Why Facebook's botched Free Basics in India doesn't really matter

Facebook’s failed Free Basics in India won’t have any real impact. As the social network continues to grow, it can expect to dominate this market in the same way it has many others.

Earlier this month, India blocked Facebook’s Free Basics program, a so-called zero rating service that provides no-cost access to a variety of sites (including Facebook, naturally).

The reason? Net neutrality, which dictates that internet access providers cannot privilege one type of content over another.

The social network made a series of missteps in launching Free Basics in India – first by attempting to give a for-profit effort the sheen of altruism, then by launching a ham-fisted campaign to drum up public support for the service.

Facebook board member Marc Andreessen’s tone-deaf response to the ban (comparing Free Basics to colonialism) was just icing on the cake.

But the ban of Free Basics isn’t going to change Facebook’s trajectory all that much. It’s already well on the way to owning the social space in India.

Here are some reasons why the Telecom Regulatory Authority of India’s ruling might not matter to Facebook in the long run:

Facebook already dominates

Facebook clearly has India in its sights as home to a significant portion of the next billion Internet users,  and Free Basics was a key part of its strategy to get a toehold among these potential users. But the company already has a dominant position in India.

While Facebook’s penetration among the overall population is low, projected at 13.2% in 2016 by eMarketer, it will have a massive number of users in absolute terms by the end of 2016, with 167.3 million.

India will soon be Facebook’s biggest market, snatching that title from the United States, which will have 161.4 million Facebook users by year’s end. (Keep in mind that Free Basics had only about one million users before it was switched over to a paid platform, and that those users may have been accessing Facebook in other ways as well.)

Facebook is also ascendant among the country’s digerati: more than half of internet users will use Facebook at least once per month this year, and the platform will have a penetration rate above 90% among social network users in India.

Facebook’s success shows no signs of slowing in the near future, with or without the presence of Free Basics. eMarketer expects the social network’s ranks in India to swell at a double-digit growth rate over the next several years, a rate significantly higher than seen in any other Asia-Pacific market over the same time frame.

This growth will largely be driven by the adoption of cheaper smartphones and a drop in the cost of data plans that will eliminate price barriers for those who have not yet gained Internet access—two factors that are completely unaffected by the presence (or absence) of Free Basics.

Yes, Free Basics theoretically hastens the adoption of Facebook by new smartphone users likely to use a pay-as-you-go model for data, but TRAI’s ruling will slow this process rather than completely derail it.

Once online, these new Internet users are likely to overlook any perceived transgressions by Facebook, falling sway to the social media platform’s network effect by seeking to reproduce their offline connections in a digital medium.

There’s no clear alternative

The reality is, Facebook is already well on its way to entrenching itself among Internet users in India. For those users outraged by the social networking giant’s handling of Free Basics, what’s the alternative? According to data from comScore, there’s not much in the way of competition.

The research firm found that Facebook topped the list of social media sites when ranked by unique visitors in November 2015.

In addition, Facebook was the only social media site that saw any growth in unique visits between November 2014 and November 2015.

ComScore has an expansive definition of a social network, counting Google’s weblog publishing outlet Blogger among its list of social media sites. But even taking that into account, Facebook has some serious distance on the competition, recording more than five times the site visits recorded by LinkedIn in November 2015, and more than 27 times the visits garnered by Tumblr.

Even when the definition of a social network is expanded to include chat apps, Facebook still has a leg up on its adversaries. Data from the TNS report Connected Life found that Facebook-owned messaging app WhatsApp was used daily by 56% of urban Internet users in India in August 2015, making it the market leader.

Facebook Messenger was in second place, used by 28% of respondents, while Yahoo Messenger was a distant third with 4%.

Although Facebook has yet to make moves in this direction, these apps have the added benefit of potentially serving as stepping stones for users to other, more visually oriented aspects of Facebook’s walled garden, such as the News Feed, where the company can leverage its data collection power to serve highly targeted ads.

The only players in town

Digital advertisers in India face the same dilemma that potential social network users do – there aren’t very many alternatives to Facebook.

The social network, along with Google, is in a rarified group of two companies on the supply side of advertising that have been able to consistently demonstrate widespread reach and clear return on investment.

Facebook, especially, has been able to offer audience targeting and measurement capabilities on the very mobile devices that will dominate Internet use in India in a way that few other publishers can.

Take a look at the combination of Facebook’s already significant user base in India and its audience buying platform with a robust data analysis feature set, and Facebook starts to resemble a Goliath lacking a David.

Yes, Facebook’s handling of Free Basics was sloppy and patronizing. It’s certainly possible that the ruling banning zero rating in India will allow for alternatives to Facebook to step in and flourish. But right now, that seems highly unlikely.

*Rahul Chadha is an analyst covering Asia-Pacific for the digital marketing research firm eMarketer.