American technology giant, Amazon, has been in talks with Bharati Airtel to buy a 5% stake in the latter's business for $2 billion. If this deal were to fructify, Amazon will surely be able to give Reliance a run for its money in the platform business. While the Jio platform has 388 million consumers, Amazon will also have access to Airtel's 300-odd million consumer base.
With its marketplace as well as other services such as Amazon Prime Video, Amazon Pay and voice offerings such as Alexa, the American tech giant will be able to give the platform business a new dimension in India. Experts are especially curious to see how Alexa would shape future buying habits of Indians. "With Alexa's voice feature, Amazon is taking retail to the next level in the US. Consumers can simply place their orders on Alexa and it would be delivered to their homes. It will be interesting to see how Amazon localises Alexa in local languages once their deal with Bharti comes through," says the former MD of a leading retail company.
"The only thing that is now missing in Amazon's kitty in India is voice, once that comes through and with the kind of digital assets they have, be it Amazon Prime Video, Kindle or Alexa, Amazon will be a force to reckon with in every aspect," he further adds.
However, one of the major reasons Amazon wants to pick up stake in Airtel, according to experts, is to fight Facebook in the advertising battle. Facebook recently bought close to 10 per cent stake in Jio for Rs 43,500 crore. "A bulk of Facebook's ad revenue world over comes from small businesses. In India, though they do have lot of small businesses advertising on them, a partnership with Jio will help them increase their reach to more and more local businesses.
Jio has customer data which will enrich Facebook's audience data," explains a senior digital advertising professional. Amazon too would be looking at Airtel to enrich its audience data and reach in India. "For instance, if I have an Airtel connection, it has a lot of data about me about what I am buying, who I am talking to, which bank or which shop I am calling. All that data would feed into Amazon's customer audience data which they will monetise through advertising. Amazon would want to do this deal to compete with Facebook on the advertising side, and with Reliance on the retail side," the digital advertising expert further explains.
It's well known that over 90 per cent of the world's internet advertising revenue is pocketed by Google and Facebook and Amazon is soon catching up. Amazon's annual advertising revenue is expected to be in excess of $40 billion by 2023. A report by Juniper Research says the ecommerce major's ad revenue is all set to outpace the ad growth rates of Google and Facebook. Amazon is known to be making huge investments in machine learning and data mining, in order to find its customer's buying tendencies so that it is able to serve them targeted ads.
In India, Amazon has the Amazon Accelerator programme through which it has partnered with local manufacturers and has helped them launch their own brands on Amazon. While the ecommerce giant claims to hand-hold challenger brands by promoting them heavily, a senior retail expert says it eventually acquires them at a mutually agreed price. "To get on to the platform these brands also need to invest in marketing and advertising on the platform," he says. Amazon Accelerator has brands such as Skrubble in dishwash, Syclone in laundry and Divine India in beauty products.
The ecommerce giant also has the 'Local Shops On Amazon' initiative which enables local shops and retailers to list themselves on the Amazon platform. So, if a consumer living in the western suburbs of Mumbai searches for a mobile phone or a TV panel on Amazon, the search will also throw up a list of local consumer durable retailers, enabling the consumer either to buy directly from the marketplace or from a local retailer where she can touch and feel the product and then close the deal. The local retailer may also offer her same-day delivery. "Listing local shops on its platform and promoting them could also become a lucrative source of advertising revenue for Amazon in the long run," explains the retail industry expert.
So, apart from leveraging multiple benefits of being part of a large consumer ecosystem, the Amazon-Airtel deal will also fuel its advertising business in a big way. An access to over 300-million consumers would certainly help the ecommerce giant to attract advertisers.