(FROM THE WALL STREET JOURNAL ASIA 3/30/15)
By Alyssa Abkowitz
BEIJING -- In China, Facebook is banned -- and ramping up efforts to make money.
Facebook Inc. is hiring in Hong Kong, has tapped a second local partner to reach advertisers and is waging a charm campaign to draw more business from Chinese companies, even though Chinese users can't access its service. The aim is to pitch Chinese companies to the benefits of reaching Facebook's 1.39 billion active monthly users beyond China's borders.
Other companies whose services are blocked are also intensifying competition on the mainland. Google Inc., which pulled some of its services out of China five years ago over censorship concerns, unveiled a Chinese-language developer channel on YouTube last month and recently opened up its Google Play store to Chinese app developers. This month, Twitter Inc. opened its first Hong Kong office with an eye toward gaining more advertising business in China.
Facebook is seeking more clients such as Youzu Interactive Co., a Shanghai online game designer. Youzu says it more than doubled the number of registered daily players for its popular "League of Angels" game after spending most of its about 10 million yuan ($1.6 million) ad budget on the social-media network.
"Half of our players come from Facebook," says Liu Wanqin, a Youzu manager involved in overseas advertising. "Facebook is our most important ad tool right now."
The ramp-up comes as Facebook intensifies its efforts to someday enter China. Beijing has banned Facebook, Twitter and other foreign social-media services.
Still, experts say Facebook stands a chance of thriving if Beijing ever relents. China has its own vibrant social-media services, but Chinese consumers have shown an appetite for new services, too. "The baseline evangelism is already there," says Thomas Crampton, global managing director of Social@Ogilvy, a part of advertising firm Ogilvy & Mather.
Mark Zuckerberg, Facebook's chief executive and a co-founder, has raised his profile in China in recent months. In October he spoke in passable Mandarin to a Chinese audience at Tsinghua University in Beijing. He also met with local tech titans including Alibaba Group Holding Ltd. chief Jack Ma and Lei Jun, the chief executive of Chinese smartphone maker Xiaomi Corp. In December he showed the country's top Internet regulator, who was visiting Facebook's headquarters, that he keeps a book of Chinese President Xi Jinping's thoughts on his desk.
It isn't clear whether the push is resonating in Beijing. Chinese officials have tightened their grip on cyberspace in recent months, including a renewed push to force Internet users to give up their anonymity and to suppress content that they deem to be rumors. The Cyberspace Administration of China didn't respond to requests for comment.
Chinese companies that use Facebook appear unfazed by the government's stance. "Companies here look at advertising from a pragmatic perspective and say, 'Is this the way to accomplish our business goal?'" Mr. Crampton says. "If it is, let's do it."
Facebook doesn't disclose revenue by country, but analysts believe Chinese advertisers play a growing role in Asia ad revenue for the company. Its fourth-quarter Asia ad revenue totaled $531 million, up 67% from a year earlier.
Google, which has 500 employees in Beijing and Shanghai, sells mobile and display ads on the mainland. Google China earned estimated ad revenue of 1.6 billion yuan during the third quarter of 2014, up 19% from a year earlier, according to market-research firm iResearch.
Light in the Box, a Chinese online retailer that sells everything from wedding dresses to baby monitors, started purchasing ads on Facebook in 2013, in addition to advertising on Google, to help create demand, says Chief Executive Alan Guo.
"Google is more text based," Mr. Guo says. "Facebook ads have a lot to do with pictures and bigger presentation space." He says his firm also likes Facebook's ability to target users in certain demographics.
Light in the Box says it now manages its own Facebook ads. Initially it used Beijing Zoom Interactive Media, also known as PZoom, one of two authorized resellers that have helped Facebook boost its ad revenues in China.
MeetSocial, an affiliate of ad agency Shanghai TianQing Info Tech Co., became the second mainland Facebook reseller last year in a process that was "a lot like dating," says Lynn Chou, social media marketing manager at MeetSocial, referring to how the collaboration was limited at first and then grew into a partnership. The company says its more than 100 clients, which include Chinese business schools who want to recruit international students and mobile developers, spend anywhere from several thousand dollars to more than $1 million a month on Facebook advertising.
MeetSocial and PZoom get commissions from Facebook and charge service fees to clients that are usually based on a percentage of the company's ad spending. Facebook partners usually earn anywhere from 10% to 15%, depending on the work level involved, according to people familiar with the industry.
Kersten Zhang contributed to this article.
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