Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

So, Zuck is doing what he can to stamp out fake news. He's also hard at work building a censorship system that would allow Facebook Inc. to enter China.

<Insert any number of jokes here.>

Except, it's no laughing matter.

Mark Zuckerberg is an innovator. And he's also brilliant. So if anyone can pull off some kind of process that will filter and deliver content targeted for specific audiences, it's him. After all, he's been doing it for years. (What, you didn't know?!)

Differentiating fake news from real news is one thing. Sorting Chinese news from uncensored news is another matter.

Google and Twitter are among the Western companies that decided not to even embark on that endeavor, choosing instead to miss out on Asia's biggest economy and remain available to the 81 percent of the global population not governed by the People's Republic.  

There are three reasons for Facebook, or any internet company, to be in China: Display Chinese ads to Chinese people, show foreign ads to Chinese people, and serve Chinese ads to non-Chinese audiences.

Selling China to the Chinese is definitely a market that Facebook's missing. The potential ad dollars are tremendous, and it ought to pain any right-minded CEO not to be able to tap that lucrative well.

But as I argued previously, Facebook is hip in China because it's not Chinese. If audiences there want filtered content curated for their tastes, they have plenty of options including Tencent, Baidu, Sina and NetEase. These are agile companies that adapt to local tastes at speeds faster than any outsider could hope to achieve.

Google knows this battle intimately, because although the conventional wisdom is that Sergey and Larry pulled out after they refused to accede to censorship, the reality is they were getting trounced by Baidu anyway so that when they did leave, they kept their aura and Western credibility intact.

By becoming a local stooge, Facebook risks not only losing credibility, but also any sense among either local or foreign audiences that it cares about fake news -- since the dark cloud of Chinese censors would cast a shadow over the company globally.

Going Steady
Facebook still gets the bulk of its revenue from North America and that's remained the case for years
Source: Bloomberg

Sure, Facebook wants and needs to broaden its revenue beyond the 50 percent it currently derives from North America. However there's every chance the reputational, business and political risk isn't worth what would probably be a small sliver of the Chinese market.

On the flipside, there are cross-border sales, an area where Facebook's reach and technology could certainly give it an advantage.

Selling into and out of China doesn't require Facebook to turn down the lights on its vibrant platform for discourse. Chinese firms can easily place ads on Facebook properties, while Facebook could do the same in China through local cooperation.

An investment or venture with Tencent, for example, would be a far more expedient way of accessing the nation's audience without damaging Facebook's own brand or treading on the local hero's turf. Such an arrangement would also give Tencent international reach, not only for its social media ads, but its games and payment platforms.

The Only Way Is Up
Tencent's monthly active users have been steadily increasing
Source: Company filings

Zuckerberg has done an impressive job of learning Mandarin to show the Chinese he gets them. But he also needs to understand that no matter how fluent he becomes, he's always going to be an outsider. Playing to that strength would be a smarter move.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Yes, I know that many other regimes also block or limit internet access.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net