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What You (And Facebook) Need To Do To Succeed In China.

By Dan Harris on Posted in China Business

Great post by David Wolf over at Silicon Hutong, entitled, “Nine Things Facebook Must Do to Better Its Chances in China.” This is the second in a trilogy Wolf is doing on Facebook in China.

I have great faith in Wolf’s prescriptions for Facebook in China, both because he is indisputably one of the foremost experts on China’s Internet and because most of what he prescribes for Facebook hew so closely to what I have seen as necessary for consumer companies (not just internet companies) to succeed in China. 

Wolf begins his post by noting how he has seen many top Western companies lose their way in China: 

Over the last two decades, I have watched China’s allure overwhelm the reasoning powers of a battalion of intelligent, experienced, and successful executives. I have seen massive companies enter the market on the thinnest of pretexts without bothering to identify and evaluate the opportunity first. And in some cases I have watched, helplessly, as great companies and captains ignored good advice and their own common sense in the dogged pursuit of a billion customers.

Wolf then raises doubts as to whether Facebook can succeed in China no matter what it does. I actually disagree with Wolf on this and I base it on having worked with many a massive company that did just about everything wrong overseas and yet still ended up succeeding. Way back when people were writing off Apple ever succeeding in China, I held on to my stock and in “Apple In China (Again) And Why SMEs Usually Do Better Faster,” I explained why large companies are often slow to succeed overseas and I instructed everyone not to worry even one bit. I actually still believe Google will eventually thrive in China.  

In any event, whether Facebook will succeed in China or not, Wolf’s prescriptions for it do ring true and below are my five favorites from Wof’s list, along with my own comments in italics: 

  • Wolf asserts that “there is no way any foreign web company can beat a local competitor in China, because the guy running the local competitor is here, and the foreign competitor’s boss is between 6,000 and 8,000 miles away” and so if Facebook is to succed in China, Zuckerberg himself needs to move to “Haidian for at least a year if not two.” If Wolf means this literally, he is going a bit overboard. But if he is saying this to stress the need to have a really high level person on the ground in China who has decision-making authority without having to call the home office, then I could not agree with him more. 
  • Get someone local to “be the chief site visionary and to actually create the service. The foreigners – even the overseas Chinese – cannot do it. Facebook China needs to be local down to its core, or the results will be disappointing. I completely agree. And someone from Taiwan or from Hong Kong or from Singapore or from Los Angeles is not going to be the answer, even if they are ethnic Chinese.
  • Get a great Chinese name.  ”If they can’t say your name (and say it without laughing at the dumb foreigners), they won’t use your service. Facebook needs to hire a locally-wise branding agency in Beijing to come up with a brand and test the hell out of the name using a great marketing research firm. The name should reflect what the service is about, and Facebook’s leaders shouldn’t worry if it they cannot pronounce it or it doesn’t sound like “Facebook.” They just don’t want to wind up with a name like feici buke (非死不可).”  Not my area of expertise, but I still know this to be true.
  • “Facebook China should forget fancy offices, company cars, and Herman Miller furniture. Replicate the dorm-room mentality, forge a tight team, and spend money on talent, IT, and the stuff that will show up on screen. Zuckerberg should take a taxi to work, or a simple Volkswagen Santana with a bodyguard.”  Yes, it may help coding and localization to be super lean and mean (just like your Chinese competitors), but David, can’t we at least allow Zuckerberg an Audi 6?  I mean, come on.  
  • Play clean. “There is a double (maybe a triple) standard for companies in China. There is one set of rules for state-owned enterprises, one set of rules for private companies, and a third set of rules for foreign companies. Foreign companies have to operate with greater integrity, transparency, and care than local companies do. For this reason, Facebook needs to operate in China as if it were in the United States and being simultaneously investigated by the FBI, OSHA, and the EPA. Doing otherwise will give the competition and the government a perfect opportunity to prove that Facebook is a scofflaw company at best, and at worse subversive. Facebook cannot afford the distraction of government harassment. I vehemently agree and from the lawyer’s perspective, I would have listed this one first, not last. The need for foreign companies to play by China’s rules (even if none of that company’s Chinese competitors do) is the theme of around ten percent of the posts on this blog. 

I urge everyone to read the rest of Wolf’s post here and then let us know what you think. Has Wolf nailed it?

  • Matt

    IMHO, Facebook’s problem is that they aren’t like computer makers, game designers or other tech companies that have succeeded in China. If Dell is required to put a Green Dam program on their China sold computers, they can do that with little effect to their users in other countries. If skeletons in World of Warcraft offend the relevant regulations, then those graphics can be removed from the Chinese servers.
    Facebook’s core service is their web of a connected users. If someone in Delaware posts a comment about T*b+t, that comment is visible to his (her) friends in China. How does Facebook deal with this situation, while complying with Chinese censorship rules and not ruffling up their non-China users?
    If the answer is to individually censor sensitive posts from reaching Chinese users, they’ll need more 5-centers than engineers in their China offices. If the answer is to give China its own walled-in version of Facebook, then what’s the point because there are already established Chinese Facebook clones.

  • http://www.bbtimechina.com.cn Diomedes

    To have someone local to mold or recreate the product has been proved succesful in other industries as well. KFC is more succesful than McDonald mainly because they localized a lot their menu. KFD hamburger is embarassingly simple, but much more loved then McDonald’s hamburger with its pickles in it!
    Local Fb competitor Renren offers a huge range of social online games, which is much more attractive to the Chinese users.
    Agree with not using a Chinese non-mainland. Hong Kong, Taiwan… they are all foreigners in the end.
    Yes. Foreign companies should learn to use money wisely. I heard stories of management teams wasting all the resources in good expat life even before starting the operations. Local competitors know how to keep costs down, go in the offices in the winter and you see employees wearing a coat!
    Ps. For the sake of the spelling it is “si” and not “ci” in here: “feici buke (非死不可)”

  • wai guo ren

    The primary thing Facebook needs to do to be able to even have a chance to succeed in China is to allow Chinese government control/censorship of its content. If that is done, then FB will be allowed to compete. If not, there will be endless stumbling blocks and problems, and the PRC will turn its hidden favortism to a local company.
    And even if FB allows PRC government control over content, there is no guarantee. PRC government doesn’t want non-Chinese internet companies to succeed anyway. The internet is too important.

  • Anon

    I disagree with you about Google. My prediction is that Google’s experience has provided/will provide 2 lessons for the world: 1) China doesn’t need you; and, perhaps more importantly, 2) You don’t need China. Facebook needs to think real hard about this decision. Zuckerberg, bless his soul, appears to be exhibiting the type of naivete that Wolf properly warns about: “How can you connect the world if you leave out a billion people?” Well, you can connect the rest of the world, and you would be able to connect those billion as well were it not for the fact that you’ve been BANNED as a threat to political stability. I’m not sure how a physical presence eliminates that problem.
    There needs to be something deeper to show that Facebook is the right fit for China than the fact that there are a lot of people there. Zuckerberg has done an amazing job building a thriving, first-rate company worth billions of dollars with little to no access to the Chinese market. What’s the rush?
    I haven’t read Wolf’s full post, but the points that you extracted, in my opinion, leave something to be desired. Not naming your company “Imminent Death” is certainly a key thing, as is having a presence on the ground, but that doesn’t help to answer the most important question: Does Facebook, given its mission and its model and its already uncertain record regarding privacy and its use elsewhere as a tool for mobilizing political dissent, really belong in China, where its mission, its model, and its uncertain record on privacy and its use as a tool for mobilizing political dissent, will all be challenged to the utmost? How will Facebook’s GLOBAL brand be affected if it actually follows all of China’s rules to a T? There are 5 billion people to connect OUTSIDE of China. It’s not worth risking all of that, or even a chunk of that, for the sake of a small slice of the people in China… Patience, self-respect, and self-confidence are key, here, far more than the relatively technical concerns that Wolf raises and that really apply to ANY business ANYWHERE, IMHO.

  • wolf

    What a load of bulshit. Move your CEO here, have a local as ‘chief visionary’ ….
    He’s forgetting that FB was immensely popular before it was blocked, the renrens and kaixingwangs were about but were very second tier. And note, this was when all it did was have a Chinese language version of the US site (it was p2p translated at the time wasn’t it?)
    What killed FB was its being blocked, and so the obverse must be true: the way to succeed in an internet biz in China is practice self censorship and cede user information to the Party when requested.
    This business with Fei Bu Ke Si…… why even bother, as if FB would be so stupid. What a waste of my time.

  • Jay

    I really agree with the last point of the post.
    Play by the rules. Completely. No matter how long or inconvenient it is, even if the people you’re working with don’t want to… or risk losing it all.
    They’ll be annoyed that they have to fill out the strange new paperwork that they’ve never filled out before, but better to risk temporary annoyance than give your competitors a way to have you publicly dragged through the mud or thrown out of China entirely.
    When the local bureaus get all huffy and annoyed by the paperwork, (and lack of hongbaos) be polite, but keep at it.

  • http://siliconhutong.com David Wolf

    Anon, you are absolutely correct, and I touched on that in the earlier post when I referred to Will Moss’ treatment of that topic at imagethief.com. I am in complete agreement with your point and Will’s analysis.
    The purpose of my three posts (third and final one going up today) was not to cover ground that had been amply addressed elsewhere, but to add a layer of operational considerations to the discussion, to say that even if Facebook decided to risk its global brand with a jump into China, the effort is fraught with so much complexity as to make it a fool’s errand.
    Dan, Apple succeeded in China after nearly two decades of embarrassing failure because when a quarter of the iPhones sold in the US started showing up in China, somebody in the organization finally decided to apply some money and executive focus to actually service the market. They LEARNED their lessons just in time, launching the iPhone in China (no jailbreakage required and supported by a carrier) three weeks before Motorola and Samsung started filling the stores with Android phones. Facebook had an iPhone-in-China moment in 2007. They ignored China. Whups.
    The point of my posts thus far is this: Given the obstacles, the only hope Facebook has to succeed in China would be to make China a corporate priority in everything it does. I doubt it will, and I doubt it should. There greener pastures and lower hanging fruit elsewhere: why waste the time and effort to till a swamp?

  • Tim

    Mr. Wolf has excellent points that most companies would be well served to heed but honestly, these points have been made so many times by so many China watchers that they are tantamount to being China business platitudes.
    His first post on why Facebook may want to reconsider joining the herd is an excellent analysis of the market dynamics and possibly more important for internet companies interested in China. I too have watched, helplessly, people check in their common sense and forget to pick it up with their luggage when they disembark at Pudong airport.
    I suspect he’ll get into this in his next post on the subject but given how Facebook has been utilized in other countries recently to foment dissent, I would be shocked if they are able to enter the China market any time soon.

  • http://www.joyceyland.com Joyce Lau

    You can’t compare FB to other tech companies because FB doesn’t make any physical thing.
    China’s not (really) afraid of products like laptops, cellphones, iPods, etc. It’s afraid of intangibles, like content and connectivity. And that’s all FB has to offer.
    If Chinese FB users can’t interact with people all over the world in real time, it’s useless.
    I think it would only work if FB worked with a local company to make some sort of mainland-specific service — but then what’s the point? Those already exist.
    Censoring all FB mainland content, while linking to the global FB service, is not a good idea. It would
    a) take much money (much more than skimping on company cars and heating!)
    b) slow the system to a crawl
    c) piss off users both in and outside China
    d) emphasize even more to foreign users how much censorship there is. (The average Westerner probably doesn’t think much about it, but if someone’s personal Chinese FB friend keeps getting blocked, it will drive that point home even more)
    e) an ethically wrong thing to do
    f) probably not work anyway.
    I see both HK and international media groups who would love to get into the China market. I don’t think any are willing to censor themselves that much… yet. But even if they took out ALL critical China coverage, there is no guarantee that even that will work.
    Restrictions are getting worse, not better. Even random stuff is getting censored — sci-fi movies, literature, art, mentions of the jasmine flower… Even experts can’t guess what will be next.
    We can’t presume that Beijing acts in a rational way when it comes to content and connectivity. Hiring a smart local boss, getting a cool Chinese name, and following all the rules may work if you’re selling handbags, cars or even tech toys. But online content is totally different,

  • http://siliconhutong.com David Wolf

    Tim, you’re right. Many of those points have been repeated so often they are platitudes. Apparently, however, they are not percolating into the received wisdom on China that guides the direction of many of the world’s finest companies. Thus Dan and I are forced to keep repeating them, not only in our blogs, but to the people who come to us for advice.
    Joyce, I agree that my nine suggestions by themselves are unlikely to help FB, for all the reasons I stated in my prior post. My point was this: if you’re determined to come here anyway, do everything in your power to give yourself the best fighting chance possible.
    And “wolf,” Facebook was never more than a niche curiosity in China, not “immensely popular,” an evaluation I’d save for services like QQ, Taobao, Baidu, Youku, and maybe Weibo. What killed FB in China was neglect and lack of relevance. The blocking came later.

  • Jack

    Hate to be a pessimist, but trust the lawyer to agree with the final point vehemently. Compliance is where lawyers make money. I know, because I studied law. But whatever..