Inside Facebook Reports: Why Hasn’t Facebook Grown More in China?

Facebook recently celebrated its 200 millionth active user. Interestingly, according to Facebook, only 300,000 of those users are in China – a small figure considering the fact that China is the most populous country in the world and home to 300 million Internet users.

Western social networks have watched as their Chinese counterparts gained momentum over the last several years. Below, Inside Facebook’s Jessica Lee provides an introductory overview of the social networking scene in China, shedding light on the obvious question: Why hasn’t Facebook grown more in China?

1. China’s Anonymous Internet Culture

The Bulletin Board System (BBS) has had a huge influence in shaping how China’s Internet users interact with each other on the Web. BBS’s are traditional discussion forums that are run by individuals, companies, and government organizations on a variety of topics ranging from shopping to current affairs. In a ReadWriteWeb post last year on the BBS phenomenon in China, registered BBS accounts were said to have reached 3 billion: users typically have multiple accounts, most of which are anonymous.

80 percent of Chinese sites still administer their own BBS’s today, bringing in a total of 1.6 billion page views and 10 million comments each day. Examples of BBS’s can be found on the People’s Daily, a government-run daily newspaper, Sina, the leading infotainment web portal in China, and the blogs of Chinese celebrities such as actress Jinglei Xu. The BBS community is characterized by its topic-centered and anonymous nature – two traits that have set an expectation around how Internet users in China feel comfortable sharing information with each other, challenging Facebook’s goal to be a platform that’s focused on real identities (not anonymous nicknames).

This preference for anonymity makes sense given harsh Internet censorship in China that holds users accountable for the content they publish, especially when it comes to political opinions that may not be in line with the government’s. In this sense, establishing a real online identity does seem to be a luxury of sorts that’s more feasible in free market economies like the US.

2. China’s “Guanxi” Business Culture

Local Chinese companies are market leaders in the social networking space because they know how to navigate the entrepreneurial landscape in China. China is still at a stage of development in which entrepreneurs are more often copying ideas than innovating on their own – Intellectual Property laws remain weak.

Moreover, while many Chinese social networking sites claim to be open platforms, they don’t offer a level playing field when it comes to building an open ecosystem for the developer community. The concept of guanxi, referring to the social and political connections that make doing business in China easier for certain influential individuals or parties, is at work. Without knowing the right contacts, developers may not get the visibility that they would normally expect in an open platform system.

For Facebook and its application developers, this means that the innovation process in general, and in particular application development, is highly competitive and vulnerable to copycat developers who can replicate ideas in a cheaper, faster manner.

The following table briefly describes four of the leading social networking sites in China, using data from TechCrunch and Alexa, a Web intelligence site:

Site NameDate FoundedNumber of Users in China (in millions)Primary Audience

199837518-34 yo
Instant messaging is the core feature

200513018-24 yo1st site to open payment system to developers (2008)

200540College studentsKnown as Facebook clone

20083025-34 yo Focus on entertainment

3. China’s Mature Virtual Goods Economy