Facebook is eyeing its 'reasonable bold next step' in China

Internet analysts and industry insiders regard Facebook's possible opening of a sales office in China "a reasonable bold next step", while cautioning that the social media giant should be on the alert for competitors to its local operation.

Bloomberg News reported on Monday that according to an anonymous source, the Menlo Park, California-based company is taking steps to establish a sales office in the central business district in Beijing this year, hopeful to acquire the vast untapped social media industry market shares in the world's second largest economy.

Although its services have not been accessible in China since 2009, China is simply too important a market for Facebook to not to have a presence, said George Koo, a Silicon Valley-based business adviser serving global high-tech companies for 30 years, "even if only as a sales office for now."

Facebook has been using an office in Hong Kong and has been building a business in the country selling ads to companies that want to reach international users.

Meanwhile, the absence of key Western social media players in China has boosted the growth of its local Internet companies. The two dominant ones - Sina's Weibo (enlisted on the New York Stock Exchange on April 17) and Tencent's WeChat - are reported to have 129 million and 355 million monthly active users respectively.

Facebook's reported China move reflects the growing importance of the Chinese economy and Chinese online advertising dollars from its vast online population.

China is a market that Facebook can't afford to miss, said Roy Kong, a veteran entrepreneur who runs a US-China tech talent competition in four consecutive years. "Even China is not completely open to Facebook yet, Facebook might want to get a good seat in line," said Kong.

In its first-quarter earnings report on April 23, Facebook posted revenues of $2.5 billion, a 72 percent increase over last year, and a profit of $1.07 billion, almost triple last year's. It also reported 1.28 billion monthly active users and more than 1 billion monthly active mobile users, compared to 1.1 billion active monthly users and 751 million monthly mobile users last year.

"Facebook's future growth will rely heavily on mobile," said Kong, adding that China boasts the largest mobile population. Umeng, a China-based mobile app analytics company, said China had more than 700 million active smartphone users by the end of 2013, outpacing the 148 million counterparts in the United States.

The top three apps Chinese users installed the most are QQ (Tencent), WeChat (Tencent) and Sina Weibo (Sina), according to a research conducted by GO-Globe.

Given its enormous reach of online audiences in both US and international markets, and the ever-increasing needs of Chinese enterprises which want their products and services to reach clients outside of China, the next logical step would be "leveraging the platform of Facebook", said Jinlin Wang, chief technology officer and executive vice-president of Answers Corporation.

And Xiao Wang, CEO of the Santa Clara-based high-tech incubator InnoSpring, said it sounds like this is an attempt for Facebook to grow its advertising outreach to internationally-focused Chinese companies.

Facebook has kept trying to entering China by a string of high-profiling public relations exposures. In September 2013, COO Sheryl Sandberg attended the summer Davos in Dalian, Liaoning province, and met in Beijing with Cai Mingzhao, the head of China's State Council Information Office, "to discuss the important role Facebook plays in helping Chinese companies expand abroad", and to explore other forms of cooperation, according to a statement issued by the government agency.

However, Facebook will be a long way off from repeating its US success story in China, warned Xiao Wang. The Internet ecosystem in China has evolved beyond what Facebook originally set out to do, with users having an incredibly rich choice of social and consumer services.

Facebook's current product would likely need significant changes to be a hit with Chinese users, and it would be very expensive for the company to build a new version, especially with no guarantee of success in an already saturated market, Wang added.

In a March briefing in San Francisco though, Victoria Wu, director of international business for Tencent's WeChat, said their app is more versatile than WhatsApp, which Facebook paid for $19 billion to acquire.

"WeChat allows users to send text, photos, voice messages and find each other by using their smartphones, as well as book and pay for taxis, and track friend's locations," said Wu.

An office is a cheap investment to build a relationship with the officials in China for the day when they will be allowed to participate in the country, said Koo.

The office is also useful as a liaison with Chinese enterprises wishing to establish a presence in the US market via Facebook, he said, adding that he thought Facebook's current low- key approach is the right way to go.

"The opening of a sales office is a necessary move for the company," said Kevin Paul Scott, co-founder of ADDO Worldwide and author of 8 Essential Exchanges, adding that Facebook would more likely work with the Chinese government and do whatever it needs to have a more progressive presence in China.

junechang@chinadailyusa.com