It's been said that Facebook is on the path of overtaking Yahoo! as one of the Big 3 of internet (Google and Microsoft being the other two). And after Microsoft struck its $240 million deal with Facebook, we all became aware of Facebook's (in fact a fledging company compared to the Big 3) price tag: $15 billion. This amazing valuation is reminiscent of Year 2000.
Facebook In China
Anyhow, Facebook's continued growth is undisputed. Its dominance overseas began approximately 2 years ago (in Europe) and completely opened its doors to all internet users a year ago. Just yesterday, it was leaked that Facebook plans to "release additional language interfaces and intends to enter the China market as early as December this year." Just how far would Facebook go, and more importantly, will it be successful in China?
Less than a week ago I reported that Google is attempting a major overhaul of its China strategy by throwing its American business model out the window. Instead of using the world's superior search engine and innovative online utilities to attract Chinese users, the firm plans to acquire smaller Chinese firms endowed with local know-how from different industries, as well as focus R&D on mobile internet environments.
How Microsoft Succeeded In China
But in that article there was another important business consideration that I didn't report on, which is arguably the most significant factor when it comes to doing business in China: making businesses work in China means making it work with the government. That is how Microsoft did it back when they first entered China, before a string of American multinationals followed suit.The problem Microsoft had when they first got into China was thus: how to make a profit from a country in which they already had 95% market share (through pirated software). What Microsoft learnt through its trial-and-error process was invaluable; Microsoft could not fight piracy using traditional methods, but unknowingly and to their advantage, the Chinese government could be enlisted for help. All the state needed was a little persuasion (that Microsoft wasn't a military agent of the US government seeking to destroy China's cyber infrastructure). That got Microsoft in, and the company soon reaped the rewards.
Google And Censorship In China
Google also had their share of smooching the government, under much criticism, when the firm censored certain keywords on its Chinese site that were provided by Beijing in 2006. The now-famous phrase that appears on Google results page whenever censored content is searched for in China is: "In accordance with local laws and policies, some of the results have not been displayed." In the end, Google sacrificed its market share amongst human rights groups (recall that Google boycott on Valentine's Day) and instead weighed its bets on a potential goldmine of 1.3 billion users.
Will Facebook Be A Winner In China?So after much digression, I come back to the question of Facebook. Obviously, Facebook deals with privacy issues (and a lot of it too) that may or may not be of interest to the Chinese government (imagine someone posting a profile picture of some you-know-what event that occurred on June 4th, 1989). Already, bloggers are wondering whether the Chinese version will be censored. And the problem is essentially a Catch-22. Yes, the company is an international market leader in P2P network sites, but its innovative edge may, like Google had, succumb and kowtow to the Great Firewall of China. What then is Facebook’s strategy of overcoming Chinese domestic rivalry? It needs its innovative and competitive edge. Catch-22.
What Facebook Should Do In China
Perhaps to make Facebook work in China, not only does Mark Zuckerberg have to put a (few) foot through the door, by acquisitions of the existing social networking sites, such as Xiaonei and Zhanzuo for data and logistics, but also convince the government that social networking does no harm, so that nothing becomes of Facebook’s actions in constructing a fully-functional site.
Facebook may falter under Chinese pressure, but nevertheless the firm must remember what made it a forerunner in America today: not a small social networking site for Harvard, but a site for anyone and everyone (with an email address). When the time comes, Facebook must ask itself, how does social networking hurt China’s image if there already exists an (almost) free flow of information through instant messaging? And how must the firm not repeat the liberalness of Youtube? Only then will Facebook champion peer-to-peer sites in China.If not, Facebook China will be a subjugated and repressed alter ego of its American self, a dysfunctional site containing a segregated Chinese online community who cannot communicate with international users. What is the use of Facebook then? If that is the future of Facebook in China, then it had better concentrate more manpower in America where it belongs.
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