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Despite Censorship, Facebook Hunts for Office Space in China

News follows Facebook’s stealth launch of photo-sharing app in the market

September 8, 2017 | Mobile | Social Media

Despite seemingly insurmountable obstacles, Facebook has not given up on trying to break into China, the market with the single largest internet population in the world—771.9 million users this year, eMarketer estimates.

This week The New York Times reported that Facebook has been quietly on the hunt for office space in Shanghai, the latest signal that the social media platform has not given up on China.

In August, the Times also broke the news that Facebook had stealthily launched a Chinese version of its photo-sharing app, Moments, called Colorful Balloons, through Beijing-based intermediary Youge Internet Technology. The app still remains widely available despite the fact that it was publicly traced back to Facebook, an outcome interpreted by some as a sign it has received the implicit approval of the country’s communist government.

But regulators’ treatment of Facebook has been uneven, making it hard to say what the odds are for the social network to truly re-enter the market. For instance, in July, regulators imposed a partial ban on Facebook-owned messaging app WhatsApp, which had previously avoided any government censorship.

Facebook has been banned in the country since 2009, after riots in China’s Western region reportedly alarmed government officials who wanted the service banned to better control domestic communications. Facebook’s Instagram was similarly blocked in 2014 during political protests in Hong Kong.

Enterprising residents of China have long used workarounds such as virtual private networks (VPNs) to access prohibited services. But the government has been cracking down on such services as it seeks to deepen its control over the internet.

Since Facebook is officially unavailable in China, eMarketer does not create a forecast for the social network’s number of users there.

However, there is research that suggests at least some residents in China use it. According to data from Kantar TNS, 19% of internet users in China used Facebook as of September 2016, the most recent date for which data was available. That was the lowest penetration rate of any market examined in the study.

Social Media Platforms Used by Internet Users in Select Countries in Asia-Pacific, Sep 2016 (% of respondents)

Despite its low usage rate in the market, Facebook still sends employees to China, for the purpose of selling ads to domestic companies targeting audiences outside the country. Facebook doesn’t break out those revenues, but the business is believed to be quite lucrative.

Facebook’s potential new office does not appear to have any obvious ties to its advertising business. The Times reported that the Shanghai facility would be intended for Facebook’s Building 8 division, which focuses on developing hardware such as cameras for augmented reality and brain-scanning technology.

Still, Facebook CEO Mark Zuckerberg likely has designs on re-entering China to access a massive audience for its advertising business. Zuckerberg has worked overtime to ingratiate himself with the country’s officials, having visited several times over the past few years.

The establishment of an office in Shanghai could serve as a symbolic victory for Facebook’s efforts to breach China’s borders. But even if the service can regain governmental approval, it will still face significant headwinds from well-entrenched social platforms like messaging service WeChat.

eMarketer projects that users of the mobile-focused, homegrown platform will number 494.3 million this year, giving WeChat a penetration rate of 79.1% among smartphone users.

Rahul Chadha

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