May 13 (Bloomberg) -- Facebook Inc. is taking steps to open a sales office in China to work with local advertisers, according to people with knowledge of the matter, in a move that would put the social network’s employees in the country for the first time, even as its service remains censored there.
Facebook could open an office in China within a year to serve a growing set of customers in the country, said a person with knowledge of the situation, who asked not to be identified because the information is private. Facebook is in discussions to lease space in Beijing’s Fortune Financial Center, located in the city’s central business district, according to other people familiar with the matter. The company hasn’t decided whether to hire contractors or full-time employees for a sales office, which would require an operating license, said another person with knowledge of the situation.
Opening a China office would mark a significant step for Facebook given the country is one of the last large markets that remains relatively untapped by the company. While Facebook’s social-networking service was banned by the Chinese government in 2009, the company -- using an office in Hong Kong, outside of the mainland -- has quietly built up a business in the country selling ads to companies that want to reach international users.
“Today, our sales team in Hong Kong is supporting these Chinese businesses, but because of the rapid growth these businesses are achieving by using Facebook, we are of course exploring ways that we can provide even more support locally and may consider having a sales office in China in the future,” Facebook Vice President Vaughan Smith said in an e-mailed statement. He declined to comment yesterday on the timing or location of a China office.
China has long been tough to crack for U.S. Internet companies. EBay Inc. and Yahoo! Inc., among others, have made little headway in the market. In 2010, Google Inc. said it wouldn’t comply with the country’s online censorship rules and shuttered its local search page. Twitter Inc. is also blocked in the country. LinkedIn Corp. recently said it plans to expand its Chinese-language website and will restrict some content to adhere to the country’s censorship rules.
“The government is still quite concerned about social instability,” said Shaun Rein, managing director at China Market Research Group in Shanghai. “I don’t think you are going to see any access for Facebook anytime soon.”
The absence of U.S. social media companies in China has spurred a boom of local Web firms. Sina Corp.’s Weibo, a Chinese service that works like Twitter, has more than 129 million monthly active users and went public in the U.S. last month. Tencent Holdings Ltd.’s WeChat, which would compete with WhatsApp, the messaging app that Facebook agreed to acquire for about $19 billion, has 355 million users.
Facebook said in its prospectus for its 2012 initial public offering that “substantial legal and regulatory complexities” prevented its entry into China, which is home to the world’s largest number of Web users.
That hasn’t stopped the Menlo Park, California-based company from developing other business strands in China. Facebook has focused on supplying ads to exporters in the country. It also has “thousands” of application developers in China, Smith told the Global Mobile Internet Conference in Beijing on May 6.
The company is now working to boost sales from Asia, where Facebook made $354 million, or 14 percent of revenue, in the first quarter. That’s up from $118 million, or 11 percent, at the time of its May 2012 IPO.
Chief Operating Officer Sheryl Sandberg in September also met with the government agency that oversees Internet controls in China. Sandberg and Cai Mingzhao, head of China’s State Council Information Office, discussed issues including the “important role” that Facebook plays in helping Chinese companies expand overseas, according to a statement posted to the agency’s website at the time.
-- Sarah Frier, Zhang Dingmin and Zijing Wu. With assistance from Edmond Lococo in Beijing and Emily Chang and Cory Johnson in San Francisco.
To contact Bloomberg News staff for this story: Sarah Frier in San Francisco at firstname.lastname@example.org; Zhang Dingmin in Beijing at email@example.com; Zijing Wu in Hong Kong at firstname.lastname@example.org
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