Google has announced the first element of its latest push to establish a stronger presence in the Indian market, with the purchase of a 7.73% stake in internet provider Jio Platforms for $4.5 billion.
As explained by Google:
"Google and Jio Platforms have entered into a commercial agreement to jointly develop an entry-level affordable smartphone with optimizations to the Android operating system and the Play Store. Together we are excited to rethink, from the ground up, how millions of users in India can become owners of smartphones. This effort will unlock new opportunities, further power the vibrant ecosystem of applications and push innovation to drive growth for the new Indian economy."
The deal will be funded by Google's recently announced India Digitization Fund, through which it will invest $10 billion into the Indian tech market over the next 5-7 years. Jio currently has around 388 million customers, and has fast become one of the nation's leading internet providers.
The deal is interesting for a couple of reasons. For one, Jio has now become something of a new portal for US firms to branch into the Indian market, with Facebook also purchasing a 9.99% stake in the company back in April for $5.7 billion.
Both Google and Facebook have been trying for years to increase their respective presence in India, but have been met with various regulatory roadblocks, with Indian officials taking a particularly cautious approach to foreign investment.
In Google's case, it had been looking to better ingratiate itself with Indian authorities through programs like Google Station, which provided free Wi-Fi in more than 400 railway stations in the nation. Google scaled back that program earlier this year.
Through Jio, both Google and Facebook will now have a new in - which, given the potential growth in the region, could position both companies for significant benefit.
For Facebook, the focus is more on eCommerce, and establishing a process through which WhatsApp, the most used messaging app in the region, becomes a central platform for all digital activity.
In Google's case, it will be looking to capitalize on the local dominance of its Android operating system to tap into that same growth. India is still in the development stages of digitization, but it's already the world’s second-largest smartphone market (after China), while the number of internet users in the nation is expected to top 850 million by 2022. For comparison, the US is expected to reach around 300 million internet users at the same stage.
A significant part of that expected growth will come from increased connectivity - as noted by Google:
"The majority of people in India still don’t have access to the internet, and fewer still own a smartphone - so there’s much more work ahead."
In order to get more Indian people connected, they'll need the support of dedicated platforms, which is where Google and Facebook will step in - and likely gain their next billion-plus users.
And if all goes to plan, a connected Indian populous will come to rely on messaging apps in much the same way that Chinese users now use WeChat for almost everything they do - from paying for groceries, buying transport tickets, paying bills, etc. WeChat, along with other, similar messaging apps, has become an essential part of everyday life in the nation, and Facebook and Google are hoping to implement the same in India, which will lead to significant benefits for both, through advertising, market presence, utility, etc.
In this respect, it seems that Facebook and Google will be partnering up in the region, at least indirectly. For years, Google had tried to take Facebook on in an effort to limit The Social Network's impact on its core business, but in this instance at least, it seems mutually beneficial for the two to facilitate solutions together, while keeping other tech players out of the market.
There's still some way to go on that front, with others also seeking their own 'in', but if Google's Jio deal is approved, and Facebook and Google get a chance to establish a stronger presence in the region, that could be a major deal for both companies.
And that could also lead to expanded opportunities for digital marketing in future.