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.
David Wolf, a Beijing-based consultant specializing in China's technology and IT sectors says,
"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."
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?
Facebook would have to cater to advertisers early on and cater to the needs of Chinese social networkers. Says Mr. Wolf,
"It might work if Mark Zuckerberg moved to China. I have seen plenty of foreign sites show up, give a good pitch, and then implode, never able to sustain viewer numbers."
COMMENTARY: According to Answers.com, there are now over 30,000 foreign websites banned from China. China insists that it has the right to ban any website for any reason. If the Chinese believe that your website can serve as a conduit to criticize the government or lead to civil unrest, bye, bye. End of discussion. If Mark Zuckerberg believes he can go over there and convince the Chinese that he can comply with their censorship rules, he is very naive. Even the rumored Baidu/Facebook deal to build a new social network site is probably dead on arrival.
Entering the Chinese social networking market will not be a slam dunk for Facebook. Adhering to China's strict censorship rules is a big hurdle, but the there are several reasons why Facebook could easily fail or be banned:
- Competition - The Chinese social networking space is highly fragmented with over 100 social networking sites. 20 social networking sites have a 1 million or more users. 9 social networking sites have over 10 million users. The top five Chinese social networks are:
- Qzone.com - 388 million users.
- 51.com - 160 million users.
- Renren - 120 million users, and often referred to as the Facebook of China). Renren just had an initial public offering, but its stock price has collapsed due to shoddy bookkeeping and a softening market for online advertising.
- Kaixin001 - 75 million users.
- Xiaonei - 40 million users.
- Switching Costs - Chinese social network users are highly loyal and "vested" with heir social networking sites, and the chances of having them switch to Facebook.cn would be inconvenient and quite challenging.
- Cultural Barriers - Facebook.cn would have to overcome East versus West cultural differences, and this is not an easy thing to do. Chinese cultural differences have torpedoed many internationa firms entering the Chinese market.
- Protectionism - China exports more than it imports ($365 billion versus $92 billion). It only imports items that are not available or it cannot produce locally. China simply does not need another social network. It has plenty of them.
- Political Differences - China's communist political system clashes with America's democratic system of freedom of expression and self-rule. Although they may have lifted that Bamboo Curtain slightly to allow westerner's to do business there, one must not forget the political differences run very deep. A foreign social network by its very nature would prove very disruptive to China's restrictive and censored political system.
If I had to guess, I put Facebook's chances of entering China at less than 1%. Zuck, you should've talked to me before you decided to go over there. Priscilla put you up to it, didn't she?
Courtesy of an article dated June 13, 2011 appearing in Ad Age Global
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