Facebook’s Revenue From China Is A Bolt From The Blue

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When a person really desires something, all the universe conspires in helping you achieve it, said Paulo Coelho.

One wonderful example of this is Facebook Inc. (NASDAQ:FB) generating between $5 billion and $7 billion in revenue in China – a country where its site does not even operate.

Owing to the ban imposed by the Chinese government in 2009, people in mainland China have no access to Facebook. Nothing shows up across their computer screens or mobile phones if they type FACEBOOK, except if they manage to set up a Virtual Private Network (VPN), something most Chinese don’t bother themselves with. And, that’s because China has its own burgeoning collection of social apps like WeChat, Sina Weibo, Tencent QQ and Baidu.

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But then how could the man, wanting to knit the world in one community, leave the huge 1.42 billion Chinese population out of its fold?

How Did Facebook Manage To Monetize the Chinese Market?

Despite slamming the door on the world’s largest online social media community, China has now become the fifth largest revenue market for Facebook, behind only the US, Russia, Turkey and Canada. Almost 10% of Facebook’s total revenue of $55 billion for the year ended 2018 came from Chinese advertisers, estimates FactSet, a financial research and software development company. Though Facebook didn’t disclose the revenue from China officially, in its annual SEC filing the company stated that the contribution of China to the company’s overall revenue in 2018 was meaningful.

 

A decade-old ban on the networking titan has not deterred it from exploring the possibility of monetizing the market.

Not wanting to leave out a country which is home to a fifth of the global human population altogether, Facebook worked its way out by tapping local partners in China. These partners then helped the site reach out to Chinese advertisers seeking to build an audience for their products outside their country.

This gave the Chinese businesses keen to improve the visibility of their products or services outside the country an opportunity to reach out to Facebook’s strong global user base while bringing in advertising dollars for the site.

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“Chinese companies want to reach consumers overseas for either business-to-business or business-to-consumer,” points out Saul Gitlin,  who is a senior marketing and a seasoned communication professional.

“The biggest chunk is likely advertising from Chinese businesses large and small that are trying to reach consumers overseas,” Gitlin insists.

Seven official Facebook advertising resellers (like Meet Social, BlueVision, Cheetah Mobile, Papaya and Powerwin) in China now help these businesses keen to scale up their presence globally by telling them the benefits of running ads across Facebook and then help them figure out how to advertise on the platform, without them having ever accessed the site.

Of course, these businesses have the option to advertise through Google ads as well. But since people are more hooked to social media nowadays, Facebook has become a favourite with potential advertisers.

A large slice of this pie ($1 billion- $1.5 billion) comes from mobile app developers, according to Brian Wieser, Pivotal Research analyst. The client profile of the remaining contributors is as varied as shoe manufacturers to makers of customized wigs and wedding dress suppliers to skateboard makers.

Chinese companies advertising across Facebook are more than happy with the results.

Youzu Interactive Co., a Shanghai-based online game designer, is elated to see the number of players registering for his online game ‘League of Angels’ double after spending 10 million yuan ($1.6 million) on Facebook ads.

Facebook local partners also hep other big brands and start-ups build up their visibility across this huge site by managing their Facebook pages.

Meet Social, an ‘experience centre’ run by a local partner in Futian district of Shenzhen province of China, helps its clients run their ads by enabling them to jump the internet filters legally and without circumventing any law or legal procedure.

“The experience center is for inviting potential clients to see how Facebook ads work,” tells Charles Shen, chief executive of Meet Social.

These reselling centres and local trading partners usually conduct talks and arrange training sessions for potential advertisers whose only earlier international exposure has come by way of selling across Alibaba and Ali Express only.

No wonder then that Meet Social now claims to be instrumental in serving nearly 20,000 Chinese ads using their software across Facebook every day and hopes to generate advertising revenue worth $1-$2 billion across Facebook and Instagram this year.

While appreciating the business acumen of the Zuckerberg led the company to milk the population of a country wherein the site cannot be accessed, we cannot overlook the other scenario.

Businessmen based in China spending their money across also means intensified competition for both advertising space and products/ services as Chinese products like Huawei and Xiaomi phones, toys, games, furniture, electronics, etc. reach out to consumers globally.

“People talk about China as a target market, but less as a competitor,” points out Swathi Eashwer, a consultant at global research outfit R3.

For now, riding on a stronger than expected fourth quarter, Zuckerberg is laughing all the way to the bank. The Chinese shot in the arm included!

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