from Net Politics and Digital and Cyberspace Policy Program

Journey to the East: Why Facebook Won’t Make it in China

Chinese Communist Party General Secretary Xi Jinping (L) talks with Facebook founder Mark Zuckerberg during a gathering of tech executives at Microsoft's main campus, September 23, 2015. (Ted S. Warren/Reuters)

April 5, 2016

Chinese Communist Party General Secretary Xi Jinping (L) talks with Facebook founder Mark Zuckerberg during a gathering of tech executives at Microsoft's main campus, September 23, 2015. (Ted S. Warren/Reuters)
Blog Post
Blog posts represent the views of CFR fellows and staff and not those of CFR, which takes no institutional positions.

More on:

China

Media

Digital Policy

Lincoln Davidson is a research associate for Asia Studies at the Council on Foreign Relations.

Last month, Chinese propaganda officials rushed to Facebook CEO Mark Zuckerberg’s defense, ordering media to crack down on criticism of the tech entrepreneur. Interesting company for a man who has celebrated the power of the Internet to enable free speech.

Zuckerberg was in China for meetings with Alibaba founder Jack Ma and Chinese Communist Party (CCP) censorship and propaganda chief Liu Yunshan. According to state media, Zuckerberg “spoke highly of the progress China has made in internet field [sic], saying he would work with Chinese peers to create a better world in cyberspace.” It would seem that this “better world” is one where Facebook isn’t blocked by the Chinese government, as Zuckerberg found ways to skirt the Great Firewall and post a picture on the social network of his jog past Tiananmen Square.

Facebook has been blocked in China since 2009, over concerns that it could be used to organize anti-government protests. Zuckerberg has gone to great lengths to make friends among the country’s business and government elite, presumably in hopes that the ban might be lifted. He’s begun to learn Chinese, delivered Chinese New Year well-wishes in the language, and gave his daughter a Chinese name. He serves on the advisory board of the School of Economics and Management at Tsinghua University, one of China’s top schools. He’s given Lu Wei, director of the Cyberspace Administration of China, a tour of Facebook’s offices, telling Lu at the time that he’d bought copies of CCP General Secretary Xi Jinping’s book The Governance of China for some of his employees.

It’s understandable that Zuckerberg wants Facebook to enter China: the country’s 660 million Internet users are an attractive market. But it’s not going to work.

The evidence suggests that the Chinese market is not interested in the product Facebook has to offer. Despite the controls the government places on freedom of expression, China has a vibrant ecosystem of online communities. And yet, the social networks that are most popular among Chinese people are ones that look very different from Facebook.

Microblogs, known as weibo in Chinese, function more similarly to Twitter than Facebook, and have about 200 million monthly active users.

WeChat, by far the most popular social media platform in China, has 650 million monthly active users, most of whom are assumed to live in China. From the core service it started out as—a messaging app similar to WhatsApp—WeChat has grown into a whole digital ecosystem in a single app. It has integrated mobile payments that are utilized by a fifth of the app’s users. Companies and government agencies use official accounts to connect with consumers and citizens. WeChat’s “Moments” allow users to post pictures that can be viewed by their connections. Businesses have come to rely on WeChat groups for communication among team members, and the app’s maker is now looking into developing an enterprise version akin to Slack. Startups are even using WeChat as a platform for launching their own services. The app has become so ubiquitous that the average Chinese phone user sends just over one text message per day.

The Chinese social network most similar to Facebook in both layout and the way in which users interact with each other, RenRen, has been losing users for years and seen the value of its stock decline by 80 percent since it listed on the NYSE in 2011.

And while the decline of weibo in the face of WeChat’s meteoric rise suggests that Chinese users can be fickle when it comes to choosing a preferred social network, this shift occurred just as the government was clamping down on weibo. It might even be the case that adoption of WeChat was a pragmatic choice by netizens who understand the limits of censorship and seek to maximize their room for expression within the strictures set by the government. If this is the case, Facebook will have difficulty winning them over, as it would surely be the target of heightened government attention were it to ever be unblocked, given its foreign status and history of use by anti-regime protestors in the Middle East.

But even if Chinese people do want the product Facebook has to offer, the fact that it’s not local is still a major barrier. The Chinese market is notoriously tricky for foreign companies to crack—particularly tech companies. There are a confluence of reasons that contribute to this difficulty. Opposition from regulators is a big one; the government’s stated objective of developing national champions creates incentives for officials to make life difficult for foreign entrants. Localizing is also not as straightforward as slapping a Chinese slogan on your product.

The list of U.S. firms that have failed at this reads like a Menlo Park phonebook. Yahoo pulled out of China fully last March, unable to make headway. Microsoft’s Bing search engine managed to attract barely one percent of online searches in the country, and then just gave up completely, making competitor Baidu (which is used for 92 percent of searches in China) the default search engine on the company’s Edge Internet browser. Amazon’s China adventure played out similarly. Faced with entrenched competitors like Alibaba and JD (and, less frequently noted, e-book publishers like Yuewen Group), by the end of 2014, Amazon had a market share of just 1.3 percent.

Even Uber, which garnered praise for hiring local managers when it entered the Chinese market, has had trouble in China. Uber has had to fight state regulators, who have repeatedly raided the company’s offices, and faces a losing battle against its main competitor, Didi Chuxing (formerly known as Didi Kuaidi) that has the backing of both Alibaba and Tencent, giants of the Chinese Internet. Didi completes about seven million rides each day, compared to Uber’s one million rides per day in China. While those numbers are likely inflated, there’s no question that Didi dominates the Chinese market. Uber CEO Travis Kalanick may be willing to bleed $1 billion per year (you read that right) fighting; how long his backers will accept that drain is a separate matter.

Even if Facebook were to make it in the Chinese market, at what cost would it come, not only in cash but in reputation? Yahoo, Microsoft, Apple have all suffered from this. Any time there’s been even the slightest suggestion that American companies are involved in Chinese censorship efforts, they’ve been widely derided in the press. And companies that stand up to the CCP, as Google did when it decided to withdraw from China in 2010, have been praised.

Is a market of 660 million Internet users worth the trouble? Mark Zuckerberg seems to think so. This history of Silicon Valley’s inroads into China suggests otherwise.

More on:

China

Media

Digital Policy

Close