Reasons Unveiled - Why Facebook Bought Nearly 10% Stake in Reliance Jio!

Reasons Unveiled – Why Facebook Bought Nearly 10% Stake in Reliance Jio!

Mukesh Ambani is never off the spotlight! And, this time, when we were least expecting it to roll out, during this lockdown, they made the headlines again. 

Reliance overshadowed the ‘oil prices sinking low news’ with their $5.7 Billion which is about whopping INR 43,574 Crore investment from Facebook in return for a 9.99% stake in Jio Platforms. The subsidiary that will house a majority of the territory’s resources. 

Facebook bought a nearly 10% stake in Reliance Jio!

The partnership with Jio would allow Mark Zuckerberg to step up his expansion in India! And, the reason behind this is that India is the second-largest market after China. And, India is also rapidly embracing online payment and e-commerce as more people get onto smartphones. 

But, everyone is grappled around this question, what was the motive behind this tie-up, and what do both of the top class companies get out of it? What are the benefits that they hold? 

Let’s know about them -

01. ‘Phygital’ commerce and a super-application:

Phygital - physical as well as digital commerce and a super application is the reason behind the tie-up? Reliance Jio has always been a tech giant and when it announced its 4G plans back in September 2016, it made some hecking good profit out of it. Each and every next person has Jio sim in their phones. It could turn the data of billions of Indians into profits. 

They earned over 300 Million Indian customers with its cheap data plans!

The suite of applications like JioCinema, Jio Money, JioTV, JioChat, which was made available to the public, didn’t make a good profit and it is still not clear when it will be monetized. While everyone doubts about the Ambani to make the value out of the application, they unveiled with the Facebook announcement. 

They mixed WhatsApp with the JioMart!

 mixed WhatsApp with the JioMart

Under this partnership, they exclaimed that it will offer consumers the ability to access the nearest grocery store, which can deliver products and services. And, this all be done, i.e., the transactions will be done through JioMart using WhatsApp. 

Ambani said in a video interview, ‘In the very near future, JioMart and WhatsApp will empower nearly three crores small Indian Kirana shops to digitally transact with every customer in their neighborhood. This means all of you can order and get faster delivery of day-to-day items from nearby local shops. At the same time, small kiranas can grow their businesses and create new employment opportunities.”

Facebook-Jio

No wonder, it is an excellent idea! The phygital commerce strategy is a real genius, as over 400 million users are there on WhatsApp and about 388 Reliance Jio subscribers. So, about 388 Million will find the nearest kirana in their hands!

All you have to do is send him a message to order your groceries!

This is the first project Facebook and Jio will work on. 

This will be a very tough competition for Amazon and Flipkart, and it even has the power to rupture the entire e-commerce ecosystem in India!

Coming to the super app, there are rumors about this powerful duo creating a super app along with the likes of WeChat. 

02. A safe bet on the future wrath:

The second reason that is making rounds is that Facebook’s investment in Jio is a safe bet on avoiding future fury by India’s authorities. As the COVID-19 pandemic only accelerate these protectionist concerns, so, Facebook picking up a near 10% stakes in Jio is actually buying ‘protection’.

There has never been more scrutiny of big technologies and foreign companies facing challenges in India in terms of law enforcement and especially the barriers that they have to face, like personal data protection of Indian citizens and also existing organizations. 

This might be true as the WhatsApp has faced a lot in rolling out the payment service in India and these processes can be eased out when they have a domestic partner like Ambani!

03. Ambani’s Debt-Free Goals:

Another reason why Ambani and Facebook’s new partnership will be a real success for Ambani is that it will help RIL’s aim of becoming free of net-debt by early 2021. With the cash flow from the Facebook deal, the Jio platform is expected to get about INR 15,000 crores which will, in turn, be used by RIL to lower the debt.

This investment + the INR 7,000 crore investment by BP in the oil marketing joint venture is expected to fix the debt by 50,000 crores. 

It is a big leap towards being net-debt free by the end of the financial year. 

04. An ocean of data for Facebook:

Even if all the above reasons or expected perks fail, still Zuckerberg has a direct pipeline to the data of India’s small and medium businesses and Jio’s network of users. While it is not clear and the Reliance and FB officials insist that there would be no data-sharing agreement on the cards, but it can be possible in the near future. 

The data give and take signature are left unsaid and unattended but they are surely not out of sight with this JioMart project. It could end up providing deeper and most valuable data to Facebook and it will benefit them to have a close insight into the consumption patterns of Indian customers which will, in turn, affect and update Facebook’s advertising machine. And, also it could make the way for Reliance to monetize Jio’s subscriber list.

In turn, it is all a ‘give and take’ partnership between Facebook and Ambani. And, it is surely going to benefit both of them. 

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