Analysis: More than just Great Firewall awaits Facebook in China

Wed Feb 8, 2012 5:13am EST
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By Melanie Lee

SHANGHAI (Reuters) - When it comes to China, Facebook should consider itself forewarned. Cracking the world's biggest Internet population might seem an obvious ambition for the social networking giant as it trumpets its global growth before a $5 billion initial public offering, but the chances it will succeed look slim.

Facebook said last week it was contemplating re-entering China, the world's second-biggest economy, after being blocked nearly three years ago.

But its offering would likely face intense competition, political meddling and little commercial success.

Few foreign Internet companies have succeeded in China. EBay Inc, Google Inc, Inc, Yahoo Inc and most recently Groupon Inc form the list of notable online players who have failed to gain traction in the fast-growing nation of 1.3 billion people.

"It's actually a bit late for Facebook," said Hong Kong-based CLSA analyst Elinor Leung, who added that the market was already quite saturated with local players such as Sina Corp, Renren Inc, Kaixinwang001 and Tencent Holdings.

Facebook first launched its Chinese interface in 2008 but was blocked by Beijing in mid-2009 following deadly riots in the western province of Xinjiang that authorities say were abetted by the social networking site.

"It will be very difficult for Facebook to introduce something that will allow them to differentiate themselves," CLSA's Leung said.

Almost half of China's 500 million Internet users use social networking sites, government data showed in January.   Continued...

<p>People look at the Facebook wall at their office in New York December 2, 2011. REUTERS/Eduardo Munoz</p>