New influencer rules ‘will raise transparency & costs’; PhonePe’s India shift cost Rs 8,000 crore: CEO

Also in this letter:
■ PhonePe’s India shift cost Rs 8,000 crore: CEO
■ US sues Google over digital ads dominance
■ Expunge amendments to IT Rules, says Editors Guild

New influencer rules will increase transparency but also raise costs: DigitalROI

The new guidelines to social media influencers to regulate promotions could lead to higher costs for advertisers as they may need to spend more on creating compliant content, according to DigitalROI, a social media and influencer marketing company.

Catch up quick: Last week, the government announced endorsement guidelines for celebrities and social media influencers, mandating disclosure of benefits for promoting goods or services on social media.

“This includes not only benefits and incentives, but also monetary or other compensation, trips or hotel stays, media barters, coverage and awards, free products with or without conditions, discounts, gifts and any family or personal or employment relationship,” the Union Consumer Affairs Ministry said in a release.

Such disclosures must be prominently displayed with terms such as ‘advertisement’, ‘sponsored’ or ‘paid promotion’, it added. Failing to do so will attract a fine of up to Rs 50 lakh.

Quote: Vikas Mangla, founder of DigitalROI, said, “Consumers may become more aware of when an endorsement is sponsored, which could lead to increased scepticism about the authenticity of the endorsement. Advertisers may need to be more transparent in their relationships with influencers and other endorsers, which could lead to increased scrutiny of these relationships.”

Yes, but: “The overall impact of the disclosure will likely depend on how strictly the regulations are enforced and how effectively they are communicated to both advertisers and consumers,” Mangla added

It cost PhonePe Rs 8,000 crore to come to India, says Sameer Nigam

PhonePe cofounder and CEO Sameer Nigam said on Wednesday that since the company shifted domicile from Singapore to India, about 20 unicorn startups and their investors have asked the company how it went about the process, saying they too are interested in moving their headquarters to India.

PhonePe completed its shift from Singapore to India in October 2022.

Indian law poses challenges: In a YouTube Live session with PhonePe cofounder and chief technology officer Rahul Chari, Nigam said Indian law poses many challenges for startups that want to shift to India, such as a capital gains tax on shareholders and investors, reset of the vesting period for employee stock options (Esops), and the inability to offset losses.

Huge tax bill: We reported on January 4 that the government is likely to gain as much as $1 billion in taxes from US-based retailing giant Walmart and other shareholders of PhonePe as part of its shift to India.

Esop challenges: Nigam said that the company also had to convince several thousand employees about being back to a “zero-vesting one-year cliff” or a reset of the vesting period for their stock options.

Can’t offset losses: “One of the things that is very common in the pre-profit startup world is your accumulating losses. As the company becomes profitable, you get to actually offset the losses, which saves you some tax. And in this case, by domiciling into India, unless the law changes by the end of March, we stand to lose about $900 million of accumulated losses, because it’s considered a restructuring event,” he said.

Sharechat founders Farid Ahsan, Bhanu Pratap Singh to step down

Sharechat cofounders Bhanu Pratap Singh and Farid Ahsan will step down from their active roles at the social media platform, cofounder and CEO Ankush Sachdeva told staff in an internal email. His note said that both Singh and Ahsan will remain on the company’s board.

Ahsan was the company’s chief operating officer, while Singh was its chief technology officer.

Quote: “Bhanu and Farid believe that all the critical business functions they are owning are now in steady hands and have decided to step down from their active roles in the company. They would, however, continue to be a guiding force for the company and stay on the board,” Sachdeva said in the mail.

MohallaTech, the parent firm of ShareChat and Moj, sacked around 500 employees, or about 20% of its staff, earlier this month, after axing at least 100 jobs in December.

Expunge amendments to IT Rules, says Editors Guild

The Editors Guild of India has written to Electronics and Information Technology Minister Ashwini Vaishnaw, urging him to “expunge” the amendments to IT Rules that seek to direct social media platforms to take down news or information identified as “fake” by the PIB’s Fact Checking Unit.

In a letter sent to IT Minister Ashwini Vaishnaw, the Guild asked the ministry to initiate consultations with press bodies, media organisations and other stakeholders on the regulatory framework for digital media.

Catch up quick: The govt on January 18, proposed that any content marked ‘fake’ or ‘false’ by the Press Information Bureau (PIB) will have to be taken down by social media intermediaries. The government then invited comments from the public on the proposed amendment.

Quote: “This new procedure basically serves to make it easier to muzzle the free press, and will give sweeping powers to the PIB, or any ‘other agency authorised by the Central Government for fact checking’, to force online intermediaries to take down content that the government may find problematic,” the letter said.

Cloud brings silver lining for Microsoft as sales slow

Despite weakening macroeconomic conditions, tech giant Microsoft narrowly beat market expectations on profits as it posted earnings-per-share of $2.32, compared to Wall Street estimates of $2.29. The company reported net income of $16.4 billion, a 12% fall YoY.

Microsoft’s revenue rose 2% to $52.7 billion in the three months ended Dec. 31, compared with the average analyst estimate of $52.94 billion.

Saved by the cloud: Microsoft’s cloud business is under the spotlight again following the viral success of chatbot ChatGPT, which answers general questions in plain language using artificial intelligence.

Azure cloud product revenue in the second quarter rose 31%, in line with estimates compiled by Visible Alpha. It has steadily grabbed market share from leader Amazon Web Services (AWS). Azure ended 2022 with 30% share in the cloud computing market, up from 20% in 2018, according to estimates from BofA Global Research. AWS dropped to 55% from 71% during the same period.

Teams, Outlook face outage: Microsoft said on Wednesday it was investigating a networking issue that impacted multiple services including Teams and Outlook, with outage reports saying the platforms were down for thousands of users in India and around the world.

Today’s ETtech Top 5 newsletter was curated by Zaheer Merchant in Mumbai and Siddharth Sharma in Bengaluru. Graphics and illustrations by Rahul Awasthi.