What value would FaceBook have if it was based in India?

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.

Mounting global debt and the way further

[cntd from previous post]
It does not appear that there is an easy way out.  During 1945-47 when US gross debt crossed the GDP figure they went for large-scale infrastructure development across the country. That in turn spurred sustained growth of economy which finally brought down the Debt/GDP ratio to 32% and made US a technology super-power. The question is what will they do this time? What will Europe do? Looking at the austerity measures of  Govt of UK and US, it seems that they are not sure. They are trying to restrain their expenses, cutting down their public expenditure in order to bring their overall deficit and hoping that somehow once they are in control of the expenses, the economy will slowly recover. People argue that it is slower path and recovery is not guranteed in the long run.
Harvard thinktank suggests that US should invest in innovation in a big way. HBR article argues that it was competition that was the hallmark of US growth. It is the high-tech sector that over the last few decades created the edge and competitiveness of US economy. They, however, showed that in the high-tech sector US trade-deficit drastically went up [ as much as 53% by 2007] since 2000. Outsourcing manufacturing for high tech goods to Asian countries [China, Taiwan, Malayasia] has ridden them of crucial ability to innovate and get better against their competition with better and advanced products. If they must get their economy back to normal, they must focus all their energy together in nurturing competition and innovation. They brought the concept of Commons, the valley of technology workers, which in actual sense, created the ability of the industry to compete and come up with better products. They believed that over the years in the name of focusing on core competency, US companies created a void in the skill requirement that drive innovation and with the depleted requirement, technical resources migrated to different areas. That in turn made these companies lose their ability to innovate. Coming years will tell if US Govt accepted the Harvard line or they chose different plan but as of now, experts in US believe that US is heading towards slower recovery path even with new stimulus package from Fed. For record, here is the Fed Reserve Bank Chairman, Ben Bernanke's latest speech at Jackson Hole.
Eurozone's problem is little deeper, there is lot of gaussian noise in the system without the emergence of any clear direction. With many soverign countries, each at different junctures and assessment of the problem, it is even a question whether Euro monetary model will survive this crisis.
    With the developed countries struggling to take their economies out of red, it is obvious that onus to drive the growth of world economy squarely falls on the shoulders of developing countries, particularly, China, Brazil and India. But are these countries really ready to lift this heavy burden? China and India both have been experiencing high inflation for last one year. Both of late have projected slower growth rate this year. For the first quarter of 2011-2012, India clocked 7.7% overall GDP growth compoared to 9.1% from last year. RBI incidentally downgraded growth projection for Indian economy to 8% from earlier projection of 8.5% for this year and next. RBI also said that inflation is likely to remain above 7% for next 12 months riding on high global inflation. China and Brazil also are facing high inflation overall. Added to that is the pain of corruption in high institutions in these countries.
Dan Rodrick, an expert from Harvard said that India and China must incentivize Innovation if they want to achieve robust economic growth during the next decade. India and China, both for instance are promoting renewable energy sector but what we are seeing today is more of adoption of technologies developed in developed countries compared to developing new technologies. Fact is traditionally [and till date] these countries have been technology adopters rather than technology creators. So it would be a challenge for these countries to create a path for technology innovation. What happens if these countries fail to create ecosystem that foster technology innovation?
There is a substantial risk of these countries becoming the growth market for developed countries. With slow growth of their economies, there are chances that both US and Eurozone will coerce the developing countries to allow open access to the markets of these countries [which the BRIC has resisted this far]. Last time this happened, the countries like India and China were collonies to British empire and industries in UK grew at the expense of the home-grown Cottage Industries in both these countries. If that kind of market access happens again, India and China will retrace their path in the history, though in a new format. IP protection will be the weapon in the new turf.
As an Indian I only can hope that Indian industry leaders come together and convince the Government to create incentive schemes for creating technology innovations and adopt the path themselves even if it means higher short-term profitability risks for them.

Incredible India!

Since August 16, all news channels are in overdrive-mode. Even after almost 18 hours/day of live coverage with as much repetition of news-clips and many regurgitated debate-hours, they do not seem to be satiated enough. Poor TV-viewers have choices of switching between channels but since content and debates are all similar and on the same topic, the choices are only for namesake. What amuses me is that even though these channels publicly compete with each other, when it comes to taking stand, all speak same language and almost in same tone. It feels like in last 48 hours, nothing has happened to this country except Mr. Hazare's detention and jail. Almost all anchors with may be one or two exceptions, persecuted, lampooned and assaulted the Union Govt in tandem and hailed the protesting crowd who came in thousands to support Mr. Hazare. Media adjudged the present Govt to be both guilty and incapable and therefore unfit to run the Govt. just because they fumbled in handling Mr. Hazare's protest. One who just landed here today would think that all the problems that India has today are there simply because India does not have a strong anti-corruption bill. You get a strong Lokpal Bill that satisfies Mr. Hazare's team and voila! all problems of India will be solved! Utopian or simply childish dream?
I think it is neither of them. I think it is desperation of adolescent Indian middle class for whom the protest of Mr. Hazare is an avenue of asserting its existence to the country. Like a school kid demanding for a motorcycle to his parents when he becomes aware that all his peers ride bikes,  educated middle class Indians from metros, otherwise busy in their lifestyle squabbles decided to demand participation in Govt. functions, when they realized that political power has gone out of their reach because of their snooty attitude to political business in this country whereas their peers in developed countries actually enjoyed more participation all along. The snooty attitude of educated class was perfectly alright till India became a brand name that started hogging limelight with foreign media. Suddenly brand India is adorable, Indian identity is 'cool' and participating in political activism is 'sexy'! Now they want a share of this brand value which they ignored for many decades after the Independence of India. Sadly politics has gone out of their hand to a new political class who came from much diverse, rural background and filled the vacuum that middle-class elites left in 70's. Poor Anna Hazare! He probably is thinking that he is leading the second freedom movement of India! Present political elites, those who have been enjoying political power almost as inheritance are puzzled; they do not recognize this new enthusiasm, viral energy of protests. They do not understand the reason. I mean why now? Since they do not understand they are unsure about right way to handle this agitation. They have memory of 70s and the effectiveness of handling the political revolt of 70's with iron-fists. But they recognize that this is 21st century and they are not sure if the methods of 70's will be effective today. So they are tentative. This tentativeness is reflected in their fumbling, in arresting Mr. Hazare and then conceding to his demands. But will they be successful to quell this new aspiration of urban middle-class? And bigger question is what will the real India, the India that comprises of  poor farmers, poor tribesmen, poor unclassifiable and uneducated Indians who got pushed out of the power equation, for many decades before and after Independence, those who were never connected to 'shining story' of India, those who shining India never cared for, do? Will they continue to live in that other India which only figures in Govt statistics or will they seize the opportunity of another socio-economical correction?
I can't answer and neither the all-knowing, self-righteous, spectacularly shallow (almost to the point of perversion) media channels can answer. That India in fact never existed for them [the India that never contributed to TRP rating]. I however do hope with all earnestness that this politically adolescent educated middleclass of India actually use this opportunity to know their country for real, grow to become true Indian in its real spirit, the spirit that transformed Mohandas Karamchand Gandhi to Mahatma Gandhi [just for the record, Gandhiji before taking up the rein of Indian Congress travelled the length and breadth of this country. He believed that a real leader must have first hand, direct knowledge about his/her country]. Otherwise this aspiration will lead to another kind of corruption, corruption that comes from rootlessness,and that will take away the middle-class dignity of being righteous, intellectually, morally.

India & China : race against or race with?

This is my second blurb on the same topic after last post on GDP comparison; hopefully we will find something different this time. Having compared the GDP as a whole, let's look at the breakdown of GDP of both countries. The figures below show that china's GDP growth engine is different than that of India. While China shows tremendous growth at the Industry sector, India's growth hero is services sector. China's industrial production saw so much rise that it is seen as the one of largest exporter in Asia today. Compared to that India's growth is propelled by internal consumption [IT services contribute merely 5-6% to India's GDP]. North American companies are the first to recognize this pattern and take advantage thereof. How? In this decade, many of the large North American equipment manufacturers have moved their manufacturing base from US to China [beside Malayasia] and equal number of them moved their Backoffice processing service to India. In short, it is amply clear that US is seeing India and China complementing each other here.

Now let's look at China and India's export scenario. Here we have a graph of relative size of bilateral trade between two countries. India's export to China has been lower-value component like mineral ores, cotton yarn and fabrics whereas China's export to India is more oriented towards finished goods, like electronic machineries, toys, etc. China is taking advantage of its mass-scale production capacity. Evidently the trade-deficit is huge from India [presently it stands at $4 billion]. Something needs to be done and both the govts are aware and working towards it as stated  by Nirupama Rao during her last diplomatic visit to China. India needs to find some niche in high-value export but it has to be something very different than what China has been building its strength on. But I bet both the Govt would be interested to find the complementing position that being in loggerhead. None would ignore the growing business volume between two countries.

Percentage of working population is another factor that is considered huge infleuncing parameter for GDP growth. Japan's one of the problem is its large aged population. Compared to that both India and China have a large working-age population [look at the figure below]. That undoubtedly is one of the great advantage for India [within next 15 years, India will cross China's population] and will continue to be so for next 2 decades.

As a corollary to that, India's credit growth is going to explode. As per the following data, India's credit ratio is much lower compared to China [Indians are known to be conservative people]. In other words, as the economy grows, as more and more people become economically 'confident', they will push the growth of the economy and fact is both China and India have lot to gain by complementing each other than fighting each other. In other words, the way to go forward is to race with as opposed to race against, however we dislike the concept. The latest WTO session showed that both the country understand that aspect very well.

As per the Goldman Sach's projection, India and China combined will become the largest economy bloc by 2050 [http://en.wikipedia.org/wiki/BRIC]. They claim that India is going to be 40 times bigger than its present size.

But a lot of it depends on how the governance play in next twenty years but let me keep it for future deliberation.