Facebook Is Trying Everything to Re-Enter China—and It’s Not Working

Facebook Is Trying Everything to Re-Enter China—and It’s Not Working

Since regulators blocked the service in 2009, CEO Mark Zuckerberg has hired well-connected executives, developed censorship tools and taken a ‘smog jog’ in Beijing—but the company has made no visible headway.

By ALYSSA ABKOWITZ in Beijing,  DEEPA SEETHARAMAN in San Francisco and EVA DOU in Wuzhen, China Jan. 30, 2017 10:45 a.m. ET

Facebook Inc.’s chances of getting back into China appeared to take a rare turn for the better when an employee noticed an official posting online: Beijing authorities had granted it a license to open a representative office in two office-tower suites in the capital.

Such permits typically give Western firms an initial China beachhead. This one, which Facebook won in late 2015, could have been a sign Beijing was ready to give the company another chance to connect with China’s roughly 700 million internet users, reopening the market as the social-media giant’s U.S.-growth prospects dimmed.

There was a catch. Facebook’s license was for three months, unusually short. Facebook executives found the limitation unexpected and frustrating, people familiar with the episode said.

Facebook never opened the office. The official posting disappeared and now exists as a ghost in cached versions of the government website. “We did, at one point in time, plan to have an office,” said Facebook spokeswoman Charlene Chian, “but we don’t today.”

The episode is part of Facebook’s running tale of woe in China, where it has been trying to set the stage for a return. Blocked on China’s internet since 2009, Facebook has courted Chinese officials, made Chief Executive Mark Zuckerberg more visible in China, hired a well-connected China-policy chief and begun developing technology that could cull content the Communist Party deems unacceptable.

It has made no visible headway. And as time passes, Facebook is watching from the outside as Chinese social-media giants mop up the market that might have been its own. Weibo, along with Tencent Holdings Ltd.’s WeChat and QQ, are now dominant in China, and it may be too late for Facebook, said industry executives including Kai-Fu Lee, Google’s former China head and now CEO of Innovation Works, a Chinese incubator.

“At this stage and time with WeChat, Weibo and other products, it’s hopeless,” Mr. Lee said.

Facebook also faces a wary central government, which blamed social media for stirring ethnic unrest in 2009 and remains uneasy with Facebook’s ability to be a dissidents’ megaphone, said industry executives and others who deal with Beijing regulators. And government censorship would be a prerequisite, under Chinese law, for Facebook to re-enter China.

“It’s important for Facebook to respect the laws and regulations of China,” said Guo Weimin, vice minister of the State Council Information Office. “The Chinese government has always had an open approach to social-media networks. Cooperation with new media is welcome on our side.”

Mr. Zuckerberg, who declined to be interviewed for this article, has said he considers China crucial to Facebook’s future. “Obviously you can’t have a mission of wanting to connect everyone in the world and leave out the biggest country,” he told analysts in 2015. “Over the long term, that is a situation we will need to figure out a way forward on.”

His drive has had fits and starts. He scored a high-profile board seat at one of China’s top universities to build inroads with Chinese officials but didn’t attend the body’s meeting last year.

“We have long said that we are interested in China, and are spending time understanding and learning more about the country,” Facebook spokeswoman Debbie Frost said. “However, we have not made any decision on our approach to China.”

Prospects were brighter in 2005, when Facebook registered “www.facebook.cn.” It launched a Chinese-language version of its website in 2008 and was a serious contender in China. A Facebook page purporting to be of then-premier Wen Jiabao had tens of thousands of “likes.”

Locked out

Things changed in 2009, when regulators blocked Facebook and Twitter in an information lockdown after riots in China ’s Muslim Xinjiang region. State media said riot leaders used social media to stir unrest.

China had previously blocked social-media sites temporarily during political unrest, and many assumed it would eventually back off this time. Instead, it continued blocking Facebook and Twitter. Some tech-savvy users found ways around the “Great Firewall,” but Facebook was effectively banned.

Mr. Zuckerberg maintained his intense interest in China, studying Mandarin and hosting Chinese officials at his Menlo Park, Calif., headquarters. He traveled to China to meet business leaders and government officials to maintain communication.

Facebook in a 2012 federal filing said it continued to “evaluate entering China” but faced “substantial legal and regulatory complexities.” It shifted focus to wooing Chinese advertisers, with teams in Hong Kong and Singapore pitching the network as a way for Chinese businesses to reach customers outside the mainland.

Over about the past two years, Facebook has stepped up its China groundwork, said current and former Facebook executives and employees. Since at least 2014, the task of coordinating the company’s China initiative has fallen to Vaughan Smith, vice president of mobile, corporate and business development, who helped negotiate dozens of Facebook’s earliest acquisitions, they said. In December, China’s elite Tsinghua University announced Mr. Smith would co-teach a class on innovation. He declined to be interviewed.

To deploy a Hong Kong-based field commander, Facebook in 2014 hired Wang-Li Moser, who spent more than a decade at Intel Corp. in China, where former colleagues said she made her name as a quiet fixer. She helped Intel navigate Chinese bureaucracy to build a $2.5 billion factory and strengthen government relations.

Born in 1954 in China’s Henan province and now a U.S. citizen, Ms. Moser was among the first wave of Chinese to go to college in China after the Cultural Revolution, according to her writings. She earned an M.B.A. from Rider University in New Jersey. She declined to be interviewed.

“Her role,” said Facebook’s Ms. Chian, “is to help us understand and learn more about China.”

That includes building more face-to-face relations with government officials. In a 2011 essay, she called arranging meetings with Chinese officials a “long, trivial and pressing” task.

“She makes a point to understand who she’s dealing with,” said Tan Wee Theng, former president of Intel China, who worked with her at Intel and now runs a business-advisory firm.

Her hiring appeared to bear fruit in December 2014, when she accompanied Mr. Zuckerberg in a meeting with Lu Wei, then China’s top internet regulator, at Facebook headquarters. She accompanied the CEO in March 2016 Beijing meetings with Mr. Lu and the Communist Party’s ideology chief Liu Yunshan.

Last fall, she was at China’s World Internet Conference in Wuzhen, an invitation-only event hosted by the Cyberspace Administration of China, the regulator that determines, among other things, which websites are blocked. She steered Mr. Smith by the arm, striking up conversations with well-placed Chinese friends and acquaintances.

Zuck’s ‘Smog jog’

Mr. Zuckerberg has made himself visible in China, joining the board of Tsinghua University’s School of Economics and Management in 2014, a high-profile group that includes Goldman Sachs Group Inc. CEO Lloyd Blankfein and Apple Inc. CEO Tim Cook.

In 2015, he gave a 22-minute speech in Mandarin at the university. Last spring, he posted a photo of himself jogging through Tiananmen Square on a smoggy day without the pollution mask many wear around the city, causing a stir online.

During Chinese President Xi Jinping’s 2015 Seattle trip, Mr. Zuckerberg was among American business leaders to meet the visiting head of state.

Facebook has rapidly expanded its sales teams in Singapore and Hong Kong in anticipation of more business in Asia, particularly in China, people familiar with the teams said.

Amin Zoufonoun, Facebook’s head of corporate development who has helped drive some of its largest acquisitions, is eyeing potential deals including joint ventures that could help jump-start Facebook’s China growth should it be allowed to return, said people familiar with Facebook. Mr. Zoufonoun, who declined to be interviewed, joined Mr. Zuckerberg on his Tiananmen “smog jog.”

Over the past year, Mr. Zuckerberg has directed engineers at Facebook to start building and adapting products that can be used in China, according to people familiar with the effort. Facebook has been working on technology that could block some content in China, said people briefed on the effort. The New York Times previously reported that Facebook is working on a tool to allow a third party to block content.

The circumstances Facebook faces are different from a decade ago when Ms. Moser made her reputation as an Intel fixer. Then, China’s tech sector was weak, and officials were eager for outsiders’ factories to employ thousands and advance China’s technology. Now China champions its own rising stars, and Facebook can’t promise the level of job creation offered by hardware makers such as Intel and Apple.

It was Ms. Moser’s name on Facebook’s application to open the Beijing office, filed with the Beijing Municipal Administration of Industry and Commerce. The agency didn’t respond to requests for comment.

Facebook has already agreed to take down, in some countries, content that is illegal there, including pro-Nazi material in Germany. Chinese law would demand more, and censorship is a price that has led Western internet companies such as Alphabet Inc.’s Google to abandon the market.

Facebook executives worry that agreeing to heavy censorship could create a backlash among the site’s 1.8 billion active users, said people familiar with the company.

Another obstacle for Facebook may be the aftermath of Google’s departure. In 2010, Google said it would stop censoring its search engine after concluding China-based hackers were attacking human-rights activists’ Gmail accounts. It pulled its engine from the mainland, redirecting users to its Hong Kong site. Chinese officials denied connection to attacks on Google.

After Google’s departure and declarations about human rights, government officials publicly called Google “unfriendly” and “irresponsible.” Within Facebook, said people familiar with the company, the view is Chinese leaders remain wary that, were they to grant Facebook access, the company might leave after deciding it can’t tolerate censorship after all—that Facebook, said one, might “pull a Google.”

While Facebook can’t be a social network in China just now, its top executives continue to urge Chinese companies to use it as an advertising platform. Facebook Chief Operating Officer Sheryl Sandberg met with a small group of advertising clients at a swanky Beijing hotel last summer. Turnout appeared light, said one attendee. A person familiar with Facebook said the event was intended it to be small. Ms. Sandberg declined to comment.

A few months later, Facebook’s Amanda Chen appeared at a regional e-commerce convention in Guangzhou. Singapore-based Ms. Chen, who oversees small-business advertising in China, told attendees how Facebook could help Chinese businesses chu hai, or “go out to sea,” and increase international sales by buying ads on Facebook. She declined to be interviewed.

Participants swarmed Ms. Chen after her presentation. They asked her to connect with them on WeChat, China’s preferred networking method. They couldn’t ask to friend her on Facebook in China.

—Yang Jie in Beijing contributed to this article.


Comments

Popular posts from this blog

The Silicon Valley Backlash is Heating Up

High-speed Hyperloop track ready for first trial run in Nevada

British supermarket offers 'finger vein' payment in worldwide first