Why China Could Be Huge For Facebook

Despite the fact that Facebook has been banned in mainland China since the government discovered dissident groups using it to facilitate communication in 2009, Bloomberg reported yesterday that the social networking company is searching for a sales office in Beijing:

[...] Opening a China office would mark a significant step for Facebook given the country is one of the last large markets that remains relatively untapped by the company. While Facebook’s social-networking service was banned by the Chinese government in 2009, the company — using an office in Hong Kong, outside of the mainland — has quietly built up a business in the country selling ads to companies that want to reach international users.

[...] “The government is still quite concerned about social instability,” said Shaun Rein, managing director at China Market Research Group in Shanghai. “I don’t think you are going to see any access for Facebook anytime soon.” [Source]

China’s media regulators have ordered that websites delete any news concerning a future Beijing office. Bloomberg also published a Skype interview with Shaun Rein, in which he contrasts Facebook’s approach to doing business in China with that of Google:

TechInAsia has more on Facebook’s burgeoning business in China, and the need for the company to make careful maneuvers as it continues to establish itself in the country:

[Facebook's VP of special project Vaughn] Smith went so far as to say Facebook contributes to China’s economic growth, citing mobile developers and exporters as examples. Among them, Facebook has helped Chinese game studio FunPlus expand its social game Family Farm Seaside to an international audience, and Facebook is the “number one way” for fashion estore exporter Wholesale Dress to reach customers outside China. Smith says Facebook has thousands of developers working on its platform in China. Furthermore, he says Alibaba and Baidu use Facebook’s technology in their data centers. Facebook is one of the biggest builders of data centers globally. The number of customers for Facebook’s advertising and distribution services are growing in China, despite the fact that the companies using them have to use virtual private networks (VPNs) or similar means to circumvent the Great Firewall in order to access Facebook.

The number of customers for Facebook’s advertising and distribution services are growing in China, despite the fact that the companies using them have to use virtual private networks (VPNs) or similar means to circumvent the Great Firewall in order to access Facebook.

This is where Facebook must tread lightly. Although it’s being used for business and not social purposes, Facebook still indirectly encourages Chinese citizens to bypass censorship measures put in place by the government. The company will have to walk a fine line to avoid Beijing’s ire in this regard. [...] [Source]

More on what Facebook has to gain from fortifying their China strategy, and the challenges that could be waiting in the market, from Quartz:

Western tech companies spend millions of dollars a month marketing their games and other apps through Facebook’s so-called mobile app install ads, and Facebook could be eyeing a similar set-up with its office in Beijing. App installs are a hugely profitable business, worth as much as $10 per successful install, and they are the main driver behind Facebook’s impressive mobile ad revenues.

App developers from the mainland don’t even need to venture beyond the confines of greater China to make Facebook an attractive marketing platform. Facebook’s 65% market penetration in Taiwan, for example, is the company’s highest anywhere in the world, narrowly edging out Hong Kong’s 61%.

There is no guarantee, of course, that Chinese firms like Tencent will pick Facebook to boost app installs outside of China—especially since WeChat is a direct competitor to Facebook’s recently purchased WhatsAppBut Facebook execs like Sheryl Sandberg, who went on a meet-and-greet tour of China last year (pictured above with Cai Mingzhao, director of the State Information Office), may think it’s worth putting out a shingle in Beijing to find out. [Source]