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McClatchy-Tribune  07/23/2014 3:49 AM ET
Facebook India profit rises 63% [Mint, New Delhi :: ]

July 23--BANGALORE -- Facebook Inc.'s India business reported a 63% rise in profits during the 2013 financial year, driven mainly by India's booming online advertising market, while its investments in India have also grown several fold since the social networking giant entered the country.

However, despite India being Facebook's second largest market globally in terms of users, after the US, the company's revenues from the country are a fraction of what it generates globally.

During the March quarter, Facebook's global revenues stood at $2.5 billion. Facebook India Online Services Pvt. Ltd reported revenues of about Rs.75.7 crore for the year ended March 2013, compared with Rs.45.2 crore in the year-ago period, according to documents posted on the corporate ministry's website on 8 July. Facebook has not yet posted its annual report for the 2013-14 financial year.

During the same period, Facebook India reported profit after tax of about Rs.9.6 crore, compared with Rs.5.9 crore the previous year.

The world's largest social network has about 100 million users in India.

Facebook chief executive officer Mark Zuckerberg said in an interview last year that the comparatively small Internet subscriber base in the country meant that Facebook had "a long road ahead" in India. India's Internet subscribers touched 238.7 million in 2013, official data show.

Globally, Facebook has over 1 billion active users and as part of its ambitious Internet.org project, is planning to reach the next 4-5 billion users.

Facebook, which launched its India operations in September 2010, has also increased its investments several fold in the country over the past three years. Its investments in India, categorized as shareholders' funds, stood at Rs.51.9 crore in March 2013, compared with Rs.17.6 crore in the year-ago period -- a three-fold increase that also signals Facebook's strategy of leveraging India's lucrative online advertising space, which, according to a report by FICCI-KPMG, is expected to grow at a compounded annual growth rate of 32% to Rs.7,400 crore by 2017.

Facebook "has been investing in sales teams...and the investments have been growing year-on-year, but not at the pace at which some of the other companies have invested in a market like India. Their focus on mobile will help them drive growth in a country like India," said Sanjay Ramakrishnan, country head at Neo@Ogilvy, a media-buying firm which works with Facebook.

Facebook India also saw changes in its board of directors during the past two years, with Cipora Rachel Herman and Theodore Warren Ullyot stepping down in 2012 and 2013, respectively. Chetan Nagendra, a former lawyer at Facebook, resigned from the board in October 2013. Facebook India appointed Ramesh Vaidyanathan, David Kling and Jaspal Athwal as board members during the same period.

During a recent trip to India, Sheryl Sandberg, chief operating officer at Facebook, had said the company was making serious investments in India, given the potential of online advertising in India.

"We really want to invest here because the returns are so great both for our local and global business," Sandberg had said. "As people are spending more time on digital, marketers will go there....The users we have in the US represent a large portion of the US population. The 100 million that we have in India do not represent a large portion of the Indian population, which means there's such huge opportunity for growth here."

Facebook, which has a partnership with India's largest telecom firm Bharti Airtel Ltd, is also testing a new kind of advertising service in India by tapping a uniquely Indian concept, missed calls: cellphone users click a button to call an advertiser, hang up and then get a return call that gives them more information about the product. For this service, Facebook has partnered with Indian start-up ZipDial Mobile Solutions Pvt. Ltd.

In the online advertising space in India, Facebook has a first-mover advantage over Twitter, but still has a long way to go before it can catch up with Google.

In India, Google generated revenues of about Rs. 2,076 crore for the financial year ended March 2013, witnessing a growth of over 75% during the period, according to documents posted on the website of the Registrar of Companies.

 

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