If Mark Zucherberg can successfully lobby Chinese officials and re-launch Facebook in China, the real question is, can Facebook compete against Chinese competitor WeChat?
Mark Zucherberg met with President Xi Jinping at the US-China Internet Industry Forum in Seattle late September. With Mark speaking mandarin to President Jinping, the talks are part of Facebook’s overall strategy to lobby Chinese officials in order to expand and re-launch Facebook in China. Earlier in 2015 Mark also invited top Chinese Internet officials to Facebook’s home in Silicon Valley. These events show Facebook’s ambition to expand into China and gain access to China’s 700 million internet users; the worlds largest market. These plans come after the Chinese Government officially banned access Facebook in 2009.
Despite Facebook being blocked, their lobbying efforts are currently celebrating moderate success. Since 2013, the Chinese Government lifted the ban around the 13 square mile free trade zone in Shanghai. In addition Facebook has also established a small operation in Beijing helping Chinese advertisers reach a global audience through Facebook’s services. It is clear that these are strategic moves in order to eventually allow Facebook to enter the Chinese domestic Internet market, gaining access to over 700 million Internet users; the largest and most important market to allow Facebook to grow.
However in order to achieve this, Facebook would have to continue its lobbing efforts and most likely follow LinkedIn’s approach to entering China by conforming and complying with to the Chinese Governments internet laws. This would involve entering through a joint venture and setting up data centers to allow the sites content to be monitored. But the real question is, if/when Facebook is successful in these lobbying efforts would it matter? Would Facebook be able to successfully penetrate the market with fierce competition from Chinese Social network platform WeChat?
The 4-year-old social networking app WeChat is the most popular and widely used instant messenger platform in China with over 549 million monthly active users (Facebook messenger 600 million worldwide outside China) and Chinese adults spending on average 40 minutes per day using the app, with 55% loading the app more than 10 times per day. WeChat users accounts for 23% of global monthly Internet users.
WeChat allows users to send direct messages, voice messages, stickers, and video moments as well as share their real time location. WeChat’s functionality extends beyond being a messenger app as WeChat has been designed to allow third party app’s to be seamlessly integrated into WeChat (called official accounts) allowing brands, banks, commerce sites, media companies, celebrities, bloggers to easily allow users to interact with their official account. To mention a few of the more popular features these official accounts allow users to view/share content, manage credit cards, access news, book flights, order taxis and buy products directly within the app. Users can order anything from a McDonalds delivered to flight tickets to pay utility bills using WeChat. In total there are 10 million official accounts. Unsurprisingly this all encompassing platform has locked in Chinese consumers, making it difficult to any future competitor including Facebook to challenge it.
If Facebook’s lobbying effort were successful, Facebook would need to focus on its mobile messenger platform as mobile is the dominant choice in China. However competing against WeChat with Facebook Messenger would be a major challenge. Despite Facebook recently improving its Messenger platform to imitate the voice messaging and location services of WeChat, if Facebook were to be successful it would need to involve Chinese consumers shifting their current behaviour from trusting a Chinese to an unknown western platform with protection data from communications and bank details. How realistic is this? Will Chinese consumers switch to an unknown western platform over an established Chinese platform, which fully meets their needs? The answer is probably not or at least not in the numbers Facebook is hoping for.
If Facebook are to be successful in China, they need to understand the Chinese market fully and innovate their mobile platform beyond imitating WeChat’s current features. However Facebook messenger has over 600 million monthly active users (outside China) whilst WeChat has 549 million monthly active users, with 100 million of these outside China within 200 countries. If WeChat decided to expand more aggressively into the west, this would present a major challenge for not only Facebook messenger but for their other products such as What’s App and Instagram. Perhaps this is an area where Facebook should be investing rather than lobbying China.
It will be interesting to see what the future has in store for Facebook ambitions to expand into China and its future growth within Europe with the rising giant of WeChat.
Consultant’s Afterword
Even though China is a large market with much potential for business growth, it cannot be underestimated the importance of fully understanding the competitive nature of the market and the scope of your opportunity. If a business enters China ill prepared, it can damage the its ability to compete in the market and waste a significant amount of capital needed for entry. For any business considering China, it’s vital to be fully prepared and be willing to adapt the business to China in order to be successful.
