Facebook is still in the look to enter the Chinese market. However, the future does not look promising. The Chinese government still perceives Facebook as a threat to the country and sponsor of terrorism. In addition to the government, prospective users are not interested in using Facebook. Facebook is an alien tool for Chinese internet users and there are existing domestic social media companies that are strengthening the entry barriers. The recent acquisition of Whatsapp seemed to be an alternative to enter the market and establish a strong presence in China. However, according to a recent article in Forbes, the acquisition of Whatsapp will not secure a way into the Chinese market. Even though the government did not block Whatsapp, it is completely overlooked by other Chinese companies that offer a similar or even better service. Moreover, the Chinese government has an obvious favoritism towards Chinese companies such as WeChat. The success of WeChat implies more jobs and a contribution to the Chinese economy. Needless to say the government has tracking power over Chinese companies, whereas foreign businesses like Whatsapp have complete privacy policies that obstruct the government’s ability to interfere with the clients’ privacy.
This is a good post about the ongoing struggle of foreigners trying to break into Chinese markets. As China develops and becomes a larger and larger consumer more attempts will be made to enter Chinese markets specifically for technology. However unlike other places in the world the culture in China makes it so that relationships are key for business success and are reluctant to work with outsiders. On top of this the government has protected many industries and barred entry or made the process cumbersome. This is a challenge that was seen when American companies tried to break into the Japanese market. In China we may be waiting for the next Kentucky Fried Chicken success story.
Even if Facebook can get access to the Chinese market, I think it will struggle a lot. I have some friends who use Facebook from China but most of Chinese use Weibo. Weibo is basically the monopolist in the blog market. However, as Paul mentioned, Facebook trying to break into the Chinese market can be viewed as an attempt to open Chinese market to foreigners.
I always find these kinds of stories interesting. As such a large potential market, companies like Facebook naturally will salivate at the prospect of gaining a foothold in China. It’s always been amusing to see China’s firm push-back against such entrances, though. Perhaps Zuckerburg needs to step up his cow-towing, though I agree with gjeong that it seems unlikely that FB will make it into the market or, even if it does, get any reasonable market share. I hesitate to underestimate Facebook and Zuckerberg, though, and while I was very surprised by the enormous price paid for WhatsApp it will be interesting to see if Zuckerberg knows something most of us do not.
And even if Facebook were to manage to seize a foothold in China, the site would run in to even more problems. Censorship might make it difficult to have one kind of page for someone in China and another for a person in LA while still allowing them to network with each other. Also, if Facebook were to become popular, the site would have to be able to manage a huge amount of new accounts and be prepared for even more as more Chinese purchase personal computers.
good point– major problem would be censorship. How will the Chinese government deal with this issue?
On the other hand, allowing these foreign messenger apps can lead to a creation of a new market (or make the market competitive).
In the background is a basic “Industrial Organization” question: are there markets where only one firm can survive? Yes, if it’s the local water utility. Yes if it’s a videotape standard – there were originally two such, VHS and Betamax, but only one survived. When HD-DVDs came out, there were intially two consortia, but only one came to market (Blueray). And for a long while, outside of the geek universe and a handful of Mac fanatics, there was only one operating system for PCs, MS-DOS (which beat out an earlier entrant, CP/M). Now there’s a bit more variety for computers, and even more for cell phones, at least for the moment.
So is there room in a market for two Facebooks? If not, then the Chinese government doesn’t need to do anything, or rather claims that it is blocking entry are red herrings: Weibo is already dominant, and will remain so.
It is network effects that determines the level of agglomeration in these markets–that is, the portability of hardware and software from one platform to another. The EU’s recent policy decision of requiring all mobile phones to use one charging device is an example of how regulatory bodies can promote competition by ensuring the openness of network effects. How does this relate to LinkedIn’s foray into China?