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India Could Be The Answer in Diversifying Facebook’s Revenue

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With over 100 million users and 900,000 small and medium businesses on Facebook in India, it’s only obvious that Sheryl Sandberg, Facebook’s Chief Operating Officer, would make monetizing it top of her agenda. India is Facebook’s second largest user base after the US.

While Facebook’s mission is to “give people the power to share and make the world more open and connected,” it is by no means a charity.  The service can only remain free if there are enough advertisers.

However, India’s contribution of just 0.23% of Facebook’s revenue poses a huge hurdle for the world’s biggest social network into branching out from the heavily saturated North American market.

The trend as shown on a graph put together by eMarketer does not look good for India to take on the expected role of diversifying Facebook’s revenue.

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(Courtesy: eMarketer)

Advertisers in the US will spend $564.84 on paid media for each consumer in the country in 2014 and grow to spend $670.65 in 2018. India, in comparison, will only spend $5.10 in 2014 and will grow by merely $1.16 to $6.26 in 2018. However, as a country that has the second largest number of SMEs in the world, the need exists for businesses to effectively target domestic customers, the bread and butter of SMEs. Although not to the size of the US, the spend per consumer could increase more rapidly if the advertisers in India start perceiving Facebook as an effective medium.

With digital channels continuing to drive the growth in advertising spend across the globe, India’s lack of a decent Internet infrastructure, slow adoption rate of technology in day-to-day business, and a low income per capita make it a country of a lot of potential users, but not enough potential customers.

What makes the discovery of valid customers even more difficult is the fact that India is one of many developing countries where click farms run rampant. As Facebook follows the cost-per-click model (advertisers pay whenever their ads are clicked, not when seen), paying for fake likes and engagements are real concerns for SMEs in India who will mostly target the domestic market.

A BBC technology correspondent Rory Cellan-Jones ran ads for a pointless page he created called Virtual Bagel Ltd in July, 2012. After spending $10 to garner 1,600 likes mostly from Egypt, Indonesia and the Philippines, he adjusted the targeting to United States, the UK, and India. After four days, his page was liked by nearly 3,000 people. When he solely targeted UK, the click through rate fell from 0.55% to 0.059%.

A popular blogger Derek Muller recently emulated the experiment with his own Virtual Cat Facebook page. And although India was not included in the targeting, he was able to exhaust the budget fairly quickly with clicks coming from suspected fake accounts. The results seem to indicate that Facebook’s on-going war with the illegal click buying industry has yet to tilt noticeably in Facebook’s favour.

In social media context, genuinely engaged users are the currency. In India, there is already a concern for ROI from small and medium businesses who are reluctant to advertise to a crowd who can’t afford their products. Before Ms. Sandberg meets with Indian businesses to ask them to embrace Facebook, she’d better have found a way for businesses to find real customers.

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