Few countries can claim to have embraced the digital world with the speed India has, and Facebook is hoovering up the cash as a result.
According to Reuters, Facebook will generate almost $1 billion in revenue across the country in 2018, a milestone which Google only reached last year. Despite the fact Google has had a presence in India for a substantially longer timeframe, Facebook seems to be better capitalizing on the surge towards virtual, inspired by the Jio disruption.
There will of course be multiple reasons for this rise, though industry commentators have pointed towards the simplicity of Facebook’s platform as one of the reasons. Although Facebook is yet to develop any India-specific products, unlike Google, the platform relies on visual communications not text, which makes the proposition a simpler one to translate for advertisers targeting Indian consumers and businesses.
The simplicity of engaging the international advertising community will of course be a factor, but perhaps timing should be taken into consideration as well. Google might have had a presence in India for years, but it is only over the last 18 months the digital economy has taken hold. The entrance of Reliance Jio should not be undervalued here either, as the firm democratised digital with ridiculously cost effective and accessible offers on mobile subscriptions. The appetite for digital has been raging in India since.
Hence the timing factor being an important one. Google might have had a presence in India, but pre-Jio there the opportunity to capitalize in the same way it has elsewhere was not present. Facebook joined the Indian bonanza just as the tsunami of consumer data consumption was rising, creating the perfect conditions to grab advertising revenues as consumers toured the digital highways for the first time.
Looking at the rise of digital advertising spend, the Pitch Madison Advertising Report estimates digital advertising spend increased by 27.2% over the course of 2017, with 2018 commanding a boost of 25%. Most estimates put the global average at a 4-5% increase. With the number of mobile subscriptions continuing to increasing month-on-month, the Telecom Regulatory Authority of India suggests 15 million new subscriptions were added to the total in July, the opportunity will only become more apparent.
For Facebook, the opportunity to grow will come as a welcome relief for investors. The most recent financial results proved to be somewhat tepid for Facebook, as while profitability is still abundant, worries about future growth have been aired. The Facebook business model, while a very successful one, is limited. It relies on advertising services to users, though there is a limit to how much the platform can be commercialised before customer experience declines. In some markets, this ceiling has been reached. For Facebook to continue growth in the long-term, the subscriber base needs to be bolstered continuously.
This is of course not an immediate worry but saturation point might be reached in the next couple of years. When you take out those who are too old, too young, not interested, not allowed or not able, how many more users are there on the planet for Facebook to lure into the walled advertising garden. Facebook initiatives like TIP become more logical when you understand the need for Facebook to fuel advertising growth with new users.
Whether this means Facebook will overtake Google in the advertising revenue league tables remains to be seen, Google’s ‘Next Billion Users’ initiative is ramping up to give it some impetus, but the management team will certainly breathe a bit easier knowing there are still users to entice out there.