What Will Facebook Find If It Ventures Into China?

With so Many Savvy Local Clones of U.S. Internet Brands, It's a Tough Market for Any Newcomers

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Firewall of                                                                    China graphic
Illustration by Anthony Freda

Mark Zuckerberg's China holiday last Christmas inspired widespread speculation about plans to bring Facebook to the world's biggest internet market.

Buzz has focused on a possible partnership with Baidu, China's dominant search engine and a leading player in China's tech industry. No formal plans have been announced, but the lack of a categorical denial from Mr. Zuckerberg's camp suggests there's truth behind the rumors.

The bigger question is how successful a Chinese version of Facebook -- which is currently blocked in China -- would be. Yes, Facebook has achieved enormous growth in other major Asian markets such as India, Indonesia and the Philippines, and Chinese are avid users of social-media platforms. But Facebook will face the same challenges that defeated other western internet giants from Google to eBay to Twitter. These include the sheer scope, scale and pace of China's internet market, as well as government protectionism and censorship, strong local competition, a late entrance, and a lack of market knowledge and consumer understanding.

And, of course, to enter China it would have to decide who to handle the country's famous demands for sensitive user data and censoring search results. But another huge stumbling block might be the fact that Facebook is not of China or its culture.

That's a huge liability in a market with a distinctive internet ecosystem and a government that prefers homegrown companies which will adhere to austere censorship rules. Timing may work against Facebook too. The so-called Arab Spring uprisings in the Middle East have made China's leaders in Beijing extra twitchy about the power of the internet and they have called for tighter control of social networks and microblogs.

Facebook would also face strong competition from local social-networking sites such as Renren, which recently listed on the New York Stock Exchange, and is most popular among youth and college students. Renren is the "perceived" leader in total user numbers -- but data in China is unreliable.

Among the other Facebook-like brands, Kaixin001 is popular among white-collar workers, 51.com has a strong rural base, Douban attracts the hip urban set and creatives, and Taomee is popular with Chinese children.

Even these Facebook-like local players are having a tough time expanding, however.

"I don't think it's been proven even by Renren that this is the type of social network that Chinese find themselves attracted to. The jury is still out on how Chinese like to communicate socially online," said David Wolf, a Beijing-based consultant specializing in China's technology and IT sectors.

A major reason China's Facebook clones are struggling to expand is the ascendency of a hot new player, Sina Weibo, a microblog launched by Chinese portal giant Sina.com in August 2009. Closer to Twitter than Facebook, Sina Weibo has become an internet phenomenon with more than 100 million users, including celebrities such as Yao Chen, who overtook Oprah Winfrey in January 2011 to become the world's 10th most-followed microblogger.

Active Sina Weibo users include senior ad industry execs such as Lowe China's CEO Kitty Lun and Group M's China CEO Bessie Lee; eminent fashion and media mogul Hung Huang; DDB China Director of Strategic Planning Jenny Liu; and Jeremy Goldkorn, founder of the media website Danwei.org.

Another major Chinese portal, Tencent, has also joined the fray with its QQ microblog, pulling users away from sites such as Renren and Kaixin001.

Facebook will have to compete for dollars as well as eyeballs. What would it take for Facebook to succeed where earlier foreign internet companies have failed?

"It might work if Mark Zuckerberg moved to China," speculated Mr. Wolf. Facebook would also need to cater to advertisers early on. Marketers in China "have seen plenty of foreign sites show up, give a good pitch, and then implode, never able to sustain viewer numbers," he added.

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Normandy Madden, Ad Age 's former Asia editor, is senior VP, content development, Asia/Pacific at Thoughtful Media Group.

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