Facebook Seeks Opportunity in China

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Hong Kong-- Facebook is evaluating opportunities to enter China, according to news reports.

Bloomberg News, citing a report in Sohu.com, reported this week that the Palo Alto, CA, based social network signed an agreement with Baidu, China's largest search engine, to launch a social networking site in the country. However, Reuters reported that Facebook has not signed a business deal with any companies there.

China has the highest number of Internet users in the world at 457 million and it would make sense for Facebook to grow its users exponentially by having a presence in the market.

AllFacebook reported that the social network giant has hit the 600 million-user mark in January this year, mainly users from the United States. Growth in Asia has come from India, Indonesia, and Philippines.

Despite being blocked in China, Facebook attracted more than 700, 000 users to its site through VPN (virtual private network) services in February 2011, an all-time high, following its CEO Mark Zuckerberg's visit to the country.

Latest figures from Socialbakers show that Facebook users in China have dipped to 391, 200, representing only one percent penetration of the country's online population.

China's social networking landscape is already dominated by key players such as Renren, Kaixin001, and 51.com.

Founded as Xiaonei in 2005, Renren has a user base of around 160 million people made up of college-aged and a younger demographic while Kaixin001's user base is around 102 million comprising white-collar yuppies that formed 30 percent market share in the country. Both social networks are expected to offer IPOs this year.

So what about Baidu that makes it compelling for Facebook?

Baidu is China's largest search engine that owns more than 75 percent market share in the country, surpassing its closest rival Google at less than 20 percent. The search engine certainly has mass reach in China that will provide access to millions of Internet users for Facebook.

From a search and social perspective, partnering with Baidu will also boost Facebook's social graph that might add to its existing partnership forged with Microsoft's Bing last October.

More importantly, Baidu will be able to assist Facebook to navigate China's government relations better.

However, if Baidu and Facebook were to launch a local social networking site, it will still be confined by restrictions from the Chinese government such as censoring "sensitive" words that would go against the ruling party as an example.

If so, what would be the differentiation for the joint SNS as Kaixin001 and Renren have already formed tight communities in China and it might be tough to get users to switch to a new social network, James Wu, general manager at Mediacom Interaction said.

But Baidu is keen to diversify its search offerings into social networking services. As part of that plan, it has recently launched a box computing application that allows China's Internet users to post simultaneously to various local microblogging sites such as Tencent, Sohu, and Netease.