Reliance Industries Ltd could gain a deeper connection with consumers by acquiring TikTok in India, but its existing strategic partnership with Facebook — which owns Instagram — could put the deal under the scrutiny of the Competition Commission of India, according to analysts tracking this space. Instagram had launched its short-form video feature, Reels, soon after TikTok’s operations in India came under fire in the aftermath of the India-China border stand-off.
But the deal, if it happens, could run into multiple problems given that TikTok is negotiating a separate deal with Microsoft for its US operations. “It would break the entire TikTok model if we break the TikTok operations. What we have to understand is that successful consumer apps thrive on the back of a global audience. While the US and the UK might have a smaller user base, they drive a significant amount of revenue for a company like TikTok, or any other company for that matter — even Facebook. While a country like India would give large masses of users, it would not offer as much revenue right away. So, breaking the TikTok operations and breaking the audience thereby would break the business model as well,” said Sanchit Vir Gogia, Founder and CEO, Greyhound Research.
Conflict of interest
ByteDance has been trying not to close its operations locally, in the hope that it will be able to speak to the Indian government. But, it has not been able to make much inroads, and the only company that has the wherewithal and subscribers to consume something like this would be Jio, Gogia explained. “(This is) because somebody needs to have both the money and the subscribers. What is interesting is that TikTok also has investments from two private equity companies, General Atlantic and KKR, and both of them are also invested into Jio platforms.” he said.
“But, there is going to be conflict because Instagram is a Facebook company and Facebook is now a significant shareholder in Jio. And Instagram just launched Reels, which is competitive to TikTok. So, it might well be that Microsoft and Jio — because Microsoft also has an alliance with Jio — run this entire platform together on a global scale. That is also a possibility. I wouldn’t really rule that out— the possibility of Microsoft and Jio really talking to each other, coming together and controlling most of the operations of TikTok in India can really help stabilise TikTok operations,” Gogia added.
“For Jio, this deal would make sense because it has the user base, the money, and is very gung-ho on the ad-tech revenue as well. It is monetising Saavan and the other apps now. So it would make a lot of sense, but there is a conflict of interest, in the form of Instagram Reels, which is by Facebook. That’s a bit of a conflict,” he said.
The worrying part is that if both these applications continue to operate in India, and one is owned by Facebook and the other by Jio, they can pretty much rule a significant portion of the ad-tech market as well, said Gogia.
“So, I am not sure if the Competition Commission of India (CCI) will allow for it. The CCI angle cannot be ruled out totally. The CCI angle is also important as Facebook, Instagram, WhatsApp are all owned by Facebook, which is invested into Jio. The only other platform that is now left is Twitter. If, let’s say, TikTok is also owned by it (RIL), would the CCI allow for it, is a big question mark,” Gogia said.Hindu Business Line
P.S.: For more information on the recent investments, value that each investor brings to Jio Platforms, engagement with Microsoft, impact on Bharti Airtel, and the challenges the company can expect, read this research report by Greyhound Research.
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