The Facebook-Reliance Jio deal envisages seamless integration of small businesses on a single network for communication and making payments through WhatsApp. But company's poor track record on privacy could hurt its payments plans, which stand crucial to its success.
Facebook's first quarter results were a reflection of how people locked-up inside homes were using social media more than ever. While the company's advertising revenues took a hit this quarter, user-engagement was at an all-time high. Family daily active people ('family' refers to people using any of the app from WhatsApp, Facebook, Instagram to Messenger) was 2.36 billion on average for March 2020, an increase of 12 per cent year-over-year and the Family monthly active people was 2.99 billion, an increase of 11 per cent year-over-year for the same period.
The Jio- Facebook deal announced last week also found a significant mention in the earnings call with CEO Mark Zuckerberg hailing the move as a step that would serve small businesses and enable commerce over the long-term in a country that has the largest Facebook and WhatsApp communities in the world. "By bringing together JioMart, which is Jio's small business initiative to connect millions of shops across India with WhatsApp, we think that we're going to create a much better shopping and commerce experience," he said . With approximately $5.7 billion investment, an early focus area for the company as part of this investment is to give micro, small and medium businesses access to digital tools that empower them and help them grow and expand their business while also connecting with their customers.
Sneak peek into FB-Jio mart
Ajit Mohan, VP and Managing Director, India said, "The collaboration with Jio is focussed on making it easy for people to interact with a business of their choice and ultimately make it seamless to find or purchase a product right within a chat. We are looking to work jointly for identifying areas of collaboration. For example, consumers are able to access the nearest kiranas who can provide products and services including transacting seamlessly with JioMart using WhatsApp." Zuckerberg hinted at what this collaboration could look like. On the commerce side, especially for Whatsapp, the focus would be on maximising business presence over all the app offerings such as Facebook, Instagram, WhatsApp, and Messenger and then increasingly doing things that can help them drive transactions. "We are working on payments to be able to complete transactions, and we've rolled out a new ad format, click to messaging ads, where basically a lot of small businesses and different businesses are finding that their message threads with people perform better for driving sales than their websites or other presences," he said.
The essential form of this commerce partnership would be that businesses buy ads inside Facebook or Instagram that send people to chat threads and tools that would be built around the threads to make it more valuable. " We think that those ads will only increase in value, which is the way we're currently thinking about that business," said Zuckerberg.
The critical piece of the missing puzzle for the social giant' s mega vision of entering commerce space is the Whatsapp Pay. WhatsApp with ICICI bank as its PSP (payments service provider) has still not secured a full-fledged go ahead to launch its UPI-based payments service. National Payments Corporation of India still lists WhatsApp as a third-party app 'live for limited users'. Ajit Mohan says while the company is still awaiting payments approvals, the use of payments on WhatsApp will be important to the success of the collaboration. He also said that Facebook is engaging constructively with regulators in India to ensure that their concerns are addressed appropriately so that WhatsApp pay can be rolled out in India.
However, along with regulatory hurdles, the company is also battling a few cases in the Supreme Court whose outcome is awaited. In a Writ Petition/PIL filed by Centre For Accountability And Systemic Change (CASA) in 2018 (FB is one of the respondents, among others), RBI had filed an affidavit that clearly stated that WhatsApp was not complied 100 per cent with the data localisation mandate for payment services as mandated. In February this year, another interim application had been filed by CASA questioning the permissibility of the limited users mandate by NPCI to WhatsApp even as the RBI admitted the company to be non-compliant. Again another PIL has been filed by Good Governance Chambers questioning the WhatsApp payments with the RBI, NPCI and ICICI bank as other respondents in the case. Ajith says that unrestricted free flow of data is a bedrock principle of the open market, which has greatly contributed to India's technology boom so far, "We continue to have independent views on a number of topics and data localisation is one of them."
While India's data and privacy bills await a final nod and are yet to firm up as an enforceable law, Facebook is already treading on a grey area. Much of its plans will depend on the outcome of these litigations.