July 4, 2020

Brand, Media & Advertising

Why would Facebook Invest $5.7 billion in Jio?

Jio, Facebook, deal, ambani, facebook jio deal
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Image Credit: Business Today

$5.7 billion deal between Facebook and Jio amidst the COVID crisis is worth noticing. There are different theories by different publications and analysts and everyone has written so much about this deal and flooded the internet on the same.

Here is my own theory after reading some of them and listening to Mukesh Ambani and Mark Zukerberg about the future of this partnership. But my theory is based on my own experience of working on the Facebook advertising platform from the last 4 years and I must say that one of the most important elements that make Facebook an advertising machine and the first choice for brands is its scale i.e the number of users who uses the Facebook and its family of apps like Instagram, Whatsapp, and messenger.

It’s not only scale the makes Facebook a darling platform for brands to advertise but it’s the data that Facebook has about you and me and which facebook concerts into the targeting capabilities of the platform and brands/advertisers are able to target people on Facebook and fulfill thier marketing goals.

There are two pictures of the deal first above the iceberg which all we can see and listen from Mr. Amabani and Zukerberg. The above the iceberg picture shows us that both the companies truly want to empower 30mn small retailers part of Jio Mart an online to offline commerce platforms which would help small retailers to take orders online.

What lies below the iceberg is that Facebook’s entire revenue model is advertising money and it makes money from Facebook and Instagram but it could not monetize the Whatsapp which has more scale than Facebook itself. Though Facebook is trying to monetize Whatsapp by bringing the ads on stories but that’s far away from may not be high revenue-generating propositions. Facebook made an attempt to launch WhatsApp pay but it could not get license form the Indian government. That could have been game-changing for Facebook as WhatsApp could make a lot of money in transactions and could become a revenue-generating product for Facebook.

So what made Facebook invest 1% of thier valuation for a 10% stake in Jio. Well, after this deal Facebook might get a license to launch Whatsapp pay will become a default payment engine on the Jio mart which will help Facebook to make some money on every transaction.

Another thing worth noticing is that data lies at the core of Facebook advertising is Data. The more data Facebook has the better brands can target people and drive ROI from the campaigns that mean more revenue for Facebook. There are speculations that this deal will give Facebook access to the data about your buying behaviors like what you buy and how much you spend on groceries and all and that can be ported back to improve Facebook targeting capabilities.

Remember it’s probably a deal about data more than anything else and Data is the new oil.