Is the TikTok deal a deal-breaker for Jio’s Swadeshi credentials?

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Art by: Pradeep Vijayan

It has been 51 days since the Indian Government banned TikTok in India. The reason given was of course national security due to its Chinese origins. TikTok has also attracted bad press over the years for its intrusive nature and privacy violations. As the ban hit a half century of sorts, TikTok has left no stone unturned to save its business in India. 

Globally too, the app has faced bans in the US, where it is now racing against the clock to sign a deal with Microsoft to sell off its American operations. Countries like Japan and Indonesia too have mulled banning the app due to inappropriate content. The company owned by the Chinese tech giant ByteDance is rumoured to be in talks with Jio to sell its Indian operations. Analysts say that the deal could be valued at around USD 5 Billion. 

The business angle

Any company looking to buy TikTok would see the immense potential it has as a product. Its ad platform is something that can be a credible threat to the likes of Facebook and Google. Figures show that while the app was downloaded only 27 million times in China in 2020, the number stood at a whopping 118 million in India. Several analysts have pointed out that because Jio has attracted significant investments from global giants like Facebook and Google, the TikTok deal could set off alarms at the Competition Commission of India, a government body that was created to eliminate practices having an adverse effect on competition in the markets of India.

Jio becoming the owner of TikTok will create a lopsided market landscape where Jio, and its close allies like Facebook and Google, might be able to corner the digital advertising market in India. This of course will come under the purview of CCI. In a hypothetical situation where Jio does buy out TikTok’s Indian operations and then later ensures that user data resides in Indian servers, there is still no getting away from the fact that it will continue to be an intrusive app that doesn’t prioritise user privacy.

The Swadeshi angle

Considering the anti-China sentiment in the country and the Boycott China movement that is gaining ground, Jio is in a much better position as an Indian company to leverage this for its benefit. Indian citizens have vowed to cut down on their usage of Chinese products and it is here that leading Indian companies like Jio can create an impact with Indian products that offer better affordability and quality. At the moment everything is going right for Jio. JioMart as per our analysis is something that can easily create the kind of impact in India that companies like Alibaba and Tencent have had in China. 

In a politically charged climate where everything is going right for India’s most valued company, the TikTok deal could leave a serious dent in its Indian credentials. The deal could very well see Jio lock horns with the government in a perception battle. While banning Tiktok, GoI had made it clear that the app had serious national security implications. A few months later, the government allowing an Indian conglomerate to take over the same app could be detrimental to its credibility as well. 

Considering its stellar track record as a profitable company that employs thousands of people and continues to deliver shareholder value across industry segments, Jio shouldn’t in an ideal situation choose potential business gains over its credentials as an Indian company run by a respected Indian business family. Yes, from a pure business perspective there is a lot to gain for Jio with the TikTok deal. But, given the Indian consumer’s current mindset to avoid China at all costs, the deal might have a long term negative impact on Jio as a rising Swadeshi brand.

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