Mired in regulatory hurdles and snooping allegations, Facebook India’s profits jump 85%

India has over 300 million Facebook and WhatsApp users, and about 69 million Instagrammers.

May 13, 2019 - Poland - In this photo illustration a Facebook logo seen displayed on a smartphone. (Credit Image: © Omar Marques/SOPA Images via ZUMA Wire

Social media behemoth Facebook saw its India profits jump 85% to USD 14.8 million for the financial year ended March 2019 over the corresponding period last year, the documents filed with the Indian ministry of corporate affairs show. The revenues for the corresponding fiscal stood at USD 126.1 million, up 71% from a year-ago period.

Since October 2018, Facebook has changed the way it records revenues in India, shifting to a more local selling structure, according to media reports. Earlier, its advertising revenues from the country were getting recorded in Dublin. Now the company has started putting this revenue under its India entity.

Facebook India currently operates as a reseller of advertising inventory to customers in the country, local media Economic Times reported.

Globally, the company earned USD 6 billion in profits on USD 17.6 billion in revenues for the quarter ended September 2019. Facebook’s daily active users (DAUs) reached 1.62 billion across the world, up 9% from the corresponding period last year, “led by growth in India, Indonesia, and the Philippines,” Facebook CFO, David Wehner said during the recent earnings call.

Asia Pacific accounted for 627 million DAUs or 38.6% of the total 1.62 billion DAUs while contributing USD 3.2 billion in revenues in the September quarter. For the full-year, ended December 2018, Facebook’s net income expanded 39% to USD 22.1 billion and revenue grew by 38% to USD 55 billion.

India continues to be the stronghold for Facebook, Inc’s social media platforms—Facebook, WhatsApp, and Instagram—in terms of user base. World’s second-most populous nation had surpassed the US in July 2017, becoming the largest market for the company with 241 million active users. At present, India has over 300 million Facebook and WhatsApp users and about 69 million Instagrammers.

Facebook estimates that “around 2.2 billion people now use Facebook, Instagram, WhatsApp, or Messenger (our ‘Family’ of services) every day on average, and around 2.8 billion people use at least one of our Family of services each month.”

While the Menlo Park, California headquartered company has made good strides in its advertising business in India, it is yet to get into the USD 200 billion digital payment space.

Facebook’s plans of the full-fledged rollout of its payment platform, WhatsApp Pay, are facing regulatory hurdles for not complying with the data localization norms for fintech companies issued by country’s apex bank, the Reserve Bank of India (RBI).

Last month, Dilip Asbe, chief executive, National Payments Corporation of India (NPCI), an umbrella organization of retail-payment operating systems formed by state-backed banks, said WhatsApp would likely take two more months to comply with India’s data localization norms.

“We’re of course, working on payments in WhatsApp. We have our tests going in India. The test really shows that a lot of people are going to want to use this product,” co-founder and CEO Mark Zuckerberg said in the October 30 earnings call. “We’re very optimistic that we’re going to be able to launch to everyone in India soon.”

A day before Zuckerberg made this statement, Facebook and WhatsApp filed a lawsuit against Israeli technology company NSO in a California court alleging that the company—creator of spyware Pegasus—was behind the cyber-attack in April and May that targeted 1400 WhatsApp users globally including several Indian journalists and activists.

While the company said, in May it had notified Indian authority CERT-IN, the Indian Computer Emergency Response Team, senior government officials said the company did not clarify that Indian citizens were affected by it, local media Economic Times reported.

Following the news outbreak, the government reached out to NPCI and RBI to raise concerns regarding data security in WhatsApp Payments and discuss risks in allowing social media companies in India digital payments space, which is set to touch USD 1 trillion by 2023.