India: World's 2nd Largest Facebook User - Analyst Blog

India became the second largest Facebook FB using nation in the world, after Monthly Active Users (MAUs) recently crossed 100 million. In terms of user base, India only lags the United States, where 180 million people use Facebook, according to Financial Times.

Per Facebook, Brazil, Indonesia and Mexico were #3, #4 and #5, respectively, in terms of MAUs.

The strong growth in MAUs in India was primarily due to the growing adoption of smartphone devices and continuing shift to the Internet. Per Internet & Mobile Association of India, mobile Internet users are expected to reach approximately 185 million by the middle of this year, which represents a significant growth opportunity.

However, we note that revenue per user in countries like India and Brazil tends to be much lower than the developed countries like the U.S. and the U.K. Nevertheless, Facebook will look to further penetrate the growing affluent tech-savvy middle class of India, which will help it to attract regional advertisers.

Moreover, Facebook's China blockade is pushing it to expand in India. The country is the third largest economy in Asia with a relatively stable political environment compared to some other Asian countries.

Of late, political leaders around the world have begun to recognize the potency of social network in changing regimes. Major political parties in India are vigorously using Facebook as a campaigning tool for the ongoing national elections, which will further boost the social network's footprint in the country,

Moreover, Facebook's acquisition of WhatsApp, which has approximately 40 million users in India, is expected to drive growth. In February this year, Facebook announced that WhatsApp will be offering free voice-call services by the second quarter of this year. We believe the availability of this service will further boost WhatsApp's user base in India.  

Facebook's initiatives such as Internet.org will also help to expand its presence in emerging countries like India and Brazil. As part of the initiative, Facebook is seeking partnership with wireless carriers who will roll out telecom networks and offer data services at affordable prices, particularly in these countries.

Facebook is already partnering on a regional basis (in Paraguay and Philippines). The initiative will help to connect billions of people who will be able to access basic data services such as search and Facebook. The company is also planning to employ a fleet of solar-powered drones to provide Internet access to remote areas of the world.

We believe Facebook's growing mobile user base (more than 1 billion), Instagram's increasing popularity (200 million users) and international expansions will boost the top line and face increasing competition from Google GOOG, Yahoo! YHOO and Twitter TWTR.

Currently, Facebook enjoys a Zacks Rank #2 (Buy).