Facebook’s Rumored Chinese Sales Office Faces Potential Problems

By TechSecurityChina.com Editor
May 14, 2014

Facebook reportedly plans to establish a sales office in China to serve local advertisers in the country.

Vaughan Smith, Facebook's enterprise development vice president, said in a statement that Chinese companies have gradually become a major advertiser group for Facebook. Therefore, the company continues to explore new methods to support local services in China and they are considering opening a sales office in the country in the future.

From a long-term strategic point of view, China is a key market for Facebook to develop the overseas market. If the company can successfully set up an office in China, they will be able to establish a closer relationship with the Chinese government, which will be conducive to its long-term development. However, the odds of Facebook ever being allowed to openly and freely operate a website in China as it does in the U.S. are non-existent. Though Facebook has shown a deep resistance to government information requests in the U.S., the company still relents and is seen as untrustworthy and unreliable to many netizens.

In January 2014, Facebook invested USD19 billion in the acquisition of the instant communications application WhatsApp, which claims to have a large user base in Greater China. In addition, Facebook owns the photo sharing application Instagram, which can sometimes used in China.

For American technology companies, entering China is not a easy task. In 2010, Google relocated its servers from the mainland to Hong Kong; YouTube is banned in China; and Gmail can only be used in a limited form.

If Facebook does create an advertising sales office, it will most likely create a wholly foreign-owned enterprise that can invoice local Chinese clients. The other option is to create only a representative office presence, but that type of structure can not legally accept payments in China, and instead Chinese clients would need to send their money to Facebook via offshore bank accounts.

However, there are still problems inherent in the advertising business in China because it can be a corrupt battleground for Facebook to enter. Facebook may instead try to evade some of the corruption issues and instead hire advertising agents in China to do their dirty work. Many foreign companies like Google, as well as some Chinese companies like Baidu, use advertising agents in China.

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