Why Mark Zuckerberg Is Pretty Smart About China


Every couple of months, I hear that Facebook CEO Mark Zuckerberg is down the street at Tsinghua University in Beijing (photo above). Usually he is giving a talk to students or meeting with Beijing officials. It seems to happen pretty regularly.

And it raises the question: Why is such a busy executive spending so much time in a country where Facebook has no business?

The most common explanations I hear are that these are calculated moves to open the door to China – or that he is building a reputation among Chinese users. But I don’t really buy it.

My take is that this is 80% personal. He just really likes China. And it’s 20% opportunistic. He’s building bridges and hunting for an opening.

And I think that’s a pretty great China strategy – for three reasons:

Reason #1 – He’s saying no to China (thus far).

Company after company comes to China, dreaming of millions of middle class consumers. And sometimes the opportunity is real and sometimes not (it depends on what you are selling). And then there are other companies that stay away because they have heard things like “Western internet companies can’t win in China”. And again this is sometimes true and sometimes not.

My argument (which I wrote a short book about) is that your fate in China is mostly determined by three constantly changing forces: rising but fickle consumers, an activist State and ruthless competitors. Everyone seems to dream about the first, have conspiracy theories about the second and underestimate the third.

For foreign internet companies, it is actually not the government that usually determines success or failure. It is most often the combination of ruthless local competitors and a little State help. Or simply not keeping up with rapidly changing customers. This is what brought down eBay, Expedia and Yahoo after some initial success in China.

In contrast, Google did pretty well in China (they were increasing in market share prior to exit). LinkedIn is doing well. AirBnb is entering and making all the right moves. Netflix has a partnership and is hunting for an opening. And Uber put up an impressive fight before walking away with about 20% of the world’s largest ride-sharing market. So it’s a mix.

But looking at these three forces today, it would be very difficult for Facebook to succeed in China. Even if they did a great joint venture with the right partner at the right terms, the political picture is forbidding right now. The competitive situation is daunting. And there is no real indication that Chinese consumers would use Facebook anyways. Whatever technological or capital advantages Facebook may have once had in China are long gone. Local competitors have lots of capital and are very good at social media, especially on smartphones.

So staying out of China right now and saying no to a big, high-profile domestic joint venture is probably avoiding a losing fight. It’s smart. Knowing when to say “no to China” is actually an important business skill – and a surprisingly rare one.

Reason #2 – He’s hunting for an opening – and there are a couple of options emerging.

Outside of doing a big domestic JV (which I argue is a bad idea this year), there are a couple of moves Facebook could make in China today.

i) Focus on cross-border, not domestic. They could capture the young, online Chinese who are now going abroad in big numbers.

Chinese consumers are going global, with +120M tourists now traveling out of China each year. In the past three years alone, over 360M Chinese have traveled out of the country. Plus there are hundreds of thousands of Chinese students studying at foreign universities. In the past three years, about 1.4M Chinese have gone abroad to study. And both groups are young and online virtually all the time.

So “young, online China” is actually coming to Facebook’s markets anyways. It’s a good group to go after. And there is really no reason why Chinese overseas, even in Silicon Valley, are still using WeChat and not Facebook. Plus, Facebook is already doing interesting things in travel anyways (a good McKinsey article here).

ii) They could focus on business content and networking (i.e., copy LinkedIn)

Another option is to focus on business networking and business content, which is much more politically acceptable. LinkedIn has done well entering China in this way. And business networking is increasingly global as an activity. Plus, most Chinese companies have not been able to crack the professional networking business.

LinkedIn is now reported at +20M China members and is surging upwards in content creation and sharing. Note: Chinese netizens are the world’s most active content creators per capita.

iii) They could invest in proven China winners (i.e., copy Yahoo or Apple)

Everyone points to Yahoo’s early investment in Alibaba as an example but this is pretty ancient history now. A better idea is to copy Apple’s $1B investment in Didi Chuxing. Use Facebook’s reputation and deep pockets to acquire minority stakes in the proven winners of the Chinese Internet. That gets them into the Chinese Internet ecosystem.

iv) They could invest in early-stage Chinese companies (i.e., copy Intel Capital China)

This is the same idea but at a much earlier stage. Intel Capital China has done quite well by leveraging its name, technology expertise and industry connections into early-stage China ventures. They have an impressive record and are a good model for how to combine strategic and financial objectives.


Overall, there are of some interesting options emerging for building in-roads into the Chinese Internet and with Chinese consumers.

Reason #3 – This appears to be a lot of personal interest.

Mark appears to have the “China dream”, a term originally from Joe Studwell’s book the China Dream and now used by President Xi frequently in a completely different context. This dream (Joe’s version) is either good and bad depending on your reading. For some, the China dream is a natural interest in one of the biggest and most interesting events of our time. For others, it is a dream that frequently ends in disappointment and losses.

But Mark clearly has it in the positive sense. He continually speaks of, and makes headlines with, his interest in China. He’s learning Mandarin. He meets with Chinese officials. And he apparently reads the speeches of President Xi.

So I would say good for him for pursuing his interests so aggressively and at such a high level. What’s the point of being a billionaire if you can’t practice your Chinese with the President of China? I certainly can’t blame him. China is awesome. Life is exciting. The markets are fascinating and the business is intoxicating (often literally).

So across the board, it seems like he is being pretty smart about China. Building bridges. Looking for openings. Pursuing his personal interests. And not doing anything stupid. That is not as common as you might think.

Thanks for reading, jeff


  • I write and speak about “how rising Chinese consumers are disrupting global markets – with a special focus on digital China”.

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