After years of lurking around the periphery of China and visits by its top executives to the country, social networking (SNS) giant Facebook (Nasdaq: FB) is preparing to dip its toe into the massive market with plans to open a sales office in Beijing. That move raises the bigger question of whether the world’s biggest SNS company is planning to open a China-based service anytime soon, which has always been part of its long-term strategy. The answer is that Facebook will almost certainly use the new Beijing office to work towards a formal China site, though such an effort could take at least a year to yield results.
Facebook has always said it wants to open a service in China, and founder Mark Zuckerberg has made several trips to the country to explore his options. More recently, Facebook’s Chief Operating Officer Sheryl Sandberg also traveled to China in September, where she met with the head of the government agency that oversees the Internet in China. According to Facebook, Sandberg discussed the important role that Facebook plays in helping Chinese companies export their goods and services to customers outside the country.
Following those talks, media are now reporting that Facebook is taking formal steps to open an office in Beijing. (English article) The move could see Facebook open the office within a year, marking the first time it has had employees formally based in the country. People in China will know that Facebook has been inaccessible in the country since 2009, though the service reportedly has hundreds of thousands of users who access its site using software designed to circumvent the so-called Great Fire Wall of China.
Facebook didn’t directly confirm that it is looking for an office in Beijing, though it strongly implied it was moving in that direction by saying it “may consider having a sales office in China in the future.” Facebook already sells advertisements to Chinese customers using its Hong Kong sales office as a base, but is reportedly considering the move into China due to the rapid expansion of that part of its business.
This kind of expansion certainly isn’t unique to Facebook, and looks somewhat similar to what leading search engine Google (Nasdaq: GOOG) has done. Google made a high profile exit from the China search market in 2010 due to disagreements over Beijing’s censorship policies. But it continues to host a sizable operation in the country that includes a major team to handle local advertising sales.
The big difference in that case is that Google has said it can’t operate a search business in China due to the country’s strict censorship rules. Facebook has acknowledged the complexities of operating a website in China, in a reference to those rules. But it has also said repeatedly that it aims to be the world’s biggest SNS company, and that China — as the world’s largest Internet market — is an important part of that equation.
So, what are we likely to see from Facebook in China over the next year? Sandberg’s visit last fall means the company is almost certainly moving forward aggressively on this latest push to open a sales office, and I expect we could see a low-key but official opening in the next 2-3 months. An actual website will take a little longer, and will almost certainly have to come in the form of a separate service through a joint venture with a local partner. I would expect to see that happen perhaps as soon as the middle of next year, potentially using a variation of the company’s recently acquired WhatsApp mobile instant messaging platform as the entry vehicle. (previous post)
Bottom line: Facebook is likely to open its first formal China presence in the next 2-3 months as a Beijing sales office, which will be followed by an SNS joint venture in the market as soon as mid 2015.