Incurring a Punishment, Is LinkedIn Staring At A Potential Ban in China?

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All it takes is one blow for the pack of cards to come hurtling down. An apt description for LinkedIn, which finds itself in something of a quandary in China.

In a fresh series of developments coming from China, it seems LinkedIn has landed in hot water.

Citing a failure to control political content, China’s internet regulators have come down heavily on LinkedIn, the professional networking platform which was acquired by Microsoft for a whopping $26.6 billion in 2018. According to three people having knowledge of the matter, the regulators have claimed to find objectionable posts circulating in the period around an annual meeting of China’s lawmakers, to deem a reprimand. Even though exact details of the material that got the company into trouble are still in the unknown, more developments are said to be underway.

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As for the punishment imposed, people in the know have told that Chinese officials are requiring LinkedIn to perform a self-evaluation and submit a report to the Cyberspace Administration of China, the country’s internet regulator. For the California-based service, this move comes after it was also forced to suspend new sign-ups of users inside China for a period of 30 days. The length of that period could vary, depending on the administration’s judgment.

Coming on the heels of some tepid news for Microsoft, do the back-to-back rebukes point to a more serious wind coming LinkedIn’s way?

Simply put, is LinkedIn staring down the barrel in the land of the Red Dragon?

The social networking service has been an anomaly of sorts for US-based apps and services in China until now.

LinkedIn In China: A Tough Market To Deal With

Entering the Chinese shores in 2014, it has blossomed into a rare example of a US social network that remains accessible in the country. With the Chinese “Great Firewall” blocking nearly all of the platform’s popular peers including Facebook, Instagram, Twitter, and most recently, the live-audio chat app Clubhouse, LinkedIn has managed to ply its trade quietly.

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From the outset, LinkedIn established tight relationships on Chinese grounds and domestic investment, securing partnerships with Sequoia China and China Broadband Capital. Along with wooing other angel investors, this allowed the US-based employment service to take flight, gathering 10 million-plus users within a one-and-a-half-year span.

However, joining hands with organizations on the turf has not meant that LinkedIn has been entitled for preferential treatment.

It has kept itself alive and primed solely due to complying with the rules and censure through its local joint ventures.

Walking the tightrope on how the internet and content are regulated around China, LinkedIn has used a combination of software algorithms and human reviewers to flag posts that could offend Beijing. As a practice, users who run afoul of the speech rules have generally received emails, informing them that their post is not viewable by LinkedIn members in China.

Now, as things stand, with the tightening of screws, several adverse scenarios have entered the equation. And for those maintaining otherwise, a look at the recent tiffs would quell all that.

If the recent patterns of skirmishes in the tech world are anything to go by, a ban on LinkedIn is perfectly within the realm of possibility.

Competition over technology has been a key sticking point between the two countries. Tech tensions between China and the US have reached a fever pitch since Trump taking office, with Chinese apps such as TikTok, WeChat, QQ and Alipay all coming under threat of US restrictions. Not just those, strong reinforcement of rules restricting Chinese businesses and tech companies to operate on its land could well be given back in kind by putting a stopper on LinkedIn, for starters.

Bear in mind, China has cultivated its own social media ecosystem consisting of the likes of microblogging site Weibo and messaging app WeChat for its more than 900 million internet users. Home-grown professional networking platforms such as Maimai – LinkedIn’s biggest rival in China – have also attracted a considerable number of users.

The handed punishment handed out now only underscores the deep divisions between the United States and China over how the internet should work.

Moreover, there is the fact that the backlash seems to have occurred right on cue before a scheduled meeting between Chinese and American officials in Alaska, the first face-to-face sit-down of the Biden administration.

Anxieties in Washington were recently heightened by a hack that Microsoft had tentatively linked to China. The hack, Washington believes, is the work of a state-sponsored cyber-espionage group called Hafnium. Operating from China, they are alleged to have attacked the Exchange servers using previously unknown vulnerabilities, aimed at Microsoft’s businesses and government agencies that used the company’s email services.

Even though Microsoft officials in China have refuted these claims, the thing is, this arm-twisting is not a one-off.

Microsoft’s journey in China has not been entirely smooth-sailing, with the company’s search engine Bing been temporarily taken offline in 2019, which had prompted speculations it had been blocked by censors.

Back in 2014, Chinese competition authorities wasted no time in opening an anti-monopoly investigation against Microsoft and its Windows software. Inspectors raided the group’s offices in four Chinese cities, confiscating files and questioning employees.

Not only has that, throughout its stay, LinkedIn been criticised in China for pulling the professional accounts of dissidents and scratching politically sensitive content from its pages.

For the 52 million strong user base it has acquired in the Chinese land, the site is mostly popular with China’s white-collar workers, especially those with overseas experiences, using to look for jobs and connect with business partners.

Facing stiff competition from Maimai in the domain (Maimai boasts over 8 million monthly active users), it has failed to generate any significant revenue from the nation. A report co-authored by Maimai and the Chinese data research firm Analysys said Maimai had penetrated 83.8% of the professional networking market, while the runner-up LinkedIn China only had 11.8% in 2018. The trend has hardly changed since then.

It is in stark contrast to the 48% YoY growth in conversations it has been able to post on the platform in the Q2, ending in December 2020, of FY21. LinkedIn has also lodged a 23% YoY growth in revenue in the same period.

The Chinese conundrum is, therefore, this – how much more can LinkedIn take when it says enough is enough at this rate?

The reality is kafkaesque for LinkedIn. Asia Pacific region accounts for 27% of its global membership. This alone is a reminder of how much LinkedIn would have to replenish its user base, particularly when it has borne the brunt of the Chinese regulations and done the hard yards.

If it gets the boot, that is.

On their part, LinkedIn has been making all the right moves, as is dictated also by its appointment of Hou Yang, the first Chinese-born executive appointed as chairman and chief executive for the Greater China region, starting in July.

Even for a service enjoying a heady 740 million user base, in today’s dynamics, particularly given the history preceding the sanction, LinkedIn could well be on its last leg in China. Nothing can be ruled out. Because in a land where policies are ironclad and winds of change fickle, only time can truly tell whether the ban on LinkedIn – which has carved out a niche for itself out of so many others – in China would become a reality or not.

Sty tuned for more updates.

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