Facebook in China

By Eric Jackson
RealMoney Contributor
4/11/2011 10:45 AM EDT
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Rumors that Baidu (BIDU - commentary - Trade Now) and Facebook have finalized a joint venture that would bring the social networking giant to China seem to be inching closer to reality. Despite Facebook's global dominance, it is currently blocked from participating in China because of The Great Firewall.

Background

Last December, Facebook's co-founder and CEO Mark Zuckerberg explained that he was merely taking a vacation when he visited China. It just so happened that he popped in on meetings with Baidu, mobile telephone giant China Mobile(CHL - commentary - Trade Now) and online media and mobile services provider Sina (SINA -commentary - Trade Now) while he was there. Zuckerberg's girlfriend is Chinese-American and he's rumored to be studying Mandarin for an hour a day. In a CNBC documentary last year, he expressed a wish to do business in China in the future.

Zuckerberg's trip resulted in a lot of positive publicity in China. The company has reportedly signed up at least 200,000 new Chinese Facebook members since the trip. That might not sound like a lot for a company with more than 600 million members worldwide but consider this: Anyone in China who signs up for Facebook has to do so via a more complicated VPN connection. Those new members showed definite devotion.

The Negatives of the Deal

From Facebook's perspective, the negatives of the deal are that the company has to share its China success with Baidu.

Also, there will likely be a lengthy review of this deal, both in China and the U.S. It could take years before the joint venture is given the green light. The Chinese government will perhaps look more fearfully at approving Facebook's entry, especially on the heels of Facebook's role in the recent North African protests and overblown fears of a "Jasmine Revolution" in China. Although there are many Chinese social networking services that the government has been living with, there might be extra concern that Facebook could bring more scrutiny to the country by outsiders.

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