Insights on Jio's business model!

Have you ever wondered about Jio's business model? Not Jio, the telecom company. I mean Jio, the tech company. In his speeches, Mukesh Ambani throws around words like AI and ML, and blockchain. But there was hardly any clarity about how Jio will actually make money as a tech company.

In last week's Reliance AGM, the picture became a little clearer. I tried to fit Jio's plans in one of the existing business models of tech companies- Software As A Service, Platform As a Service, Infrastructure As A Service. But none of these models can accommodate the incredible breadth of Jio.

Jio's business model is something unique, something I'm calling- Jio As A Service.

That's what today's newsletter is about.

Hey friends I'm Shreyans! Welcome back to another edition of my newsletter, Integral- a place where we get smarter about the Indian tech industry.

If you’re new here, please subscribe- it keeps me motivated to write better content for your people!

Let’s go🚀🚀🚀

Earlier, software companies used to develop software, and make money by selling copies of it. But in 1999, a small startup called Salesforce changed this model forever.

Salesforce had developed software for salespersons. But they didn't sell copies of their software. Instead, they put the software on their website and made a Netflix-like subscription. People could just subscribe on a monthly/annual basis, and use the software on the website.

At that time, people were used to buying copies of software and installing them on their computers and then using them. Installing was a messy process- there were bugs and errors and crashes. That's why Salesforce's model became a hit- people didn't need to install the software. Salesforce ran the software on its website. People could simply go to the website and access it.

Today, Salesforce's model has another name- Software-As-A-Service(SaaS).

The 2 features of SaaS are-

  1. No need for a messy installation process. The company handles that part.

  2. SaaS model sells access to the software.

Jio's business model is something similar.

By giving away free sim cards and building a telecom network, Jio achieved what Facebook and Google couldn't- bringing rural India online. Jio has become a recognized and trusted brand in rural India. This is a big opportunity for the American tech giants- they can use Jio to gain access to this huge market. JioMart has built a retail chain that tech giants can use to expand their ambitions in India. And a bonus- by partnering with Jio, American tech companies can clear the regulatory hurdles.

This, my friends, is Jio-as-a-Service.

The 2 features of JaaS are-

  1. Tech giants like FB and Google don't have to do the messy process of building a telecom network and establishing their rural brand and a retail chain. Jio handles that part.

  2. JaaS model sells access to Jio's telecom network and rural brand and retail chain.

🕹️How does Jio benefit from JaaS model?

Earlier, I thought that Jio would do everything by itself- make a Jio phone, make a Jio OS, only allow Jio apps, etc. This seems like a golden dream of a Jio world. But this was a mistake on my part- building so much stuff is incredibly hard. And expensive. And foolish. Even if Jio managed to do all this, it would have to compete with the tech giants because they also want to capture India's rural market. They would definitely give a tough fight to Jio.

But why compete with tech giants, when Jio can partner with them😏

That's what Mukesh Ambani said in the AGM last week-

We are indeed privileged to have partners like Facebook, Google and Microsoft, in whose company, our efforts to create a DIGITAL SOCIETY in India seems that much easier.

This is where the huge investments in Jio come into the picture.

Last year, when all the American tech giants were investing in Jio, everyone’s eyes were fixed on how much they were investing. But hardly anyone paid attention to why these companies were investing in Jio.

The why is key to understanding JaaS. Let's take the example of 2 of Jio's biggest investors- Facebook and Google.

🕹️Facebook made the biggest investment in Jio:

Rs. 44,000 crores

Obviously, Facebook is hoping for the biggest benefit. At that time, the company had given a hint about its hope:

Our goal is to enable new opportunities [...] especially for the more than 60 million small businesses across India. For instance, by bringing together JioMart, Jio’s small business initiative, with the power of WhatsApp, we can enable people to connect with businesses, shop and ultimately purchase products in a seamless mobile experience.

Got the hint?

🔔"by bringing together JioMart with the power of WhatsApp"🔔

And that's what Mukesh Ambani announced in his speech at the AGM-

We have launched an initial set of integrations between WhatsApp and JioMart on a trial basis... Our joint teams are actively developing the full New Commerce solution linking merchants and consumers, and we plan to progressively launch these over the next few quarters.

Combining JioMart and WhatsApp may not sound like something very beneficial for Facebook. But bring in WhatsApp Payments, and suddenly Facebook's ambitions become clear- a super app!

This is Facebook's strategy-

  1. millions of Indians already use WhatsApp to chat.

  2. Once JioMart is added to WhatsApp, people can just order their daily items through WhatsApp, without leaving the app. Just message the JioMart business account, and your items will be delivered.

  3. Pay for the items using WhatsApp Pay, no need to leave the app to pay.

Chat + Retail + Payments = WhatsApp's super app🚀🚀

JioMart benefits as well- by integrating with WhatsApp, it gets lots of new customers. So it has additional ammo against competitors like Amazon and Flipkart.

Here's The Mint with an explanation of how JioMart + WhatsApp will work-

Reliance Retail is also on-boarding local kirana stores on its platform. So, when a customer orders using the JioMart app, the app maps the user to a nearby kirana store. The delivery is either done by the kirana shop or by RIL’s logistics arm Grab, which it acquired in 2019 for $14 million. The kirana store gets a commission on the sales.

Can you see the JaaS model here?

  1. Facebook doesn't need to do the messy work of building a retail chain, Jio already has a huge retail network through JioMart.

  2. Facebook is paying for access to that retail chain.

That's JaaS!

Facebook gets some secondary benefits as well- remember the controversial WhatsApp policy? Yes, that one.

That policy directly impacts JioMart+WhatsApp. JioMart will be present on WhatsApp as a business account, right? That policy implied that WhatsApp will share your business account chats with Facebook and Facebook may use them to show ads. More data from your JioMart chats so more ads so more revenue for Facebook.

🕹️Onto the next example, Google:

Last year, Google had invested Rs. 34,000 crore in Jio. At that time, Google said that they would make an "entry-level affordable smartphone" along with Jio. And last week at the AGM, this smartphone was unveiled. Here's what Sundar Pichai said-

I’m excited that today, we can announce the next steps in this vision, starting with a new, affordable Jio smartphone, created with Google. Our teams have optimized a version of our Android OS especially for this device. It will offer language and translation features, a great camera, and support for the latest Android updates

Google benefits a lot from this smartphone- it gets millions of new users for Android. These new users will be using a lot of Google products- search, youtube, etc. So many users for Google's products means a huge amount of data that Google can use to show ads. The result? A dramatic expansion in Google's revenue. Of course, the actual results won't be as smooth and as sudden as I make it seem- rural people will need to get used to the internet. Moreover, showing them ads initially won't work since their income is low.

But you get the idea, right? By partnering with Jio, Google has access to a huge market with huge potential.

The JaaS model is at work here again-

  1. Google doesn't have to do the messy process of connecting rural India to the internet and establishing its brand. Jio handles that part.

  2. Google is paying for access to Jio's telecom network and rural brand.

There are some secondary benefits for Google as well- Reliance is "migrating its core retail businesses like Reliance Retail, JioMart, JioHealth, JioSaavn and others to Google Cloud". So Google Cloud gets a huge customer.

The Economic Times even came up with an estimate of Google's benefit by partnering with Jio- $1 billion.

🕹️The Future: Open or Closed ecosystem?

Jio has a monopoly in rural India. It is the only one with a wide telecom network. It is the only one with such a trusted brand. It is the only one with giant partners like Facebook and Google. The question is- will it keep JaaS as a closed ecosystem and tighten its monopoly over rural India? Or will it open up JaaS to other companies and make JaaS an open ecosystem?

🕹This week, I wrote about-

  1. Windows is giving the middle-finger-salute to Apple (Link: LinkedInTwitter)

  2. The crazy story behind Snapchat’s first funding (Link: LinkedInTwitter)

  3. Amazon’s most dangerous competitor- Shopify (Link: LinkedInTwitter)

  4. My startup idea😂😂 (Link: Twitter)

This wraps up today’s newsletter. I hope you enjoyed reading it. If you have any feedback/suggestions/corrections, just reply to this mail and share them with me.

I’ve started writing on Twitter as well. Follow me there so that you don’t miss all these insights:

Follow me on Twitter

Thanks for being a supporter! Bye-bye and enjoy your day!!