Deep Dive :: How will Facebook Recoup its US$5.7 Billion Investment in Reliance Jio?

My colleague Tarun eloquently summarized his perspective on how Facebook’s $5.7 billion investment in Reliance Jio platforms will help Facebook monetize Whatsapp. This can be the ‘eureka’ moment for the Indian digital commerce sector to offer a mobile platform and services to the businesses which are still not benefitting from intersection of mobile, software and internet.

This is one of the biggest deals in India’s telco history and second biggest for Facebook after its Whatsapp acquisition.

While it is quite straightforward how Reliance Jio, which has grown to become the top Indian operator, benefits from this deal. The mobile giant gets the dollars to reduce its debt & have access to Facebook’s technologies. However, the larger question here is what’s in it for Facebook? Even though it can be considered a long-term strategic bet, what will need to happen for Facebook to reap a healthy ROI on this huge $5.7 billion investment?

We see the opportunity for Facebook to recover at least 5x on its investment over the next few years. This deal is much more than Whatsapp-Jio digital commerce solutions. Not certain if this is what Mr. Zuckerberg had in mind, but certainly the expectation is a substantial return on this massive investment. For understanding it better, let’s deep-dive into the current capabilities of both of the tech giants and where there are synergies for deeper integration and who has the most to gain?

Counterpoint: How will Facebook Recoup its US$5.7 Billion Investment in Reliance Jio?

  1. Ad Platform Integration into Jio Platforms: This is the biggest and only way to recoup big $$$. By targeting the Jio user base, Facebook will be receiving a revenue % cut as Jio, thus far, has failed to monetize its ~400M subscribers via advertising.
  2. Digital Commerce: While Whatsapp is touted to be “the channel”, the real $$ will come from the % cut on the commerce transactions (margin and commissions) over the platform via millions of SMEs & users. Average transaction/SME for Facebook is the metric Facebook will be keeping an eye on.
  3. Whatsapp: Big opportunity to white label Whatsapp for Business into a platform powering Jio’s properties and monetizing via customization for different SMEs to setup channels/ store (Shopify model) or consumption model for communication & commerce.
  4. Social Graph: Obviously having access to close to half a billion subs (projected) will greatly enhance Facebook’s Social Graph, further attracting marketers & higher bid rates. The traditional Facebook advertising business will get a shot in the arm vs. Google and others.
  5. Facebook Connectivity: The business model is not entirely known but Facebook’s aggression to rope in ISPs and influence open network architecture (potentially to its long-term access benefit) and the current positioning of bringing Internet to masses which indirectly expands its TAM of potential advertisers and audience. With Jio this should be part of Facebook’s long-term strategy.
  6. Content: Jio TV has been the most successful of Jio’s digital properties. Facebook could see this as an opportunity to scale its content ambitions in the second largest market in the world (largest if you leave out China). Cross-selling gaming and video content to Jio’s growing user base would be lucrative. However, this is relatively tougher and has a high CAPEX vs. the above opportunities of monetization. We discussed this six years ago why Facebook should have gone aggressive with its content ambitions. Players such as Spotify and Netflix are leaders handsomely attracting ears and eyes and a greater share of digital life.

Privacy & Regulatory Hurdles Galore

Having said that, Facebook has multiple avenues to monetize this strategic investment but lot will depend also on how the government sees this (and potential competitors which will lobby hard against the deal). There will need to be high transparency on the data sharing agreements between the two giants. Further, the user data and platform cannot be misused for intrusive or targeted schemes similar to Facebook’s scandalous history, as the trust factor is fairly low. Thirdly, Indian government could be concerned about the amount of data access Facebook will have.

Future of Telcos

It is said that data is the new oil. I would argue data is the new “crude” and what companies like Jio or Facebook or Google do with this crude converting into Big information is going to shape the future business model in the telco space as everyone is looking to become an end-to-end internet player rather than a telco. I believe if this trend continues, in the next ten years, we could see e-commerce, content, cloud and social tech companies replacing traditional telcos to sell end-to-end services from communication to content to commerce to cloud to collaboration services.

Neil is a sought-after frequently-quoted Industry Analyst with a wide spectrum of rich multifunctional experience. He is a knowledgeable, adept, and accomplished strategist. In the last 18 years he has offered expert strategic advice that has been highly regarded across different industries especially in telecom. Prior to Counterpoint, Neil worked at Strategy Analytics as a Senior Analyst (Telecom). Neil also had an opportunity to work with Philips Electronics in multiple roles. He is also an IEEE Certified Wireless Professional with a Master of Science (Telecommunications & Business) from the University of Maryland, College Park, USA.

Term of Use and Privacy Policy

Counterpoint Technology Market Research Limited


In order to access Counterpoint Technology Market Research Limited (Company or We hereafter) Web sites, you may be asked to complete a registration form. You are required to provide contact information which is used to enhance the user experience and determine whether you are a paid subscriber or not.
Personal Information When you register on we ask you for personal information. We use this information to provide you with the best advice and highest-quality service as well as with offers that we think are relevant to you. We may also contact you regarding a Web site problem or other customer service-related issues. We do not sell, share or rent personal information about you collected on Company Web sites.

How to unsubscribe and Termination

You may request to terminate your account or unsubscribe to any email subscriptions or mailing lists at any time. In accessing and using this Website, User agrees to comply with all applicable laws and agrees not to take any action that would compromise the security or viability of this Website. The Company may terminate User’s access to this Website at any time for any reason. The terms hereunder regarding Accuracy of Information and Third Party Rights shall survive termination.

Website Content and Copyright

This Website is the property of Counterpoint and is protected by international copyright law and conventions. We grant users the right to access and use the Website, so long as such use is for internal information purposes, and User does not alter, copy, disseminate, redistribute or republish any content or feature of this Website. User acknowledges that access to and use of this Website is subject to these TERMS OF USE and any expanded access or use must be approved in writing by the Company.
– Passwords are for user’s individual use
– Passwords may not be shared with others
– Users may not store documents in shared folders.
– Users may not redistribute documents to non-users unless otherwise stated in their contract terms.

Changes or Updates to the Website

The Company reserves the right to change, update or discontinue any aspect of this Website at any time without notice. Your continued use of the Website after any such change constitutes your agreement to these TERMS OF USE, as modified.
Accuracy of Information: While the information contained on this Website has been obtained from sources believed to be reliable, We disclaims all warranties as to the accuracy, completeness or adequacy of such information. User assumes sole responsibility for the use it makes of this Website to achieve his/her intended results.

Third Party Links: This Website may contain links to other third party websites, which are provided as additional resources for the convenience of Users. We do not endorse, sponsor or accept any responsibility for these third party websites, User agrees to direct any concerns relating to these third party websites to the relevant website administrator.

Cookies and Tracking

We may monitor how you use our Web sites. It is used solely for purposes of enabling us to provide you with a personalized Web site experience.
This data may also be used in the aggregate, to identify appropriate product offerings and subscription plans.
Cookies may be set in order to identify you and determine your access privileges. Cookies are simply identifiers. You have the ability to delete cookie files from your hard disk drive.