INTERNET: Facebook Inches Closer to China with Tencent Poach

Bottom line: Facebook’s new hire of a top WeChat executive could be the latest signal that it expects to get permission to launch a China-based service soon, possibly by the end of this year.

WeChat exec defects to Facebook

Following several months of relative silence, social networking (SNS) giant Facebook (Nasdaq: FB) is back in the China headlines, with word of a major executive poach from China’s leading SNS company. This particular headline is filled with mixed signals. On the one hand, the hire of a former top executive from WeChat looks like a significant move closer to China, since the hugely popular Chinese SNS operator would be Facebook’s main rival if it’s ever allowed into China. But on the other hand, the executive is a foreigner from WeChat’s international division, which has been a poor performer in the service’s weak attempts to go global.

The bigger story behind this hire is the unrelenting drive by Facebook founder Mark Zuckerberg to enter China, which forces all Internet companies to strictly self-censor themselves for user generated content on sensitive subjects. That requirement prompted China to block Facebook’s global site in 2009, alongside the sites of Twitter (NYSE: TWTR) and YouTube, which also contain large volumes of user generated content.

While Twitter has previously said it has no interest in coming to China and YouTube also shows no interest, Facebook has been just the opposite. Zuckerberg frequently visits the country, including his most recent trip in March when he was notoriously photographed running in the thick smog that has become a fixture of Beijing. (previous post)

Zuckerberg’s efforts, which include regular attendance at Beijing-sponsored events and welcoming of Chinese officials to Facebook’s California headquarters, appear to be helping his company win favor among top Chinese officials. Accordingly, I’ve previously predicted that Facebook could finally get permission to launch a China service by the end of this year, though it would probably be as a joint venture that would be separately run from the company’s main global service.

Thus some might interpret this high-profile poaching from WeChat as the latest signal that such a move into China might be coming soon. According to the latest headlines, Facebook has hired Dan Grover, who was formerly tasked with spearheading WeChat’s drive to expand beyond its traditional market that is mostly confined to Chinese-speaking countries and regions. (Chinese article)

The hire was revealed in a Twitter post from an Uber employee, featuring a photo of a birthday cake for Grover decorated with an arrow showing a move from a WeChat logo to a Facebook one. Grover revealed on his own Twitter account last month that he was leaving WeChat after 2 and a half years, though he didn’t say where he was going.

Headed for China?

It’s not really clear from the Twitter posts where Grover would be based, but presumably Facebook is hiring him for his China knowledge. I can’t personally speak about Grover’s actual skills, but WeChat’s own attempts to enter the US around 2 years ago were a notorious flop. (previous post) Several media reports detailed that failed campaign, and one of my sources said at the time that WeChat parent Tencent (HKEx: 700) reportedly spent $300 million on the effort.

This new hire comes after Zuckerberg made headlines for his latest China trip in March, where he spoke at a conference hosted by Tsinghua University, China’s top sciences university. Facebook was also in China headlines in May, when it won a trademark dispute against a beverage maker trying to use its name. (previous post) This new hire also comes as growing signals from Internet rival Google (Nasdaq: GOOG) indicate the company is hoping to open a China version of its app store soon, following the shuttering of its China search site after a dispute with Beijing in 2010. (previous post)

All of that brings us back to this latest China-related hire by Facebook, and its broader significance. Grover’s foreign background and experience working with Chinese SNS seem to make him a good candidate to lead a Facebook campaign into China, even if he wasn’t exactly very successful bringing WeChat to the US. Accordingly, I continue to stand by my earlier prediction that Facebook could finally get permission to launch a separate China service by year end, and it’s quite possible Grover could head the new venture.

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