The first rule of modern marketing is, consumers are inherently suspicious of the word “free.” The second rule of modern marketing is, if something isn’t worth having — even if it’s free — then such a ploy may well do more harm than good.
Although Facebook (FB) seemed to remember these two key premises as it was rolling out its social networking platform en masse a few years ago (and delighting owners of FB stock in the meantime for successfully monetizing what was “free”), they’re lessons that CEO Mark Zuckerberg seems to have forgotten in his quest to bring so-called “free internet” to India.
A Free Facebook Internet Service in India?
The premise is simple enough — Zuckerberg feels all the citizens of India now need, want, and deserve a connection to the Internet. Ergo, largely through Facebook as the platform, in February Zuckerberg unveiled the Internet.org service in India.
“Over the last year we’ve rolled out Internet.org free basic services to countries with more than 150 million people total across Africa and Latin America. More than 6 million people are already connected to the internet who previously weren’t, and we’ve started hearing incredible stories about how the internet is changing lives and communities.
But to continue connecting the world, we have to connect India. More than a billion people in India don’t have access to the internet. That means they can’t enjoy the same opportunities many of us take for granted, and the entire world is robbed of their ideas and creativity.”
As could be expected, a new venture that isn’t — and never will be — fiscally self-sustaining can expect to hit a few road bumps. Throw in the fact that much of India simply lacks adequate infrastructure to supply Internet services in a way that matters, it’s even less surprising the initiative hasn’t been kink-free.
Nevertheless, Facebook has pushed ahead, launching the wirelessly-delivered service in more locales in India in the meantime, and recently changing the name of said service from Internet.org to a more marketable “Free Basics,” which better explains what the service does and why one would want to use it.
Indian consumers remain unimpressed.
Call It What You Want — It Still Stinks
In retrospect, Facebook may have wanted to rethink its one and only initial Indian partner before debuting the free Internet service a few months ago.
The free Facebook Internet service — branded as Freenet in India — is delivered through a wireless service called Reliance, which is not one of India’s preferred service providers. As cell phone service shop owner Shoaib Khan explained, “The Reliance connection is very patchy. I would really have to sell the customer on it.”
Rival cell phone shop owner Rizwan Khan (no relation to Shoaib Khan) is equally unkeen on selling the service, noting, “New customers don’t come looking for Freenet… If you have to pay for data, what’s the point of calling it free?” referring to the fact that not only does the free Facebook Internet service not support the clamored-for Whatsapp, the service only allows users to access websites hand-picked by Facebook. Customers can access the entire Internet through Freenet, but only for an additional fee.
In the meantime, Facebook has said it was looking at other wireless partners, and has even launched a pilot program with AirJaldi that allows subscribers to use 20 gigabytes worth of data per month at a price of Rs 200, or roughly $3.00. That’s dirt cheap, even by Indian standards. But, once again, users are less than thrilled, especially considering that signal strength is spotty.
And, even if connectivity issues were resolved, users have largely soured on the idea, noting it’s little more than a platform to sell paid plans offered by Reliance, underscoring Indian consumers’ suspicions that nothing is ever really free.
Bottom Line for FB Stock
The good news for owners of FB stock is, this was a relatively inexpensive effort to capture a piece of a big, but relatively unfruitful market; the median annual per-capita income in India is only $616, leaving very little disposable income left for Facebook to tap into after accounting for exchange rates.
The bad news is, the roundabout way of trying to introduce Facebook to Indian consumers was not only strange, but ineffective, perhaps damaging whatever value the Facebook brand had in India. Not only are consumers now jaded, but the nation’s regulators may be as well. The chairman of the Telecom Regulatory Authority of India, Ram Sewak Sharma, recently opined, “Maybe they have wonderful objectives, but the way it is being implemented, that’s not really appropriate.”
While that isn’t directly a reason to view FB stock as a liability rather than an asset, this is the first time investors have seen Facebook put an initative in place without having a clear goal in mind, nor having an intelligent way to monetize it. Maybe it won’t be the last, either.
But, is Internet for all a worthy, altruistic goal in itself? Sure. Problem is, Facebook didn’t do anything worthy to that end in India.
It makes current FB stock investors wonder what other miscues the company is quietly making.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
