The 13% growth is on a base of ₹16,189 crore, which was the company’s advertising reseller revenue in FY22.
In FY23, the advertising industry faced several headwinds with large corporate advertisers adopting a cautious approach and start-up advertising witnessing a near collapse due to a funding winter.
Meta’s India arm earns ad revenue by selling ad inventory on Facebook, Instagram, and Messenger. Along with Google, Meta has been one of the biggest beneficiaries of the shift in ad spending from traditional platforms to digital.
“Overall, I see green shoots in terms of the ad market itself growing as the economy continues to grow. And India is one of the fastest ad markets globally. Digital is powering a lot of that growth,” Meta India VP and Head Sandhya Devanathan told ET in an interview in May.
Ad giant GroupM had projected that the digital ad market in India could touch ₹ 82,542 crore in 2023, comprising a 56% share of the total ad market, which was expected to touch ₹146,450 crore.In the fiscal year, the company changed its operating model from merely being a reseller of ad inventory for Meta USA to a reseller and operating license model.Following the change in operating model effective August 2022, Facebook recognises its gross ad revenue under two heads: gross ad reseller revenue and gross ad revenue. Of the gross ad revenue of ₹18,308 crore, the company’s gross advertising reseller revenue stood at ₹6,120 crore, while the gross advertising revenue came in at ₹ 12,188 crore.
Until July 2022, Facebook India worked on a reseller model, buying ad inventory from its parent company, and selling it in India.
As per MCA filings, the reseller agreement between Facebook Online India and Meta USA was terminated on July 31, 2022, and the company entered into an operating license agreement with Meta USA with effect from August 1, 2022.
Under the new arrangement, the company will compensate Meta USA with royalty payments for commercialising the IP of Meta USA and infrastructure charges for maintenance of infrastructure.
The company’s cost of ad inventory declined 63% to ₹5,666 crore due to the change in the model. The company paid royalty and infrastructure charges of ₹9167 crore and ₹1,543 crore, respectively, to Meta USA.
Facebook India’s FY23 net profit jumped 19% to ₹352 crore, while revenue increased 20% to ₹2,776 crore.