FACEBOOK AND BAIDU, CHINA'S SEARCH ENGINE GIANT, FORM PARTNERSHIP TO BUILD A NEW CHINESE SOCIAL NETWORK

Facebook may have struck a deal with local search giant Baidu to launch a new social network in China, according to reports surfacing today. It won't be connected to Facebook.com, thanks to China's strict national-level censorship. But it will allow Mark Zuckerberg to tap the huge Chinese population's online habits and make loads of cash.

Baidu rules the search market in China, much to Google's sorrow (and partly because Google wouldn't bow to China's demands to rigorously censor its search engine there). Facebook is also blocked inside China, due to government concerns that the social networking system could be a portal for Chinese citizens to see a different way of life and thus disrupt "social harmony." But the booming Chinese Net economy is a potential multi-billion-dollar affair that simply can't be ignored, so Facebook is launching a joint venture with Baidu to create a new social networking system for the Chinese people.

Insiders have leaked information on the deal to the Chinese press, which is effectively an official "unofficial" confirmation of the story, and these people are also noting that the new system wouldn't connect to Facebook.com--highlighting that the new social network, whenever it arrives after China's various regulatory bodies give approval, will be a stand-alone affair.

But there are more questions than answers at this point.

• Will it be called Facebook, or a variant thereof? 
• Will you at least be able to "friend" Chinese users, on some kind of heavily filtered level from the real Facebook? 
• Will Facebook accede to Chinese requests to censor the kind of activities that go on, and surrender information on request to the Chinese authorities so they can control dissenting comment?

It's unlikely that the new service will be called Facebook, given China's habit of marking things in its own way. And it's unlikely China will let its users skip over the Great Firewall to connect with foreign Facebookers and risk cultural "contamination." And if it wants to operate in China, gaining access to a potentially massive and lucrative market, Facebook will have to abide by with Chinese laws about self-regulating censorship and demands to snoop on user activity--the very same laws Google refused to comply with.

Baidu stands to benefit from Facebook's technical and branding expertise, which could easily let it craft a social network that could unseat local social champion Renren.

But the deal doesn't come without risks to Facebook. China's record on human rights abuses is highly tarnished (and in the headlines at the moment due to the controversial arrest of globally renowned artist Ai Weiwei). And Facebook, by providing a sophisticated and addictive social network system to China, could be seen as giving the government another tool with which to control its population. PR like this is tricky to deal with, Mark Zuckerberg will have to tread a careful line.

COMMENTARY:   It looks like my prediction that Facebook would either have to acquire a Chinese social network or partner with a local Chinese company has come true.   It seemed very unlikely that China was going to lift the ban on Facebook because if it did, it would have to do the same with 10,000+ sites it currently bans.  Facebook had no choice, it was to partner or be denied access to a multi-billion advertising market.  

However, this is still very much in the preliminary stages, and I predict that it will take at least a year or longer to go through the government reviews and approvals, designing and building the new site, and beta-testing it before an official launch.  There is also the issue of synergy between Baidu and Facebook staffers.   

If you have followed my posts, I have for quite a while believed that the ad-supported revenue model of social networks is basically flawed created as a "quick and dirty" way to generate revenues.  The period of exponential growth has ended, and Facebook has reached a critical inflection point,  entering a period of slower growth in users,  with the number of users and ad revenues peaking over time.  My inflection point theory of social networks remains intact, and I am still confident that Facebook will not reach the magic billion user mark for at least another year or two. 

On the surface there appears to be synergy between Baidu and Facebook.  Both are internet giants--Baidu in search, and Facebook in social networking.   However, the future Facebook/Baidu social network will face some formidable competition.  Renren is one of dozens of social networks that dominate China's social networking landscape (see links below), and they won't be easy to unseat. The Chinese are fiercely loyal to their social network, and it will take more than just throwing a Facebook-like social network in front of them.  The new site has to be head-and-shoulders better than the other Chinese social networks.   For a closer look at China's social networking market please read my blog posts of January 17, 2011 and  February 12, 2011.        

Facebook needs all the help it can get, having encountered numerous challenges penetrating the social network markets in Japan, Korea, Russia, India and Brazil.   According to social media experts, it is Facebook's inability to cross the cultural divide.  The partnership with Baidu will certainly help Facebook overcome that problem, at least in China.  Having said this, if the Baidu partnership proves successful, and we won't know for several years, I predict that Facebook will end up partnering with social network sites in the aforementioned countries.  

JUST IN:  Quoting sources within Baidu, Sohu.com is reporting that the rumored cooperation agreement between Facebook and Baidu to set up a social networking site in China has indeed been signed.  If true, we can expect a press conference confirmation from Facebook and Baidu.  

Courtesy of an article dated April 11, 2011 appearing in Fast Company and an article dated April 11, 2011 appearing in Penn Olsen The Asian Tech Journal

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