vocal about local”, the ability to online Kirana’s for grocery delivery is a huge opportunity (and a HUGE problem), one that no other country around the world (China included) can solve. Only an Indian company can. And really, who better than the richest man in India : Mukesh Ambani.
Wireless Presence
Jio has ~400M million subscribers in India and has been making the leap from traditional channels in mobile such as basic voice calling toward a digital ecosystem. A 35% market share is nothing to be sniffed at.
Facebook : This helps Facebook pre-seed their apps (the whole shebang!) on a Jio phone. Defaults matter, defaults win even if they are poor in quality
Qualcomm : The chips inside a Jio phone are from 2 companies : Spreadtrum and Qualcomm. Spreadtrum is a uh, well Chinese company. We know how that will most likely go. Qualcomm, by virtue of this, and having a baby seat at the table can definitely push things in their favor
Intel : There are 2 possibilities here. Base Station Chips as well as phone chips. This also gives intel a baby seat at the table. I’m not fully sure how the dynamics would work if Intel tries to push their chips.
Google : Google’s Indian CEO is bullish on India. The emphasis on Indian was not me to be clear. You can read the blog post from the big G! Anyway, Google is quite honestly invested in many products in India (and they are valuable) for sure. Furthermore, Google Assistant is also the Jio Phone. All you gotta do is, well, “Just say Hello!” (now that is corny marketing)
Entertainment and Content (JioSaavn and JioTV)
Jio also owns a music-streaming service called JioSaavn, as well as a streaming TV business called JioTV. Obviously given COVID, digital adoption has accelerated and with that more people are watching JioSaavn and JioTV (Netflix and Spotify) this is a good thing for all the players. More powerful phones, networks, data, etc.
Payments (JioPay)
Jio, earlier this year had plans to become the first telco to offer a Unified Payments Interface. This will help with financial inclusion among the unbanked and underbanked Indian population. Guess who’s smiling here? Yep, Facebook.
Future China (and Future India) & Geopolitics
I think the world generally, and India and China are at an interesting inflection point. There has been a lot of talk about a “splinternet” (US and China) and I wonder if this will only escalate with the India-China conflict where Indian users want their own Indian TikTok’s (or American Instagram Reels) and devices made in India with Indian parts and Indian technology?
The one thing that is true about Indian people is that they are mostly peaceful people until provoked and maybe this is the provocation that was needed. Indian engineers, product managers, companies can easily go on to create a brand new part of “splinternet”. Well, Facebook is laughing … all the way to the bank along with Mukesh Ambani. Jiyo mere laal (live my dear in Hindi)
In closing, I suspect Google will not be the last of the investments. We are going to see more interested players across the value chain who are going to hope to invest. I hope Wix is one of them. They really need a better website :)
Side note : Indian websites are crowded, busy, quite unlike US websites. One of the worst offenders is ICICI Bank.
Thank you for reading. Stay safe, be well!