Facebook’s growth in India continues to be robust, but regulatory scrutiny on its business practices could spoil the party for Mark Zuckerberg in the coming year.
When it comes to India’s market potential, Facebook will have no reason to complain. After all the internet user base has swelled in India to 460 million and is expected to reach 635.8 million by 2021. With this rise, companies like Facebook definitely stand to gain from the increased subscriber base.
The numbers speak for themselves. Facebook’s India operations posted a profit of Rs 57 crore in the year ending March 2018, growing by 40% yoy. Revenue grew by 53% over the previous year to reach Rs 521 crore including Whatsapp. In the previous year, however, the growth had doubled.
These figures represent the services provided by the Indian subsidiary to the US company according to the statement. The subsidiary operates through an entity registered in Singapore.
Experts feel that this revenue does not actually represent the moolah that Facebook earns through digital advertising. Data from Magna 2019 shows that digital advertising is projected to reach a size of Rs 18,802.3 crore in 2019. Over 65% of this pie is in the kitty of Google and Facebook. For the sake of reference, Google’s digital ad revenues stood at Rs 10,000 crore in FY 2017-18.
In 2017-18, the media and advertising sector saw a drop in revenues by around 25% due to the twin impact of GST and demonetisation. The current fiscal could show a definite improvement in the fortunes of these companies.
However, the company also admitted that it was grappling with ongoing disputes on income tax, VAT, sales tax, customs and excise and service tax. The government has imposed an equalisation levy of 6% on online advertising revenues, which is also known as Google Tax, most of which is reportedly collected from Google, Facebook and LinkedIn.
The major concern for Facebook is litigation and the loss of face due to incessant scrutiny on its data policies. One recent instance was the internal email exchanges of Facebook that were brought in the public domain by British Parliamentarians. These emails have Mark Zuckerberg and other executives discussing ways to beat the competition, and also exploring the possibilities to monetise the massive amounts of user data at Facebook’s disposal. Even in India, Facebook has reportedly doubled its spending on legal and advertising spends. While advertising and promotional expenditure grew by 122% yoy to Rs 94 crore, legal expenditure grew by 85% to Rs 78 crore.
India is Facebook’s largest market with 294 million users. But this also raises huge privacy concerns and the government is already pressurising companies on data localisation. Moreover, Facebook will be on the radar along with other social media companies for its role in the upcoming General Elections. In this regard, the company recently announced that it will be carefully verifying political advertisements on its platform.