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  Technology   In Other news  02 May 2020  Tech this week | Jio-Facebook’s e-commerce monopoly is not a foregone conclusion

Tech this week | Jio-Facebook’s e-commerce monopoly is not a foregone conclusion

Published : May 2, 2020, 11:32 pm IST
Updated : May 2, 2020, 11:32 pm IST

Amazon has also made a move to get kirana shops on its platform, and in the coming months it's likely that Flipkart and Snapdeal will too.

Kirana stores are an unexplored market and there is an opportunity to be tapped. But a first mover advantage does not directly mean victory.
 Kirana stores are an unexplored market and there is an opportunity to be tapped. But a first mover advantage does not directly mean victory.

Earlier last month when Facebook made a $5.7 billion, (₹43,574 crore) investment to buy 9.99% share in Jio Platforms ltd, it led to plenty of analysis on how this deal was going to impact the Indian digital ecosystem.

There is, of course, plenty to read into. For starters, you could say that for Facebook, this is all a long ploy to monetize WhatsApp. WhatsApp is the dominant means of communication in India. In 2017, Indians made 50 million minutes of WhatsApp video calls a day.

Considering the bigger picture, Indian traffic on WhatsApp is bound to be significantly higher. WhatsApp has likely acquired a sizeable number of Indian customers since 2017 and the statistic above does not even take into account time spent by Indians on voice calls and texts.

India is a huge market opportunity for WhatsApp, and considering the platform is end to end encrypted and does not run ads, the market dominance does not directly translate into revenue. It is no wonder that WhatsApp has been trying to launch a payments service in India for over two years now. ‘WhatsApp Pay’ has recently been granted regulatory approval to roll out the service in a phased manner.  Chatter after the deal focused on the combination of WhatsApp and ‘JioMart’ bringing kirana stores online, making a decisive entry into a new, relatively unexplored landscape.

When asked to do a ‘TalkPoint’ by The Print on the subject, I found to my surprise, the widespread speculation around whether this news was the beginning of an inevitable monopoly. The short answer to this question is that the Jio-Facebook alliance translating into a monopoly is far from a foregone conclusion.

The long answer begins with my information economics class for The Takshashila Institution. During the segment on standards wars, one of the key topics is around what are the key assets for a technology to establish itself as a standard. According to Hal Varian (Chief Economist at Google), there are seven key assets to a standards war; control over an installed base of users, intellectual property rights, ability to innovate, first-mover advantages, manufacturing abilities, strength in complements, brand name and reputation.

Just looking at the deal and the nature of JioMart and WhatsApp, it is evident that the alliance has the first mover advantage. Kirana stores are an unexplored market and there is a significant opportunity to be tapped here. But a first mover advantage does not directly translate into victory.

History of modern tech (a fascinating topic for a different column) has repeatedly taught us that doing something right can be more important than doing something first. The iPad was not the first tablet and Microsoft Zune was launched before the iTouch. But Zune, and the early competitors to the iPad have been relegated to being case studies in product failure.

Put this into context, and the rest of recent news starts to seem like a natural flow of events. The week the news broke, Amazon’s homepage was updated with an article by Gopal Pillai (VP, Seller Services) titled ‘Local Shops on Amazon, a new beginning for offline retailers, highlighting Amazon’s shift of focus towards the issue. The timing is not a coincidence, competition moves fast. In the coming months, expect similar developments from Flipkart and Snapdeal as well.

It is also important to note that core competences are going to play an important role here. Jio and Facebook can boast unparalleled national integration and scale.  However, neither of those companies have the experience in seller interactions, operating complex supply chains, and consumer preference data that Amazon boasts.

So the first mover advantage is not definitive. Comparative strengths in other assets will be established over time. It is too early to say who the players will be. There is a whole bunch of plausible combinations involving payment apps, telcos, and e-commerce giants that could be possible. The Jio-Facebook alliance is likely the first alliance in a battle that is going to be long and drawn out. In addition, we do not know yet how the ability to innovate and strength in complements will demonstrate itself over the coming times.

Borrowing from Donald Rumsfeld, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. The outcome of this deal on the e-commerce landscape in India is filled with known unknowns.

Sure, given Facebook’s financial might and Jio’s demonstrated understanding of the Indian market, it is so easy to classify the move as the beginning of a monopoly. It may well turn out to be one. But to conclude that a monopoly is inevitable or that in some sense we are already there, is jumping to conclusions.

Tags: facebook, jio, amazon, flipkart, snapdeal