INTERNET: Facebook Eyeing China from Taiwan?

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Bottom line: Facebook’s plans for a Taiwan data center reflect its big hopes for Asia, and could portend its long-sought receipt of permission to open a China service next year through a local joint venture.

Facebook eyes Taiwan data center

As the rest of the world buzzes over Mark Zuckerberg’s new daughter and philanthropy plans, other media reports are providing new signals involving his ongoing aspirations to bring his Facebook (Nasdaq: FB) empire to the world’s biggest Internet market in China. In all fairness, those reports that Facebook is studying a plan to set up its first Asian data center in Taiwan don’t necessarily point directly to its separate China aspirations.

But Taiwan is certainly much closer to China than the US, and a data center there would make Facebook quicker for people in China to access if and when Beijing ever decides to open its doors to the world’s largest social networking service (SNS). That said, Asia is already a huge region for Facebook, accounting for about a third of its 1.5 billion users worldwide. Thus a data center in Asia makes sense for Facebook to better serve that base of about 500 million users.

The Taiwan talk comes as Zuckerberg and his wife Priscilla Chan make much bigger headlines with announcement of the birth of their daughter, Max, along with word that they’ll donate nearly all of their $45 billion Facebook fortune to charity over the long term. Facebook followers will recall that Zuckerberg made related headlines in October, when he asked visiting Chinese President Xi Jinping to choose an honorary Chinese name for their soon-to-be-born daughter. (previous post) Xi reportedly declined that request.

The latest headlines are far more business-like, and cite a Taiwan official saying Facebook has held talks to set up a potential data center in his home Changhua County. (English article; Chinese article) From the article it’s apparent that Changhua has done a feasibility study and concluded it can provide the necessary infrastructure for the center, which would cost about $300 million and be sited on 6 acres of land with potential for expansion up to 20 acres.

Nothing to announce

Facebook said no decision has been made on the matter, and added it doesn’t have anything to announce at this time. If built, the center would be Facebook’s first in Asia, complementing its 4 centers in the US and 1 in Sweden to serve its European users. In terms of location, Taiwan is quite centrally located for Facebook’s current Asia user base that counts Indonesia, the Philippines and India as its largest market. Despite its closeness to China, the center may not even be able to host a future Chinese service since Beijing would probably require such a service to store all user data on servers insider China.

All that said, it’s still intriguing to explore the possibility that the opening of a Taiwan center would move Facebook one step closer to its goal of entering China, the world’s largest Internet market with about 700 million users. Zuckerberg has long stated his desire to enter the market, and has traveled there numerous times in both official and personal capacities in pursuit of that goal.

All of his efforts to date have yet to produce a positive result, most likely due to Chinese suspicion that a local edition of Facebook might be used to transmit information that Beijing considers sensitive. Despite that, Facebook has opened a sales office in Beijing, and a top-level Chinese Internet official visited the company’s California headquarters last year. Zuckerberg also attended 2 events with Xi Jinping on the Chinese president’s trip to the US in October, reflecting China’s slowly warming attitude towards Facebook.

I’ve previously predicted that Facebook would ultimately be allowed into China, most likely as a local joint venture that would operate a stand-alone site separate from Facebook’s main service. This latest Taiwan data center plan may or may not reflect a move in that direction, but I would still stand by my previous forecast and add there’s a good chance that Facebook could finally achieve its China breakthrough in 2016.

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