Facebook In India And China: Big Risk, Big Reward

In the face of slowing growth at home, Facebook Inc. (FB) is courting new users in India and China. Mark Zuckerberg, the company’s CEO, spoke to students at Tsinghua University in “heavily accented” Mandarin and will renew efforts to promote Internet connectivity to the masses when he travels to India later this week.

But the company’s ventures into new territories is fraught with risks. It may not result in substantial revenues and it also might tarnish the social network’s reputation as a place for free expression.

(Dis)Likes in India

India would seem like safe ground for Facebook.
It is already home to the second-largest Facebook population in the world. By 2020, the South Asian country is expected to overtake the United States in the number of Facebook users. That growth in users comes on the back of a solid reputation for U.S. tech firms, such as Alphabet Inc. (GOOG) and Facebook that employ a large number of Indian engineers and are generally perceived as a force for good in the country’s burgeoning tech economy.

But, Facebook’s reputation has taken a beating in recent times.

The social network’s Internet.org initiative, a collection of free Internet services offered in partnership with local carriers, has failed to take off due to a patchy Internet connection. What’s more, the Menlo Park-based company has also been charged with “economic racism” for limiting the Internet’s unbounded confines by cherry-picking select sites for its service. For example, Google, the world’s most popular search engine, is not offered as part of the Internet.org service. Instead, Microsoft Corp.’s (MSFT) Bing is the default search engine. (Microsoft is an investor in Facebook.)

The charges could hurt the company in the long run, especially as its competitor Google, which launched its own cheap phone – the Android One – last year, makes inroads into the market.

Then, there is the question of revenues. Even with a growing ecosystem, India does not represent substantial mobile advertising revenues for the company. According to a report released by research firm emarketer earlier this year, India will fail to “eclipse $1 billion” in ad spend by 2018. For comparison, the United States and China, the top two markets for mobile ads, are collectively expected to spend $62.38 billion in advertising this year.

China: A Complicated Case

But, India remains a far easier case study for Facebook, as compared to China where the service is blocked. Even if it is allowed to operate in the country, Facebook would find operations difficult. As a host of American companies, such as Amazon.com Inc. (AMZN) and Home Depot Inc. (HD), have already found out, China is not an easy market to crack. The company already faces formidable competition from a number of home-grown social networking sites, such as Weibo.com and Renren.com, which comply with government dictates and have already garnered a substantial following.

What’s more, Facebook’s foray into China could entail subjecting its user’s posts to censorship. Chinese regulations also mandate technology companies to operate their servers in the local market. This means that Facebook’s servers would be subject to security checks and could threaten the viability of its operations. In turn, this could compromise the social network’s commitment to free expression and set a precedent for its operations in other countries.

The Bottom Line

Emerging markets promise growth for Facebook. But, that growth comes at a cost. As it expands outside home base, the social network sticking to its original vision of a connected world without making compromises.

By Rakesh Sharma (a freelance journalist) 

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