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The Sale-and-Leaseback of India's Internet Economy

India’s internet economy has two choices, an immediate USD 30 Billion Sale-and-Leaseback or a USD 3 Trillion value harvesting over decades, the choice is sadly made.

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In real estate, shipping and, aviation, a sale-and-leaseback involves selling an asset to raise capital upfront, then rent-leasing that very asset back from the purchaser.  India is perhaps the world's first country to sale-and-leaseback its internet economy.

Multiple-free-for-user-positioned platforms owning yet mono-product digital advertising giants, Facebook and Google have separately, but equally proudly announced a total of USD 16 Billion in investments tagging India's elected leaders with emotive hashtags like #empoweringIndia, #digitalIndia in their press and social media announcements. If we add another USD 14 Billion of Uber, Twitter, LinkedIn, Amazon and other foreign technology company investments that may come in, this ballparks to an eloquent sum of USD 30 billion, the sum at which the internet economy of the world's second most populous country with the second-largest internet user base has been sold. Indian parents have ensure this investment-attracting-spree goes viral via India's legendary good-morning-forwards WhatsApp engine since they clearly see a hopeful future for their kids being employed with these well-paying digital technology colonizers, not to mention the Instagram worthy swag merchandize for new joiners.

Boston Consulting Group has categorized Indian's everyday internet journey via 8 S’s, seeing (YouTube), Shopping (Amazon), Studying (YouTube), Saving (UPI), Selling (Facebook, WhatsApp, Olx), Socializing (Facebook, Instagram), Searching (Google, Maps), Selecting (Online reviews). All of these S's are directly or indirectly influenced by Google, Facebook, LinkedIn, Twitter, and other foreign technology companies, which offer their multiple platforms free to users, in exchange for permissions to access user digital footprints and sell high precision targeted digital advertisements.

All Indian businesses, big or small, listed or unlisted, sole proprietorships to mega conglomerates have begun allocating budget to advertisements on Google and Facebook. Legend has it, that the largest benefactor of startup funding in India is, well you guessed it, these twin advertising giants. All startups, be it e-commerce, fintech, EdTech or travel invest a chunky portion of their total capital raised on advertisements in Google and Facebook.  Each small business needs a Facebook and Google profile. Your reliable handyman, carpenter, painter, plumber increasingly have their Google profiles.

Nothing wrong, except it is Indians paying foreign owned, foreign listed, digital platforms to make money off advertisements, from Indians. Facebook and Google India operations are generating a constantly growing, mountain-sized high gross margin revenue. Investors in these foreign technology companies, listed on the NYSE, continue to see growth from emerging markets, the digital colonies, propelling the stock prices, onwards and upwards. India which is selling its internet economy now pays rent to access its very own internet economy.

Take for example, Google Pay, which curiously six-month head started its UPI race, now commands a fifty percent market share of India's free for consumers, over-a-billion transactions per month UPI payment method. The advertisements on Google Pay will shortly begin, any Indian financial services companies including digital lenders, banks, investment managers, stock brokers will be able to target Indian UPI consumers, with massive potential advertising revenue accruing to Google Pay. Think of this phenomenon repeating across industries, Indian businesses buying advertisement on foreign platforms, to advertise to Indians.

Compare and contrast this with China, which laid an internet economy vision and built enabling policy provisions for its domestic internet economy to flourish, reflecting in the  USD 3 Trillion valuation of listed and unlisted, China headquartered home-grown technology giants such as Tencent (WeChat, video-game PUBG), Alibaba, Alipay, JD, Baidu (China's Google), Meituan Dianping, DiDi (China's Uber), Kuaishou, Byte Dance (TikTok) and EdTech VIP Kid. Most of these companies are global category creators or leaders. Global venture capital funds invest in these companies and many of them have ultimately listed and unlocked their value, in hold your breath, America. China has aced maximizing the potential of its internet economy. China led the world in manufacturing of physical goods, it is now second to America, in manufacturing of digital goods and services.

Ironically, nothing validates the importance of China's global technology prowess better than, countries in territorial, economic or COVID pandemic blame-game disputes with China, as an immediate anti-dote have or are warning to block off Chinese tech assets operating in their countries, illustrating the size, scale, fear and global importance of China' growing internet economy.

Imagine if India replicated the China internet economy vision, we would perhaps miss on the immediate USD 30 Billion potential investments by Google and Facebook, but in a decade build, unlock and harvest value from a potential USD 3 Trillion worth of internet economy. A digital economy so large, that, pun unintended, it would come with a risk of other countries warning to block off Indian internet apps if ever, any territorial or economic disputes arose.

India’s internet economy has two choices, an immediate USD 30 Billion Sale-and-Leaseback or a USD 3 Trillion value harvesting over decades, the choice is sadly made.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Tags assigned to this article:
internet economy

Vibhu Arya

The author is a Fintech and Consumer Internet specialist.

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