About a month ago Mark Zuckerberg came to China, again, and the trip brought a ton of media. To tell the truth, I am tried of reading misguided and “me too” articles, which is why I decided to write this post. Mashable, TechInAsia, Time, etc. have all run articles talking about how Zuckerberg is in China trying to get Facebook unblocked, but I feel they are missing the bigger picture.
According to Quartz, “Zuckerberg’s goal, of course, is to bring Facebook to China, which has been blocked by Beijing since 2009. Adding just half of China’s 668 million internet users to Facebook would increase the social network’s total by 20%—and create a lucrative new market for advertising and publishing.”
I hate reading Quartz’s lazy assumption. “Of course” like there could be no other reason for him to be in China. Zuckerberg is the CEO of Facebook, inc., which owns multiple product lines including WhatsApp, Instagram, and Oculus VR just to name a few. I think he is smart and I think he knows Facebook, in its current form, will never be allowed back into China. So, the question becomes why is he spending time in China and trying to create strong relationships with top officials?
Why is Zuckerberg interested in China 7 years after Facebook was blocked in China? The answer is simple and many writers have missed the point. Zuckerberg is trying to differentiate his product lines in order to enter China. Currently, Facebook is blocked and Chinese officials have blocked most of Facebook’s product lines. This is a big problem for Zuckerberg, because his next phase is virtual reality.
Here is the deal, WeChat is, by far, a better social network than Facebook. If the Facebook platform was unblocked in China, it would have little or no impact. Here is a good analysis by TechInAsia on why Facebook would have no impact in China. I think Zuckerberg knows this and if he doesn’t than the rest of this article will be a waste of time. Let’s make our own assumption and say Zuckerberg is smart and he knows the Facebook platform will not be unblocked in China. It would be nice, but it won’t happen.
Zuckerberg and his team has to come up with strategies and looking forward 10 or 20 years is normal. They have to decide were their profits will come from over the next 10-20 years and all data points to virtual reality. The largest virtual reality market will be China and China will remain the largest gaming market. According to CCTV America, “The Chinese gaming market saw $22 billion in revenue in 2015, and China has the world’s largest Internet user population.” Mobile gaming alone made over $6 billion in 2015.
Zuckerberg and his team knows that the first headset to the market will capture a large majority, but the Oculus Rift will not be allowed into China if Zuckerberg has not made the right connections and separated his product lines. Chinese officials are concerned about their public reputation or “Face” and they would lose face if they let Facebook into China without prior public consideration.
In order for Facebook to bring the Oculus VR product line into China, Zuckerberg has to publicly appear to support Chinese officials and give them “face.” This is nothing new and companies have been doing this for years. Tim Cook, Howard Schultz, and many others have done this in the past, but it has not been so pubic because their products have not been ban in China. The reason Zuckerberg has to jump (or run) through hoops is because his product has been ban and he has to “make up” for that failure. Once he has sufficiently made up for it, the Chinese officials will not lose face once they allow his product into China. It is all a big game, but it can’t be ignored.
Chinese VR market: Oculus Rift in China
I think in 2017-18 Facebook will release their Oculus Rift headset into China with a local partner. This will allow them to capture the Chinese VR market and develop it over the next 5-10 years; making the Chinese VR market an important part of their total revenue by 2020 and a major part of their total revenue by 2030.
I think this is the big picture for Facebook and I think this is the reason we have seen Zuckerberg running around China and shaking hands with important people. I could be wrong and Zukerberg could be an idiot trying to push Facebook into China, but given his track record and his ability to run a multi-billion dollar company, I think he knows the Facebook platform has no real future in China.
On the other hand, any company that can capture the Chinese VR market is bound to make billions in software and hardware sales. China might be Facebook’s next multi-billion dollar market, but not for the reasons many people are writing about in the news.
What are your thoughts? Do you think he is looking 10-20 years into the future or looking 7 years into the past?