Facebook’s Foray (Back) Into China

Facebook and China certainly have an interesting relationship. After releasing a Chinese-language version of the platform in 2008, Facebook was banned by the Chinese government the very next year — in large part due to its role as a communication tool for anti-government protests. In its’ absence, homegrown platforms like Sina Weibo and WeChat have dominated the space. WeChat in particular has been hailed as the “one app to rule them all“, essentially combining the best features of Facebook, Twitter, Venmo, Yelp, Uber, and more, all into one app — and boasting more than 700 million active users to boot.

facebook-in-china

Is there any hope left for Facebook in China? Even tech giants like Google and Uber have failed to make a significant mark on the country — often losing out to their Chinese counterparts. In 2010, Google pulled out of China after years of offering a censored Google.cn to the Chinese market. Despite tremendous financial efforts to improve search results and provide a more reliable service over the years, Google was never able to capture the majority of Chinese users, 64% of which belonged to competitor, Baidu. Not only did Baidu have superior search technology, the company tailored its search engine specifically for its Chinese audience, additionally offering a wide variety of unique services and features.

Uber similarly faced significant hurdles in China. Initially, the company enjoyed early success, especially among foreigners and tourists living or visiting in China. However, in 2015, Didi Dache and Kuaidi Dache, two Chinese Uber competitors, merged together to form Didi Chuxing. In addition, Didi Chuxing is backed by three of the largest Chinese tech giants, Alibaba, Baidu, and Tencent — the developer of WeChat no less. Faced with intense pressure from the local company, Uber China eventually conceded and was sold to Didi Chuxing in 2015.

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Robert Salomon writes that it is difficult for these Western companies to enter the Chinese market because

China’s infrastructure, financial markets, and banking system are underdeveloped relative to those in the West, making it difficult for Western firms to operate in China as they do at home. Western managers find China’s political structure, legal system, and regulatory rules complex and vexing. Also, the Chinese practice of intermingling personal and business relationships is foreign to U.S. companies accustomed to more transactional relationships with their customers and employees. Finally, Chinese consumer tastes are so different from Westerners’ that foreign companies find it challenging to adapt their products and services to meet the specific needs of Chinese customers.

With the exception of Apple, western companies have a seemingly dismal track record in China. So why is Facebook considering entry in the Chinese arena once more? Mark Zuckerberg has certainly made it clear that he has his eyes set on China. Aside from learning Mandarin, visiting the country multiple times, and meeting with top Internet leaders, Zuckerberg himself said that “you can’t have a mission to want to connect everyone in the world and leave out the biggest country“.  While it is unlikely that Facebook will overthrow WeChat, capturing even a small fraction of China’s massive Internet population will bring in massive amounts of revenue for the company. Such untapped potential presents itself as a tempting opportunity for Facebook to reach even newer heights. But at what cost?

The New York Times reported that “the social network has quietly developed software to suppress posts from appearing in people’s news feeds in specific geographic areas, according to three current and former employees”. China is notorious for it’s Great Firewall that blocks access to many foreign sites, filters out certain keywords, and criminalizes certain online speech and activities — often deemed as anti-communist. The reported censorship tool would allow a third party Chinese company to censor any content they deem inappropriate on the site.

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Though Chinese companies have been able to advertise on Facebook, even through the site’s ban, the introduction of a censorship tool is a certainly gray area. Other companies, like LinkedIn, have complied with China’s censorship laws, and the results have led to great success in which “LinkedIn has grown its China membership base by over fivefold to 20 million members”. However, with strong competitors in both Weibo and WeChat, many argue that Facebook would be irrelevant to Chinese users outside of those who are looking to stay connected with friends and family overseas. Thus the question remains, is it worth it for Facebook to comply to censorship rules in order to enter the Chinese market? Keep a lookout on your news feeds for any updates in the near future, hopefully it’s not fake.

10 comments

  1. Very interesting post! I am very interested in the Chinese Market. I had first hand experience with these issues when I was studying abroad in Beijing, China. It is true that Wechat is an incredible app! It really does have it all, but that does not mean ( at least for me) that it can replace Facebook, Google, Uber, ect… While studying abroad in China I read an article which explained that Google refused to comprise their values by succumbing to Chinese censorship and in turn lost a major market and fell deeply out of grace with the Chinese government. Yahoo, on the other hand, agreed to Chinese censorship laws and has therefore pieced up a market in China. I still keep in contact with my friends in Beijing on weekly basis, through Wechat of course. I can’t imagine any of them using Facebook becasue they are truly loyal to Wechat becasue it is their one-stop-shop to everything. However, at least Chinese students my age, are very curious to Western customs, culture, society, and trends, and I believe if Facebook was legal in China it would defiantly gain traction. Very interested to see what happens. I will defiantly keep my eyes peeled! Thanks for sharing.

  2. rohansuwarna · ·

    This was a great blog post! Facebook’s decision to enter China’s social realm is a case of morals vs money. They could easily benefit off of about 31 million additional users, however they need to decide if they can abide by Chinese regulations for freedom of speech. As you said they have developed software to suppress specific language and topics being posted and seen by users. Personally, I feel like Facebook could really benefit off of China simply because of the user base. However, there will be many conflicts due to Chinese laws that Facebook will have to learn to deal with.

  3. Nice post. I guess FB is really running out of room to grow, so China is really its only option.

  4. olearycal · ·

    I think it makes sense Facebook wants to venture back into China if Zuckerberg’s goal is to connect the entire world. A problem that Facebook will face is creating network effects. If all of your friends are already on WeChat, what’s going to make you switch to something similar? It’s probably one of those cases in which it’s better to do something than nothing at all.

  5. polmankevin · ·

    Great post! I think everyone knows that western companies have historically struggled in China, but to actually breakdown the reasons why provides a great insight into the struggles of international markets. I think the quote from Robert Salomon does a great job of analyzing these struggles. I never considered how less efficient financial markets could hinder western companies in China, but I realize that it would be very frustrating for firms who are used to our financial system. Additionally, censorship, regulations, and different consumer preferences are three hurdles are difficult to tackle and are also out of the control of western organizations.

  6. Nice post! As you mentioned, even gaining a small portion of overall Chinese users would have a significant impact on Facebook’s performance. I completely agree with Robert Salomon that our infrastructure, markets, and legal system are so different from the Western models that these companies were built on. The key is to build strong global relationships and tailor these platforms to our diverse needs. I’m interested to see how Apple became one of the few companies that has successfully tapped into this market. Perhaps there is something to learn from them.

  7. skuchma215 · ·

    Great job! I had no idea so many western tech and social media companies were banned in China. What scares me is the fact the Facebook has developed extensive software to heavily block content. There is nothing to keep them from slowly implementing that software into their domestic platform here in the US. Additionally, I wonder why Facebook is even trying to enter the Chinese market place if they know they won’t gain the majority of the market share. After all, isn’t Zuckerberg’s mission to connect all of China to the world?

  8. I love Mark’s quote about trying to grow worldwide without including the biggest country is silly. Right now though, I don’t see Facebook making a lot of progress. Wechat has a lot of what Facebook provides but much more all consolidated onto one application. Chinese people have all of their friends and family added on the application and it’s already a big hit with the older generation, one of the hardest generations to reach (my parents love WeChat). If Facebook were to somehow make it past the great firewall of China, there would be very high switching costs from WeChat to Facebook and I just don’t see what Facebook could provide that WeChat couldn’t. The only thing I could see is the continuation of Chinese companies advertising on Facebook but beyond that, Mark has to do a lot more than just learn Mandarin.

  9. michaelahoff · ·

    Even Facebook is subject to the insatiable need to grow at all costs that all public companies face. It’s quite impressive how big Facebook has gotten without China, but it’ll still be hard to make inroads. As you mentioned, lots of companies from Uber to Trip Advisor have fallen flat trying to penetrate the Chinese market.

  10. Tyler O'Neill · ·

    Great post! It certainly seems foolish to try and enter a market that has kicked Facebook out in the past. Zuckerberg’s mission “to connect everyone” does not seem one that will maximize shareholder value. Facebook should be more concerned with their profitability in expanding but with respect to the cost. Having already failed to enter the market, there is little insight that shows this time will be any different than the last. For Facebook’s sake, I hope they have better luck this time!

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