As India User Base Nears 100M, Facebook Hopes To Earn Big Revenue From SMBs

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India is set to become Facebook’s biggest market in terms of number of users later this year, but don’t expect that to translate into ad dollars for the Palo Alto company anytime soon. India’s online advertising market maxes out at around $360 million, making it difficult for the company to translate this horde of users into a billion-dollar business.

Companies like Facebook and Twitter are not new to this problem – their biggest user markets (mostly outside of the U.S.) are not necessarily top revenue sources.

But Facebook sees immediate opportunity to earn big ad revenue by targeting India’s around 50 million SMBs who are increasingly becoming tech savvy and leveraging their smartphones to connect with potential customers.

“It’s a huge opportunity and we’re just getting started. We are building products and features that target the needs of SMBs who can start with us for as little as $5 daily,” said Andy Hwang, Facebook’s director for SMB business in Asia Pacific.

India has around 50 million SMBs, and many of them such as Kaya Skin Clinic, and smaller retailers including Pigtails and Ponys are now spending over $5 a day with Facebook, Hwang added. Online fashion retailer Yepme is another such early Facebook customer that has seen its ‘likes’ touch 4 million recently.

“With a minimum advertising budget on Facebook, we got around 33,000 likes in a span of one month,” said Nivedha Charles of Pigtails and Ponys. The startups sells handmade hair accessories. 

“The main thing we had to keep in mind was to to never get ahead of ourselves and to maintain the quality of our page. We had to check ourselves so that the excitement of page likes didn’t land us in a situation where we bit more than we could chew,” Nivedha said.

Kaya Skin Clinic, a chain of salons owned by a mid-sized FMCG company Marico, is now seeing around 20% of all its sales come directly through Facebook. Fashion retailer Myntra is now earning a quarter of its revenues through Facebook.

Facebook has already developed some specific products for SMBs that are beginning to gain traction. One of them is sponsored post, which is already being used by bigger advertisers such as P&G.

In few months, Facebook’s active user base in India will cross 100 million (from around 90 million currently), making it the second biggest market in terms of active users after the U.S. In fact, Jana founder Nathan Eagle has already predicted that India will become the biggest user market for Facebook ‘in a matter of months.

The biggest challenge for Facebook in India going forward would be to convert some of these early SMB case studies into advertisers who spend more regularly. And that’s where even incumbents like Google (with around $330 million in annual India revenue) are stuck. Also, Google is not just a social media network — it has Youtube for video ads apart from search-based advertising, which is quite established even in a nascent market like India.

“Initially, we started spending with Facebook, but realized later that just getting ‘likes’ was not enough, and we found it really challenging to translate these ‘likes’ into real business,” said the marketing manager of an Indian e-commerce site.

Another reality facing Google and Facebook in India is that most of these SMBs are not as tech or social media savvy as they would like. Only 20% of these SMBs are technology-ready as research firm Zinnov estimates.

As this post from NextBigWhat blog mentioned, Facebook may not be a threat yet for Google in India. However, with China out of radar for Facebook, India will be its biggest bet and a lot would be riding on the market not just in terms of user base, but ways to earn future revenues.

And Facebook is hoping that smartphones and mobiles can help it address the SMB market better. This year, according to Jana, India will add 207 new smartphone users, ahead of the U.S. (47.5M).

“Around 10 million Facebook SMB pages are now being managed by our app using mobiles, and that’s why it’s so important,” he said.

Another feature that Facebook is betting on in a growing market like India is the conversion tracking — which links sales with ad campaigns.

“You will see more such innovations going forward,” Hwang added.

Photo via Shutterstock