Facebook Moves Ahead In Beijing, Line Blocked
Two of the world’s biggest social networking service (SNS) operators are in the headlines as the new week begins, starting with word that Facebook (Nasdaq: FB) is moving ahead with its plans to open in China. Meantime, separate reports are saying Japanese-based mobile instant messaging service Line has been disrupted in China, perhaps for carrying sensitive content.
These news bits may look different on the surface, but they’re really quite similar in broader terms. China is extremely wary of offshore-based SNS like Facebook, Line and Twitter (NYSE: TWTR), because they are not subject to the country’s strict self-censorship laws. Thus companies that want to develop a China business must open offices and host their Chinese services on local servers to placate Beijing, which is what Facebook and Line are doing now.
Both Facebook and Line were in the news earlier this year on reports that each was preparing to enter the market despite its big risks. Facebook was the first to make headlines in May when media reported that the company was planning to open a sales office in Beijing, marking its first formal presence in China. (previous post) A short time later, other media reports said that Line was also preparing to enter China with its flagship mobile instant messaging service that is already popular in Asia with 400 million users. (previous post)
Now the latest reports are saying that Facebook has found an 800 square meter space in Beijing Central Business District, and signed a 3-year lease for the office. (Chinese article) The reports say Facebook has yet to start formally fitting out the space, though its large size indicates it could potentially become home to several hundred workers.
This particular move is relatively incremental, since Facebook had hinted at the opening of a Beijing office at the time of the earlier reports. At that time, I said that staff in the new office would almost certainly focus on sales in the beginning, but that the company would also start exploring the launch of a China-based site as well.
Facebook’s and Twitter’s global sites have been blocked in China since 2009, presumably because they were hosting content considered objectionable by Beijing. Facebook has said all along that it wants to have an SNS site in China, and the renting of such a large office space indicates it has long-term plans to open a locally-based service for the market. I might even accelerate my previous prediction and say this latest move shows the company could launch a China site within the next 2 years.
Meantime, let’s look at Line, which has hit its first official roadblock in China following its recent steady steps to enter the market. Line was just one of several major services that were reportedly blocked in China last week, prompting widespread complaints among Chinese users. (English article) Other services that were blocked included Yahoo’s (Nasdaq: YHOO) photo-sharing Flickr service, and Microsoft’s (Nasdaq: MSFT) OneDrive file storage service.
China never comments when such disruptions occur, though observers are always more than happy to guess what might be the reason for these periodic blockages. In this case, media speculated the move might be related to a major demonstration that was planned in Hong Kong on July 1 to call for democratic elections the next time a new leader is chosen for the former British colony.
I suspect the disruptions will be temporary, though there’s always the chance the blockage could become permanent like it was with Facebook and Twitter in 2009. That could bring greater urgency for Line to speed up its China plans, which could see it launch a China-based service that would be separate from its global service and subject to Chinese self-censorship laws, by the end of this year.
Bottom line: Facebook’s rental of a large Beijing office and the recent blockage of Line in China could signal both companies will accelerate their plans to open locally-based Chinese versions of their services.