Facebook may need a partner to get into China

Updated: 2014-12-10 12:37

By Paul Welitzkin i New York(China Daily USA)

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Facebook may need a partner to get into China

If Facebook Inc wants to establish its presence in China market, the social-networking giant may have to look for a Chinese partner, according to analysts.

Lu Wei, minister of the State Council's Cyberspace Administration of China, recently visited company founder Mark Zuckerberg and that led to speculation on Facebook's status in the Chinese mainland. Facebook opened a sales office in Hong Kong.

China will soon have more than 650 million online users, a huge potential audience of users for Facebook. But if it wants to enter China, it may have to do what almost all US companies have done, be part of a joint venture with a China-based company, according to analysts, as well as share user data with the government.

"Leveraging the brand and client base of an established social media player in China would help Facebook navigate local regulations and come to market quickly," Brendan Ahern, chief investment officer for KraneShares, operator of Chinese exchange-traded funds, said in an e-mail.

"Though China has the largest Internet user base globally, only half of the Chinese population utilizes the Internet today. While taking on a local partner seems counter-intuitive to a successful company like Facebook, it could be a key step in penetrating a large potential market quickly."

In the past, analysts and others have speculated that potential partners for Facebook could include the Chinese social network Renren. Weibo, China's Twitter which went public in the US earlier this year might be a potential associate with its nearly 130 million monthly active users. WeChat, owned by Tencent, could be another partner, given Facebook's acquisition of WeChat-competitor WhatsApp.

"The strongest partner would be a BAT company (Baidu, Alibaba and Tencent) due to their dominating market share and extensive user bases. At the same time a larger partner would want more say in the partnership than a smaller player like Weibo or Renren. There are pros and cons to either partnership opportunity," said Ahern.

Jack Liu, senior vice-presidentat Chardan Capital Markets in New York, said he doesn't think a joint venture structure will be a solution. "Teaming up with a partner like Tencent or Alibaba will certainly cost Facebook its control in China In addition, a joint venture like this could potentially trigger a lot of scrutiny due to antitrust concern," said Liu.

LinkedIn Corp initiated a Mandarin-language professional networking site in February and is the biggest US social media company active in China.

A Chinese government news portal released a photo of Zuckerberg with a copy of Chinese President Xi Jinping's book on governance at his desk while hosting Wei.