Is Facebook arm-twisting small advertisers?

 Ajita Shashidhar   New Delhi     Last Updated: November 8, 2017  | 14:11 IST
Is Facebook arm-twisting small advertisers?

The equalisation levy or the Indian version of the Google Tax (where advertisers who advertise on foreign technology platforms such as Facebook or YouTube, that don't have a registered entity in India, have to pay an incidence of 6 per cent as Google Tax) is pinching the pockets of start-ups and smaller advertisers which typically spend much less than a crore on advertising.

While Google has started giving them an Indian invoice, the likes of Facebook continue to bill advertisers through their off-shore entity so that they don't come under the purview of Indian taxation. "We are absorbing the additional hit, which should have ideally been borne by Facebook," remarks Shanker Prasad, Founder of personal care start-up, Plum.

"It's a big hit on our P&L. We are penalised," adds Rahul Dash, Co-Founder,, an online beauty retailer, for whom Facebook and other global digital media platforms are an important part of the media mix.

In fact, for most of the smaller advertisers Facebook (with average cost per minute rates of Rs 400 and an active user base of 241 million) is a must-have in their media mix and they have little choice but to absorb the 6 per cent additional hit. "Google and Facebook are primary drivers in paid media for start-ups like us. We can't avoid them," points out Dash of Purpulle.

Plum, says Prasad, is continuously looking for ways and means to optimise costs on Facebook, as it is difficult for a B2C business to run without Facebook in its media plan. So, is Facebook arm-twisting small advertisers?

Girish Menon, Partner, KPMG, suggests that there should be an exemption for the very small entrepreneur-led businesses whose billings are small. "Just as GST gives exemption to businesses that generate revenue of less than Rs 20 lakh per annum, a similar exemption should be made for the small advertisers investing on digital platforms."


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