Five companies are at the forefront of a new era where U.S. and Chinese companies will dominate commerce and trade in the world’s fastest growing emerging markets, and will likely also have influence over politics due to their spending power and lobbying influence.
Alibaba (NYSE: BABA), Alphabet (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), Facebook (NASDAQ: FB), and Tencent (OTC: TCEHY) have already infiltrated the everyday lives of consumers in the U.S. and China with their power in both countries going largely unchecked. Now these companies are expanding into new territories like India, where McKinsey Global Institute says each has a long-term “insurmountable advantage” because of their size and their ability to invest in new technologies including AI and robotics.
Facebook (NASDAQ: FB)
Currently, Facebook’s WhatsApp is playing a major role in India’s election where the app is seeing the most intense political campaigning of any other platform. WhatsApp has 250 million users in India and is taking an increasingly central role in the elections in both India and other developing countries.
According to The New York Times, “More than any other social media or messaging app, WhatsApp was used in recent months by India’s political parties, religious activists and others to send messages and distribute news to… 49 million voters.”
The Facebook and Instagram apps have been under scrutiny for the role they played in the 2016 U.S. presidential election and how Russian agents were able to use the apps to manipulate American voters. But Facebook-owned WhatsApp has largely flown under the radar because it is used more widely outside of the U.S. In countries like India, Brazil, and Indonesia, the app sends approximately 60 billion messages a day.
With its popularity in India, Facebook has introduced several India-focused features and is considering its scalability in the country. Not only that, the social-media giant is also looking for a head to lead Facebook India which certainly asserts its intent to dominate social media in the country.
Meanwhile, Amazon and Chinese internet giant Alibaba are staging up for a battle over e-commerce dominance outside of their home markets, including in India and other fast growing emerging markets.
In a Morgan Stanley note to clients, the firm wrote that Amazon has a “larger long-term need for global expansion,” with India emerging as the foremost battleground. “For now, we see Amazon ahead in India, Alibaba ahead in Southeast Asia, and both players planting seeds in Latin America and Australia.”
In India, Amazon will face tough competition from Walmart (NYSE: WMT) after its recent acquisition of Indian e-commerce heavyweight Flipkart, a firm that was founded by former Amazon employees. But to fend off Walmart, Amazon has committed an additional $2 billion to its investments in the emerging market.
Amazon has already built 60 fulfillment and distribution centers in India, and is expanding local video content for its internet streaming service. Amazon founder Jeff Bezos also says that its India marketplace Amazon.in is the most visited shopping site in the country for the last two years.
While Amazon does have the upper-hand in India over Alibaba, the Chinese internet titan does have a strong presence as it supports the Indian online shopping site Paytm Mall. Paytm is a rival of Flipkart, and Alibaba owns a 36% stake in the company.
Alibaba also has a presence in the country through its investments in an online grocer, BigBasket, and logistics firm XpressBees, according to Morgan Stanley’s note.
Paytm recorded a fourfold jump in its annualized gross transaction value to $20 billion from $5 billion in March 2017. BigBasket by comparison increased its overall losses by nearly seven times hitting $96.35 million for FY17 compared to $14 million the year before.
Morgan Stanley notes that Amazon and Alibaba will be fighting for a $5 trillion market opportunity in India, Latin America, Southeast Asia, and Australia.
Tencent (OTC: TCEHY)
Another Chinese internet giant is also making waves in India.
Tencent has already consolidated its position in China and now has moved to India to capture market share outside of its home country. While its efforts to spread the use of its WeChat app—which recently hit 1 billion users—outside of China have largely flopped, the company is taking a different approach to gaining footholds in Southeast Asia and India by investing in fast-growing local players.
Tencent, which is strong in gaming and media and saw revenues of $37.5 billion last year, recently led a $50 million Series C fundraising round for NewsDog, an India-focused news aggregator.
The app has over 50 million users and curates content from multiple news sites in 10 local Indian languages. A portion of the funding will go toward adding more local languages so the app can expand its user base.
Tencent’s investment may be a very good call as analysts believe news feed and aggregator apps that offer vernacular language content will see massive growth in India.
The Chinese powerhouse also previously backed Indian e-commerce platform Flipkart, ride-hailing company Ola, and music streaming site Gaana, though NewsDog marks its first venture into news.
As data becomes cheaper and smartphone adoption rises in India, digital content is fast becoming an attractive sector for Chinese investors, including Tencent.
“Indian consumers are increasingly spending more time on video and online content. And this is a market where, other than YouTube maybe, there is no real leader as of now,” as Delhi-based analyst Satish Meena of Forrester Research told Quartz. “(Chinese investors and firms) seek experience from China to build firms at scale and that gives them advantage here.”
NewsDog is said to have been at the top of the Google Play store news category in India since 2016, where Android is the dominant operating system, which gives Tencent a nice foothold in this burgeoning market.
Alphabet (NASDAQ: GOOGL)
Finally, Google-parent Alphabet has made several investments in India. Back in 2015, the company launched an initiative to bring free WiFi to India’s railway stations. Yesterday, the tech giant announced that the program had surpassed its target of reaching 400 stations, which has attracted in excess of 8 million users.
In addition to that, Alphabet is pinning its hopes on cloud computing to attract enterprises in India. The U.S.-based internet behemoth is hoping to woo enterprise clients in India with its machine learning tools and strict privacy policies.
Alphabet sees India as a huge area of opportunity for its cloud services as startups are in their early stages of cloud adoption in the country, which means huge potential for future growth.
“Large enterprises with big infrastructure processes definitely have [a] cloud-first strategy in India. Apart from this, there [are] large small entrepreneurial startups who don’t have to think about existing infrastructure and thus they can straightaway go to the new products,” said Oyvind Roti, Head of Solutions for Japan and the Asia Pacific Region at Google Cloud. “I think opportunity in [the] cloud services space here is too big and we are very committed to this market.”
Alphabet also recently increased its commitment to India with the release of its new social app, Neighbourly, focused on building neighborhood communities within cities in India. Its “Next Billion” team in charge of emerging markets has dedicated significant resources to the country, and the Neighbourly app joins a long list of Google’s projects in the country.