The crown of thorns that awaits Facebook’s India MD hire

The article by Sunny Sen and Jayadevan PK was published by Factor Daily on July 25, 2018. Sunil Abraham was quoted.

By advertising metrics, such a reach – buttressed by usage through the day – is unprecedented and unrivalled. That should make Facebook India the most powerful advertising platform in the country. And, by corollary, its managing director or CEO among the most powerful executives in India, right?

Yes, except that no such person exists.

The corner room position at Facebook India has been unoccupied since October last year despite an extensive search (even on LinkedIn), a $2-million compensation package, and the immense power that comes with the job.

Long, winding months of search – there have been extensive meetings with more than half a dozen shortlisted candidates – are yet to culminate in an announcement that will tell the Indian advertising and media world who will lead Facebook in India, the social media giant’s second-largest market by several metrics.

Why? To put it simply, a yawning trust deficit and the difficulty in fixing it. A deficit that Facebook faces with almost all stakeholders in its ecosystem: users, regulators, advertisers, publishers, and agencies.

In India, the trust gap with regulators began to form with founder Mark Zuckerberg’s pet Free Basics program of early 2015 that ran afoul of net neutrality principles. India’s telecom regulator intervened and the project was ultimately shuttered in February 2016.

Facebook tried to change public perception of Free Basics by running multi-million advertising campaigns.

Facebook tried to change public perception of Free Basics by running multi-million advertising campaigns – billboards, newspaper advertisements, and the works – but the scepticism and opposition from large swathes of the startup ecosystem, proponents of net neutrality, and many Facebook users saw it in. Facebook also has an important case in the Supreme Court from last year, where petitioners have challenged the sharing of data between Facebook, WhatsApp, and third parties. If that was not all, the Cambridge Analytica scandal from early 2018 has all but singed the company’s reputation – its actions in the country have been questioned by the government with one minister even saying he would subpoena Zuckerberg if needed. The recent spate of lynchings, some traced to rumours that spread on WhatsApp, had the government asking the messaging platform what it is doing to stop the killings.

Facebook’s troubles with publishers is well documented. First, it was accused of promoting clickbaity content that forced people to spend more and more time on the platform. After Facebook changed news feed algorithms to show more of friends and family related content and less of news, publishers who had dived headlong into the Facebook ecosystem felt jilted. “Media companies are not making much money from Facebook. DB Corp has said that it is not getting enough revenue from social media so it is taking its content off the platforms… it will try to drive traffic directly to its own websites,” said Abneesh Roy, senior vice president at Edelweiss Capital, a Mumbai investment bank.

“Media companies are not making much money from Facebook. DB Corp has said that it is not getting enough revenue from social media so it is taking its content off the platforms”

Agencies, who often play a cosy role mediating between the buyers of advertisement space or time and the sellers, don’t like digital platforms such as Facebook and Google because both ultimately aim to disintermediate agencies through a set of self-service tools. The suspicion is rooted in commissions that are squeezed by the digital platforms: while print, TV and other media platforms pay a generous 15% or more commission on ad billings, agencies receive only 2% to 4 % from Facebook and 8% to 10% from Google. The digital platforms get away – or, at least, have gotten away so far thanks to the scale and low costs they operate at.

Overall, all this makes Facebook look ogreish that it – and, importantly, its people – may not be in real life. But, American writer Terry Goodkind’s “Reality is irrelevant; perception is everything

” holds true more than ever in the times we live and public perception is hurting the company in India. At least a dozen people, both from within, close and around the company, have told FactorDaily that while user metrics continue to grow strongly in India, especially on the back of an upsurge of data use in India in the last two years (thanks to Reliance Jio), Facebook India is a little at sea. “Facebook needs a face like Rajan Anandan is for Google,” is how one person with close knowledge of the situation put it. Anandan is vice president, South East Asia and India for Google and is its face for the company in this part of the world.

Facebook did not respond to a request mailed for comments.

Hotshot names all but…

Facebook is said to have interviewed – a few of these conversations continue – some of the top names from the India corporate landscape for its India CEO position: Star India MD Sanjay Gupta; Ajit Mohan, CEO, Hotstar; Sameer Nair, CEO, Applause Entertainment, part of the Aditya Birla Group; D Shivakumar, group president, strategy at the Aditya Birla Group; Tata Sky MD Harit Nagpal; Sudhanshu Vats, Viacom18 group CEO; and Sudhir Sitapati, executive director-refreshments at Hindustan Unilever. The hiring conversations even covered Srivatsa Krishna, an Indian Administrative Service officer who was the Karnataka IT secretary until last year.

Some of these people confirmed to FactorDaily they had been reached out to by Facebook and the headhunter Spencer Stuart it has engaged for the task, one denied it, and others didn’t respond to requests for comment.

Mohan and Nair have an edge, according to a hiring firm source and one of the other candidates. “We have heard quite a few names but it seems that Ajit Mohan is a front-runner. He has successfully built Hotstar,” a Facebook insider told FactorDaily, on the condition of anonymity because he is not authorised to speak with the media.

A person with knowledge of the job position said that Facebook was gravitating towards someone with experience in the media industry. “They believe that they are in the content game and want to build that cache,” the person said describing his conversations with David Fischer, Facebook’s vice president of business and marketing partnerships, who is leading the CEO search.

More details were not immediately available on what Facebook wants in a person for the role. “I’m sorry but Spencer Stuart is under confidentiality agreements and may not talk about its work,” a spokesperson for the headhunter said on email.

Facebook’s India leadership crisis, ironically, comes from its stupendous success in the country. India was more a development outpost for the social media giant when it started here in 2010 with a centre in Hyderabad. Kirthiga Reddy, its first Indian employee, transitioned into a market-facing India managing director role when Facebook saw its user base here explode a couple of years later. “She did a great job with setting the foundations of relationships with the big advertisers and agencies here,” said the person with knowledge of the open CEO position quoted earlier. Her successor Umang Bedi, too, was into a sales-heavy role with demand for ad inventory going through the roof at Facebook India.

But, with its growing presence – the company closed calendar 2017 with $700 million in sales, including spots bought by small businesses by swiping a credit card which typically gets registered outside India – the role of the India managing director now has to change, Facebook seems to have acknowledged. When Reddy’s successor, Bedi was the managing director, India, he reported into Dan Neary, vice president for Asia Pacific at Facebook. Neary’s boss was Carolyn Everson, vice president, global marketing solutions at Facebook, who, in turn, reported to Fischer.

“For David, India is a big thing. Sheryl (Sandberg) brought him from Google… He understands India well,” said a second source close to Facebook. Sources say Facebook is thinking of making the reporting relationship of the India MD directly into Fischer cutting two layers from the hierarchy.

“You need a grown-up to lead the market. The kind of role (of a sales head) didn’t help anymore,” said a third source, close to Facebook. “It was like a merry-go-round, especially with the kind of problems (Facebook) India was facing from FreeBasics to fake news.”

The missing hand at the wheel

Without a country head, Facebook India is missing on a lot of things. Like any other country head, the role of the new India head will be that of an ambassador at  Facebook’s headquarters in Menlo Park, California. A map-tap approach of a leader achieving numbers isn’t enough. “It is very bad for FB or any company to go headless in a rapidly growing market like India,” said Kavil Ramachandran, Thomas Schmidheiny chair professor of family business and wealth management, Indian School of Business.

The leader will not only have to lobby for investments but also show that India is not a problem child. The company will have to have a growth story of every app and every product that gets rolled out in India. “Why shouldn’t there be a product coming out of India to fight fake news and why does everything have to go up to Dublin,” the third source said. Dublin is where Facebook does a lot of its development work in Europe.

Apart from Facebook Lite, there is no other product that is aimed at the Indian user. Google, in contrast, offers a slew of them like YouTube Go and Google Tez and projects such as Google Wifi or Internet Saathis – all initiatives rooted or aimed at India. Even Apple, with all its premium swag, is looking at India to build maps and brought out the iPhone SE to stay relevant among Indian buyers.

Ramachandran helps put the difficulty of finding someone to fill Facebook’s India MD position – Bedi announced his resignation last October – in context. “Typically, this happens when the job is not attractive for various reasons. In the case of FB, it can’t be money. Then what? Most likely, potential legal implications of any action that may not be under the control of the country head. If the head office does something and the company is breaching the country’s law, the local head will be liable or potentially so. (Cambridge) Analytica is a case in point,” he said.

“Headquarters has a lot to learn from the India team in terms of sophistication and honesty in the regulatory debate. The Californian ideology has run its course.”

Then, there is the question of building trust in a sullied platform. “Basically Facebook has lost consumer trust over the years because they don’t consistently tell the truth, the whole truth and nothing but the truth. Headquarters has a lot to learn from the India team in terms of sophistication and honesty in the regulatory debate. The Californian ideology has run its course,” said Sunil Abraham, executive director of Bengaluru-based Centre for Internet and Society. The California reference is to the brazen manner in which San Francisco-based platforms have grown unmindful of the law and societal norms at times.

At the end of the day, Facebook is valuable to customers as it is able to tell brands what customers want and thus help target ads. The internal thinking, some of which finds some takers in the advertising fraternity, is that Facebook has headroom in sales growth waiting to be grabbed. They point to Google’s India revenues of over $1 billion or nearly Rs 6,900 crore, and projections for the Indian digital ad market of some Rs 19,000 crore by 2020. The real value of the Indian digital ad market is actually a lot more: the estimates understate what is actually made because many companies register their ad revenue in tax havens to lower the incidence of tax on them.

But signing on potential revenues is easier said than done. “In the past one year, our digital ad spend has grown five times. Almost two-thirds of that increased spending has gone to Google,” said a marketing executive with a large two-wheeler company, hinting that Facebook has lost at least a large portion of the incremental revenue. He did not want his name taken in this story because the company doesn’t disclose how it splits its ad spends.

The marketing head of a leading carmaker said that Facebook is very good when it comes to narrowly targeting people but search-based advertising is still big in India. Many of his company’s dealers prefer campaigns on Google and “that is why a large portion of digital revenue is being cornered by Google,” this executive said.

The CEO of a consumer durables company said being on Facebook was “unsexy” now. “There has been so much of trust issues with Facebook that I don’t want my product to be seen there so often… I have scaled down on my Facebook budget,” the CEO said without sharing more details.

An image makeover, then, will be the new India MD’s biggest task and global bosses don’t want it lost in the hierarchical process that most MNCs operate in. The bosses want someone who can take India from $500 million to $5 billion. Fast.

Preparing an organisation for that kind of growth means resourcing it with people who have handled scale in the past or have the potential to do so. Take the example of Nokia – now gone and buried as a brand but 10 years ago, it was India’s biggest MNC. When Shivakumar, now with Aditya Birla Group, was hired as its India managing director in 2006, Nokia had understood the potential that the country offered. The goal was to grow operations of half a billion dollars manifold. Nokia India became a company with $4 billion in sales in the 2008-2009 period. One way to assess that performance is to check where the team that delivered the vision is today. Vipul Sabharwal, whose five-year stint with Nokia ended in 2011 as sales director is now managing director of Luminous Power. V Ramnath, who also left Nokia as its sales director in 2013 is managing director, Racold Thermo. Vineet Taneja, head of marketing at Nokia when he is left in 2010, is now CEO of Dyson in India after stints in between at Bharti Airtel and Samsung India. Poonam Kaul, former director of communications at Nokia, is director of marketing at Apple India now.

Large operations need capable people and Facebook is missing its go-to person in India badly. This is evident in its ask of the CEO candidate here and the changes it is willing to put in place. Gurprriet Siingh, senior client partner with headhunter Korn Ferry, said that there are three reasons why the India head role has been moved closer to the US: to speed up decision-making, to signal the importance of India, and to give context to the individual of what is expected. “A managing director’s role is to manage investors, customers, sales, regulators and government relations,” Siingh added.

With great powers come great responsibilities. That line, immortalised in Spiderman movies, will be playing on the minds of the person who signs up for the Facebook India job. With one tweak: “With great powers come great responsibilities. And, a lot to do.”