Google’s pledge to invest $10 billion in India’s digital ecosystem over 5-7 years is a welcome bright spot amid the economic gloom caused by COVID-19. To understand just how big it is, consider these.
Since it opened its ecommerce operations in India, Amazon’s investment pledges over seven years is less than $7 billion. On the other hand, Walmart pumped $16 billion to buy a majority stake in Flipkart, and weeks ago Facebook put down $5.7 billion for a stake in Reliance Industries’ Jio Platforms.
Clearly, all these affirm the huge digital potential of India, but also underscore different approaches towards cracking a cluttered and noisy market. Most or all of these initiatives may not have occurred had China not shut out the American companies. Just over the past year or so, Google was thwarted by a backhanded attempt to launch a censored search engine in China, and most recently dumped a plan for a cloud service. To that extent, China’s policy has accelerated India’s digital push and India would do well to make the most of it.
The timing of Google’s pledge is significant in other ways too. It comes weeks after Mukesh Ambani’s Reliance Industries announced a partnership with Facebook in its quest to drive e-commerce via the WhatsApp messaging platform, rather than picking Google’s search smarts. That deal threatened to leave Google behind arch-rival Facebook, perhaps even isolating it in India, and also raised prospects of a telecom-led digital push similar to Jio’s.
Since then, Google has been rumoured to eye a stake in embattled Vodafone-Idea. Financial Times, which in May reported the talks, suggested Google was considering buying a 5 percent stake but that might be considerably less ambitious. The third leading telecom player, Bharti Airtel, is believed to be negotiating a $2 billion stake sale to Amazon, though buzz around the company’s shares suggest the rumour — and perhaps the prospect itself — has cooled. Regardless, it seems more likely than not that Airtel will find a partner for a digital push to rival Jio.
So what can Google do in India to, say, stay in the race with global rivals such as Amazon and Facebook?
In his web presentation announcing the investment, Google’s India-born chief executive Sundar Pichai said he plans to pump in $10 billion “through a mix of equity investment, partnership, and operational, infrastructure and ecosystem investments.” Google is to focus on four areas — affordable Internet access in Indian languages, development of unique products and services for the Indian market, enable digital transformation for businesses, and leverage technologies including AI for social good in areas such as education, healthcare and agriculture.
Pichai’s agenda does not suggest a ‘big bang’ initiative but it is tempting to see a hidden one for multiple reasons. India’s digital advertising is tiny. By one estimate, it is expected to be less than $1 billion, growing at less than 20 percent annually. Last year, Google’s India revenue barely accounted for 1 percent of its global advertising revenue of $135 billion. So it is tempting to see Google eyeing something bigger with its new war chest, rather than simply targeting a modest advertising pie.
Payments is a promising area of growth. Google Pay is already a leader in this segment, with a nearly two-thirds share, but the market itself is tipped to reach a humungous $1 trillion by 2023, affording more ambitious growth opportunities. Google has dabbled with shopping, without much success, but India is still an untapped market for e-commerce. A deal with Flipkart may not be unimaginable.
While the looming digital battle ahead looks exciting for Indian consumers, it also brings multiple challenges. Google enjoys a monopoly in multiple areas, notably in the Android mobile operating system powering nearly all of India’s smartphones, and in search-based advertising. Amazon and Flipkart threaten to subsume ecommerce, and all the digital companies threaten personal and social data.
India’s regulators and ministers have made a lot of noise about regulating digital giants, but have yet to translate them into meaningful action except for its so-called Google tax on digital products targeting Indian users. India has yet to meaningfully address any of the monopolies, or create a true level playing field. It has also yet to craft laws to protect data.
If leaked details about a law to protect personal data, or a panel’s recommendation on non-personal data, are anything to go by, India has a lot of work ahead to tame the global digital giants.
Bala Murali Krishna works for a New York-based startup. Views are personal
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
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