Ajit Mohan started following Lily Collins after watching her on Netflix’s Emily in Paris. He found on Instagram that the actor had recently invested in Beekeeper’s Naturals, a Canadian natural health product company that makes bee by-products like raw honey and bee pollen. The brand has quite a star following, from Drew Barrymore to Kourtney Kardashian. After discovering the brand on Collins’ post, Mohan, 46, is all set to order its products.
Like many users, he has bought everything from shoes to alphonso mangoes off Instagram (he didn’t like the shoes), says Mohan, who is vice president and managing director, Facebook India. Globally, influencers are convincing people to buy products they recommend, and small businesses are using Facebook platforms to reach consumers everywhere while keeping their spending in check. The trend, says Mohan, has been accelerated by Covid-19 as more people went online and shopped as they were forced to stay indoors during the pandemic.
“While recognising the disruption to life, I think it was a bit of a second coming for social media because it reminded people of its core purpose,” Mohan tells Fortune India. Meanwhile, during the pandemic, businesses discovered that the only way to survive was to find customers and sell to them online. Besides Facebook, the ecosystem has two other platforms: WhatsApp, which in India has over 15 million businesses; and Instagram, on which 90% of consumers follow brands. Globally, the ecosystem has more than 200 million businesses on it.
With consumers moving to these platforms during the pandemic, so did advertising. That’s music to Facebook’s ears, as most of its revenue still comes from ads. In India, according to its filings with the Registrar of Companies, Facebook’s gross ad revenue for FY20 was ₹6,613 crore.
According to Sandeep Bhushan, director and head, global marketing solutions, Facebook India, by 2023, digital advertising will be bigger than TV advertising. In fact, according to media investment company GroupM’s latest TYNY (This Year, Next Year) report, digital advertising was one of the few categories which grew globally last year. (See graphic).
No wonder that Facebook, from being a platform for connections, is focussing on content creators and small businesses to make them its growth drivers for the future.
While Facebook has news as well as music/videos from publishers, a big piece of the content story is made up of short videos. Facebook arguably has been the biggest beneficiary of the ban on popular Chinese short-video app TikTok in markets such as India and the U.S., although Facebook founder and CEO Mark Zuckerberg has said that such bans set a “bad long-term precedent”. Instagram’s Reels, which was launched last year, has seen interest from millions of young people.
The popularity of Reels, which can also be cross-posted on the Facebook platform, fits squarely into Facebook’s focus on content and creators. Mohan says it is one of their internal ambitions to see a big global superstar creator emerge out of India. “That’s one of our North Stars… We are passionate about the idea that we will aid someone from India, who was not known, and would leverage Instagram and Facebook to find a global audience.”
While creator monetisation isn’t available on IGTV (Instagram’s format for longer videos) and Reels yet, there are branded content tools available that enable creator and brand partnerships. Creators and influencers on Instagram make millions from sponsored content. The platform also allows them to have ads in videos, like YouTube, essentially expanding its advertising revenues.
“We’re thinking about extensions of commerce and shopping, we’re thinking of the extensions of people and fans connecting with creators directly, advertising revenue share; there’s a lot of different monetisation opportunities that we’re thinking about for creators on Instagram,” says Vishal Shah, head of product, Instagram.
In a blog post, Facebook says that globally, the number of content creators earning the equivalent of $10,000 per month grew 88% in 2020 compared to the previous year.
Short videos have helped Instagram with the younger demographic as well as moving beyond the metros, considered its primary audience till a few years ago. And with that it has become important to have content in local languages. “The need for expression is a very deep and essential need in India,” says Avinash Pant, director-marketing, Facebook India, adding that Reels is the perfect platform for that. To cater to those in smaller towns who might be using entry-level smartphones or may have spotty Internet service, Facebook has rolled out innovations such as Facebook Lite and Instagram Lite, lightweight apps for mobile phones.
It is important for younger audiences to stay hooked to Instagram or Facebook. Creators set the tone for conversations, for culture, and they can truly make or break a platform. And videos have been a good hook for creators.
For Facebook, videos present a massive opportunity. But it needs to find its space; for now, it seems it is doing a little bit of everything. A lot of it is shaping up, and working too. Barnik Chitran Maitra, managing partner and CEO of Arthur D. Little, India and South Asia, is not impressed with Facebook’s video presence. “I think the biggest threat to its business is that consumers are moving eyeballs to video... You can’t have a content play if you don’t have a YouTube or an OTT kind of a peg,” he says.
The idea of having social videos on Facebook is again that of leveraging the power of the community. Its Watch feature—which has original shows and popular videos—is built on the premise that people would like to watch things with their friends or family.
Mohan says what makes Facebook different from other video platforms is essentially the social aspect. “It is built on the idea of videos [which come up in the feed] that connect you to your friends and your community,” he says.
Facebook, though, seems to be in YouTube territory as it is trying to have more music launches and other such content on its platforms. “The method of how content finds you is very different. There is no ‘trending now’ or this is what India is watching so you must watch this… it’s personalised, it’s for you,” says Manish Chopra, director and head of partnerships, Facebook India.
The other big focus for Facebook is small and medium businesses (SMBs). All three platforms, each with hundreds of millions of Indian users, have made it easier for SMBs, including kirana stores, to get online, digitise, and sell. With the launch of WhatsApp Pay, and Facebook’s $5.7-billion investment in Reliance’s Jio Platforms, Facebook’s focus on small businesses is abundantly clear.
These businesses moved very strongly in terms of digital during the pandemic. “In India, half of the small businesses [we know of] are transacting a quarter of their revenue digitally,” says Bhushan.
But what’s so unique about Facebook’s interest in SMBs, considering that everyone from Hindustan Unilever, Amazon, and Paytm want to digitise small businesses and give them tools to become more tech savvy? According to Mohan, what’s special is that the smallest businesses are given the same kind of access to Facebook’s tools as its largest clients.
This, even though only 10 million of the 200 million businesses on the platform are advertisers. “Size shouldn’t constrain you from accessing all the tools... the more these 190 million businesses find value from us, the more they grow. They eventually will be at a stage where they will scale up and become advertisers,” he explains.
Businesses which access S buyers on social media platforms are considered part of the burgeoning social commerce sector. Ankur Pawha, partner, EY, explains there are two ways that commerce works on social media. One is social selling or using a network to buy and influence people to buy. The second is commerce on social media, which is buying directly from brands on social platforms.
He says India is having a bit of a ‘Shopify’ moment, meaning as a brand, customer acquisition can happen on social platforms like Facebook and Instagram and if they don’t offer a storefront, shipping, or logistics, a product like Shopify, that hosts your online store, can be plugged in.
In India, businesses sell on Facebook’s platforms, but the actual act of buying the product or the monetary transaction, happens on the seller’s website or some other medium. Last year, Facebook introduced Facebook Shops and Instagram Shops in certain geographies, for small businesses to set up shop; these aren’t available in India yet.
“Amazon is much like a Google for products. Is there a Facebook for products? I don’t think so! Facebook is suitably placed to build one because they have the largest social media play out there,” says Piyush Sharma, executivein-residence, UCLA, and a C-suite+ and startup adviser. According to a report by Bain and Company and Sequoia Capital, social commerce will be worth about $20 billion in India in the next five years, up from $1.5 billion-$2 billion currently. They expect it to be “twice the size of the current e-commerce market within 10 years.”
Meanwhile, roughly 41% of Indians have access to the Internet and only 8% of the population shops online. Bain and Sequoia say that the average online spend in India is only $286 per year, suggesting a huge potential for growth.
Facebook’s biggest USP is the power of the community. This allows businesses to tell their story and connect with customers around the world, and expand quickly.
“These businesses are not running mega month campaigns and shooting things in another location and cutting things up for mobile and for TV. They’re creating content every single day, multiple times a day on their phone, telling their story, and engaging with their community,” says Instagram’s Shah, who is based in California. Currently, more than a billion accounts worldwide use Instagram every month, and more than 500 million people use Stories every day.
“Brands like it [the Facebook ecosystem] because it’s very focussed and targeted, the cost of acquisition is smaller, and they’re able to scale quickly and efficiently, given the costs are better managed,” says Pahwa.
Facebook is creating a compelling buying and selling proposition in India and around the world. Take WhatsApp, for example. It launched WhatsApp Pay in India last year and has the WhatsApp Business app, targeted at small businesses.
Abhijit Bose, head of India for WhatsApp, says the WhatApp Business app has special features which make it much easier for businesses to talk to their customers more efficiently by using tools to automate, sort, and quickly respond to messages. Secondly, larger businesses can also do an integration with WhatsApp and have access to more services. For example, if someone books a ticket on MakeMyTrip, they will get their boarding pass on WhatsApp.
This integration happens through access to WhatsApp Business API (application programming interface), which is a new revenue stream, says Bhushan.
WhatsApp Business, however, is free and is utilised by small businesses to offer features like catalogues. Bose says nearly 3 million people in India view a business catalogue on WhatsApp each month.
For businesses, the three platforms put together are a comprehensive digital solution, Facebook believes. Across these platforms, Bhushan says, businesses get a full stack of services. “Think of [their] presence as having a page on Facebook or on Instagram. Your communication is [through] ads, and you have the ability to continue the conversation through WhatsApp. So, businesses want to come in to be able to do all three: [have] presence, communicate, and converse.”
And it’s not just small businesses. Samsung, for example, is training promoters of its multi-brand stores to build communities with their customers on Facebook and WhatsApp.
Communities are also valuable for building consumer trust. EY’s Pahwa says that this is especially important for new consumers coming online from smaller towns, who may have used social media for interaction but not for transactions. “If they’re seeing that [someone they know] has liked a product, they trust you; they may think it’s good enough, and maybe they will try it,” he says.
What will really make Facebook an interesting prospect for sellers or small businesses eventually is its partnership with Jio, which has more than 400 million subscribers in India. Zuckerberg had spoken about how the company sees the WhatsApp-JioMart deal, in a July 2020 earnings call with investors. “A big part of the partnership that we have with Jio will be to wire up and get thousands of small businesses across India on-boarded onto WhatsApp, to do commerce there,” he had said.
WhatsApp’s Bose says the company’s collaboration with Jio can potentially impact more than 60 million MSMEs and other small businesses. “Through this arrangement, we envision enabling people to browse the availability of shops, get answers from a business, and ultimately purchase a product right within a WhatsApp chat with the business,” he adds.
While it all sounds like a perfect plan, the small hitch here is fulfilment. Facebook clarifies that it does not intend to engage in that.
“Google and Facebook till date have been soft players in commerce. Advertising is a very white-collar, neat, and sophisticated business that is primarily B2B. The e-commerce part of the business is essentially a B2C business. It has an inherent brick-and-mortar character,” says Sharma. “Everything has to physically be seen, delivered, returned, then delivered again. I think the initial success will come only through the route of services where the fulfilment can happen virtually, like bookings and ticketing.”
Bose says that the platform will only help businesses have a presence. “When you’re interacting, you’re not interacting with WhatsApp; you’re interacting with the business of your choice, so anything that’s part of their business is handled by them. What we are not solving is the business; what we’re solving is kind of a more efficient way, a complementary way, not a replacement,” he says.
While business continues, privacy and the spread of misinformation and hate speech have been the biggest problems for Facebook the world over. The latest data breach that impacted private information of 533 million accounts, or the WhatsApp policy update in February that the company called a communication faux pas, caused a furore recently. While any negligence in terms of privacy is obviously concerning, it isn’t good for business either.
Facebook recognises that. “Consumers, including in India, care about privacy, no question. And second, we live in a hyper competitive market, where any product, any tech can dislocate us,” says Mohan.
Meanwhile, Facebook isn’t sitting on its laurels. It is constantly innovating and looking for new revenue streams. A key focus area is augmented reality (AR)/virtual reality (VR). While Facebook owns tech company Oculus VR, Instagram is backing visual artists and creators on its AR platform, Spark, which has over a million visual creators who create effects. Globally, both Oculus and Portal, Facebook’s video calling device which has not yet debuted in India, are new revenue streams, says Bhushan. With virtual product launches being the order of the day, there are exciting times ahead for such immersive technologies.
And Facebook is smart enough to realise that.
(This story originally appeared in Fortune India's May 2021 issue).