Monday, Oct 03, 2022

How India Can Impact Facebook Fortune As Its Shares Tumble On Wall Street

India is the largest market for Meta’s three top products—Facebook, WhatsApp and Instagram. Its India MD Ajit Mohan argues that India still has a lot of growth to offer. What happens to his prediction in India could decide how Meta performs globally in days to come

Ajit Mohan
Ajit Mohan

“Although our direction is clear, it seems that our path ahead is not quite perfectly defined,” Meta Platforms CEO Mark Zuckerberg told his investors on Wednesday. The shares of the Facebook parent have fallen for two consecutive days, hitting the lowest value down 26 per cent on Thursday, after it projected a subdued growth.

Though Meta blamed Apple for a drop in projected earnings in the first quarter, saying that Apple’s new privacy feature is impacting Facebook’s advertisement revenue, there could be other reasons at play too. In the January issue of Outlook Business, vice-president and managing director of Facebook India Ajit Mohan discussed at length the hits and misses of the social media giant’s strategy. India is the biggest market for Facebook, Instagram and WhatsApp, Mohan said. Many of its product innovations were first scaled up in the Indian market before they were pushed into the global arena. 

Year after year, the phenomenal rise of the Facebook properties in India has given it a global user base and revenue that has driven its share prices up. Indian users produce six million Instagram Reels every day, still, Instagram has not touched the level TikTok had attained in India when it was banned by the government after border tension with China escalated in Ladakh. 

“A lot of people have come online due to affordability of and access to high-quality internet in a short period of time. That kind of a shift where you have had well north of 700-750 million people coming online in just five years—which hasn’t happened even in China—is phenomenal,” Mohan said. The profits of Facebook rests on this type of mass penetration of the internet in an emerging market like India, not in the saturated regions in the West. Facebook failed in India with an attempt to create a free internet ecosystem through Free Basics. Activists called it an attempt to monopolise the sector and to get an unfair advantage over competitors. Now, it has entered into a partnership with Jio Platforms, a company that has been at forefront of deepening internet penetration in the country, and hopes to expand its reach if Jio is able to further expand exponentially.

Another challenge Facebook faces in India is that it has made a decidedly sharp move towards virtual reality, something that seems to be targeted at a Western audience as India still has device-level challenges.

Below are excerpts of an interview with Ajit Mohan where he discusses many of these issues about growth challenges that have become a global topic of discussion now:

Facebook India Online Services’ gross advertising revenue grew 41 per cent to Rs 9,321 crore in FY21. How do you plan to keep up the growth momentum?

When we look at India, we don’t start with revenue. We look at it in two ways—one, it is the largest country for Instagram, WhatsApp and Facebook and therefore, very consequential. Second-- it is the context of the country itself. A lot of people have come online due to the affordability of and access to high-quality internet in a short period of time. That kind of a shift where you have had well north of 700 to 750 million people coming online in just five years—which hasn’t happened even in China—is phenomenal.

In that context, we made a few choices a few years ago. One was to focus on the agenda of entrepreneurship and small businesses. We realised that although hundreds of millions of people had come online, most companies were focused only on the top 50 or top 100 million. We bet on the agenda of making it easier for smaller businesses to use our platforms and to grow in scale both domestically and internationally. Our second bet was on Instagram because we knew that in a country as young as this, there is a tradition of creative expression. Instagram had made India a focus country back in 2019—well before the rise of Reels. We saw the opportunity behind the short-form video and went on to build a product that was India-centric. That’s the story of Reels which, in many ways, originated in India—the pilots were done here, the first scaling was done here and it’s the Reels model that has gone global and done extremely well. 

Our third bet, from an economic point of view, was online commerce. Our ad platform, where advertising leads to action, has always been particularly useful for small businesses. We believe that if we do the right thing for creators, for small businesses, eventually we will benefit in terms of revenue growth for ourselves.

Some reports suggest that youngsters are weaning off social media. Do you see a saturation point for the Facebook app and perhaps a bigger growth momentum for Instagram and WhatsApp?

We have more than 434 million users on Facebook in India. And, as per the numbers disclosed over the last few years, we are continuing to grow in Facebook (the app), Instagram and WhatsApp. The propositions of the three apps are very different—for WhatsApp, the promise is of private messaging, for Facebook it is the promise of connecting with people and for Instagram, it is about following interests. The distinctness of the proposition is relevant as newer players are coming into the internet. So, when you ask me if the growth of Instagram is happening at the cost of Facebook or if one is not growing as much as the other, the answer is 'no.'

TikTok dominated the short video space until it was banned in India. What is your focus in the short-video space?

India has become a video-first market and 70 to 80 per cent of all data in the country is on video. Given the predominant role of video in driving online consumption and social experiences, it is a huge priority for Meta.

It has been a year-and-a-half since Instagram Reels has been around. Today, it is a growing space globally where brands and creators can be discovered by anyone. That’s because Reels is the best place on Instagram to reach people who don’t follow you. It has transformed the way content is created and consumed on Instagram and given rise to a whole new wave of young creators.

Facebook started off as a great tool for people to connect with friends and family. Now, your evolution means your algorithm will prioritise commercials over individual posts. How do you see these two strategies marrying?

I don’t think we prioritise commercials. The maximising function of the algorithm is how to produce relevant content for an individual. The big shift a few years ago was the algorithm essentially prioritising friends and family over commercial content. The bet was on people seeing content from friends and family rather than from public sources—even if they are going viral. People do see ads on the feed but there are very strong policies on what kind of ads marketers can put up. There are very tight numbers of ads that a particular user can see. Consumers have never complained about it. They understand that it is because of the ads that we have been able to keep a very useful service free for everyone and second is the power of personalised ads. It’s the same ad engine that drives ads on both Facebook and Instagram. Users don’t see it as a disturbance to the experience. They see it as an addition to the experience.

Free Basics, the plan that Facebook wanted to succeed in India, had to be shelved following allegations of monopoly. Reliance, too, has a history of creating monopolies in the segments it operates in. Do you think your deal with Jio can bring back similar accusations for both companies? 

There isn’t much connection between the two. The principle of neutrality remains. I think when we announced the investment in Jio a year and a half ago, we also announced the partnership between WhatsApp and JioMart. We enabled the digitisation of the Kirana stores in India and to make it easy for people from across the country to order from these shops, we didn’t make the partnership exclusive. So, it doesn’t prevent either Jio or Meta, as companies, from working with others. 

Also, the partnership was approved by the Competition Commission of India which is the agency that ensures that competition remains intense in the market. If you look at any segment in India—commerce, social media, messaging—there is competition everywhere. I have only seen a positive assessment of the partnership that it is fundamentally an opportunity to connect the scale of WhatsApp to the reality that most offline commerce in India continues to be the Kirana stores.

Tell us about Metaverse and its relevance to India.

If you look at the last few years, since the acquisition of Oculus in 2014, there has been a lot of investment in fundamental research and product work that we haven’t talked a lot about. Today, when you wear the Quest 2 headset, you will realise the massive improvement in the device as compared to the last few years. A lot of this wouldn’t have happened without intentional effort and investment. We have the opportunity to contribute to the building of a more immersive and more embodied version of the internet than the mobile. And, we are well-positioned to contribute to it because of what we are building in AR (augmented reality) and VR (virtual reality) through the apps that we have. We see a direct line from Facebook, Instagram and WhatsApp into how we can leverage those to help the social technologies that will underline the Metaverse.

From a platform point of view, we can contribute to the many blocks that will constitute the making of the Metaverse. That explains the timing. As a company, we are going to put in all our energy from an engineering, investment and partnership point of view.

Read full interview here: