Apparently my last post did not bring enough contentment to me, hence another post on a similar note. While Facebook IPO [future], LinkedIn and Twitter valuation clearly established the potential of the Identity-realty, the question whether that valuation transcends the boundary is not answered. To make it simpler, let's just consider this question: Would FaceBook be valued equally had it been based in India or China? The question is not as frivolous as it may sound to some. If you look at the user base of Facebook, India provides second largest user-base with 43 million users just after its home turf i.e. USA with 155.5 million users [source: http://www.socialbakers.com/facebook-statistics/]. Moreover while the user-base in USA contracted over last few months, Indian user-base continues to grow. In fact Facebook clearly states in its SEC filing that India is going to be the biggest driver for their growth in next few years. 1.2+ billion population with only 15% penetration, how can anyone ignore the potential!
Similar statistics can be found with Twitter and LinkedIn too, but that is beside the point. Fact is today's valuation of Facebook is done in USA by the USA analysts using the benchmark that is largely driven by USA economic parameters. The fact that Facebook has users across 200 countries, the fact that 3/4th users are from outside the USA, makes it a truly international entity. Even to think of it, a social platform that assimilates so many different cultures and languages, nation boundaries with its local laws under a single computing infrastructure is by itself an enormous feat, only to be matched with that of its mother invention i.e. internet. But I think what makes the difference here is that Facebook has created multiple revenue channels, that it has generated a $1 billion cash reserve before it goes for IPO, that its revenue has grown spectacularly since last year, that it is seen as the second best platform for online advertising after Google, that the online advertising market is seen as an area with immense potential, that it has created a platform that most big companies and even Govt. agencies find difficult to stay away from and more importantly that it has invested heavily in building massive analytics engine that can analyze and provide online reports to suit the customer's need in almost real time. An advertiser can monitor effectiveness and progress of any single advertising campaign that it has launched and get cues on how to make it more PERSONALIZED ..yes PERSONALIZED for every individual user.
As many observed already, the biggest promise of online advertising is its ability to enable the advertisers to reach a customer when he needs the product/service most. Facebook not only understood that, they committed themselves to create the massive engine that sifts through all the online updates in real time and make accurate prediction about user's i.e. customer's behaviour.
This, however is the need for advanced users, those who use smartphones or at the least internet. In India TV Ads still form the biggest share of advertising expense and total annual budget for online advertising is hardly more than few hundred of millions of dollars, which mostly, again, come from American companies.
Does that mean that India does not have any hope for internet-based online service delivery? Actually not that bad if you look at the following two recent reports from IndiaDigitalReview portal. The first one says, "according to India e-Marketing Outlook 2012, conducted by Octane.in, Social Media and Email Marketing will emerge as the top two online marketing initiatives that will see an increase in marketing investments in 2012, as compared to 2011."
Next one tells us that Flipkart, an Indian equivalent of Amazon online shop has raised $150 million of series D funding which pulls the capital infusion value to $850 million. That is a huge number considering that Flipkart sells products to mostly English-speaking internet-savvy customers and its market is entirely limited to Indian subcontinent [where Amazon does not sell] and many of the science and technology books [Books constitutes large chunk of Flipkart's retail portfolio] are to be exported from either USA or UK. One must not forget that its annual revenue this year reached Rs 50 crores. In fact that figure pushed Amazon to launch its India-equivalent service with junglee.com.
That takes us to the question we started with. What would be the valuation of Facebook if it was based in India? If one could, and there is a biiiiig IF, build Facebook [with the totallity of what it has today] from India, I think, learning from Flipkart experience, it would have reached at least one tenth of its present valuation if not more. And that is not too low considering India's GDP is just little more than a trillion dollar and that more than half of its population is still outside any advertising net.
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