China scuppers Facebook comeback

Zuck in Beijing. Image credit: Mark Zuckerberg’s Facebook.

Facebook has just set up a subsidiary in China, where its social media service has been banned since 2009.

Registered with capital worth US$4.4 million, the entity is wholly owned by Facebook Hong Kong, according to a filing on the Chinese government’s enterprise database. It’s registered in Hangzhou, Alibaba’s home city and capital of Zhejiang province.

The business filing, however, has been taken down from the government website late Tuesday. The approval was withdrawn due to a disagreement between Zhejiang officials and China’s central internet regulator, a source told The New York Times. Tech in Asia has reached out to Facebook for comment.

The Facebook subsidiary isn’t setting its sights on social media – a market dominated by Tencent’s WeChat. Instead, it’s looking to bring its innovation know-how to China and tap into local businesses’ growing demand for overseas advertising.

“We are interested in setting up an innovation hub in Zhejiang to support Chinese developers, innovators and startups,” a Facebook representative told Reuters.

Facebook has “long been interested in China and is spending time understanding and learning about China in different ways, including how Chinese exporters and developers are using its platform,” someone familiar with the matter told Tech in Asia.

The social media titan has been a popular advertising channel for Chinese businesses targeting overseas users, an area that is estimated to generate more than US$1 billion a year for the US giant.

“Facebook used to generate most of its China advertising revenues from mobile gaming and apps, and now the focus is shifting to export and cross-border ecommerce,” Patrick Gao, a Hangzhou-based Facebook marketing consultant, told Tech in Asia.

A series of moves has hinted at Facebook’s ongoing interest in China. Last year, Colorful Balloon, an app that resembles Facebook’s photo-sharing Moments app, quietly appeared on Apple’s China app store. In January, Facebook partnered with smartphone maker Xiaomi to launch a virtual reality headset in the country.

Facebook’s latest China push – and regulatory backlash – makes a recent Mark Zuckerberg comment all the more interesting:

“Do we want American companies to be exporting across the world?” Zuckerberg said last week to Recode‘s Kara Swisher. “I think that the alternative, frankly, is going to be the Chinese companies.”

But he admitted that the company was “a long time away from doing anything” in China.

“We need to figure out a solution that is in line with our principles and what we want to do, and in line with the laws there, or else it’s not going to happen. Right now, there isn’t an intersection,” said Zuckerberg.