China teased Zuckerberg with a taste of the promised land — then took it all away

After spending years trying to break back into the Chinese market, Facebook won approval to open its first subsidiary in mainland China -- only to lose permission the same day.

Yesterday, Facebook announced that it won approval to set up its first subsidiary in mainland China — a $30m ‘innovation hub’ in Hangzhou. The license was an apparent victory in Zuckerberg’s long quest to bring Facebook to the restrictive country.

He finally did it, we all thought. All those Mandarin lessons finally paid off… 

But hours later, China withdrew its approval, leaving FB up a creek without a poke.

Left outside the Great Firewall for a decade

Facebook’s user base is stagnant in America and shrinking in Europe (part of the reason that Facebook’s stock slumped a shocking 24% yesterday) making the Chinese market, where Facebook has been blocked for 10 years, more important than ever. 

To get in, Zuckerberg has been willing to try almost anything. He learned Mandarin to host a Q&A at a Chinese university, jogged across smog-choked Tiananmen Square, and released a secret Chinese app. But most importantly, Zuckerberg spent hours sweet-talking Chinese officials.  

And, for a few hours on Tuesday, it looked like it was all finally worth it. 

But the glimmer of hope was extinguished fast

Turns out, Facebook got approval from local officials, only to get shot down by the national internet regulator. 

The quick reversal, reminiscent of 2015, when China gave Facebook a 3-month Shanghai office permit but refused to renew it, highlights the difficulty of navigating China’s regulatory bureaucracy.

Back to the digital drawing board

Despite the setback, Facebook will continue to remain active in China. Facebook’s platform is banned in China, but Chinese companies are still Facebook’s biggest ad buyers in all of Asia. 

Other companies (like LinkedIn) have submitted to Beijing’s rules to stay, but Zuckerberg has refused to let the government censor the platform in spite of his numerous attempts to win over Chinese users.

Instead, Zuckerberg has said Facebook will continue to develop products for China “over the long term” — likely following Google’s lead by slowly investing in Chinese startups and releasing apps in 3rd-party stores.

In the meantime, Zuckerberg better treat Chinese officials to some niiiice dinners…

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