Facebook and Twitter too late for China's Internet

By Paul Carsten

BEIJING (Reuters) - Facebook Inc and Twitter face a daunting task in China, if access to their social networks is unblocked, as they would be up against deeply entrenched domestic rivals which cater to local needs and tastes.

Years of isolated growth means China's sophisticated social media companies, including Tencent Holdings <0700.HK>, Sina Inc and Renren Inc , won't be too worried if Facebook and Twitter prise open the door to China's 591 million Internet users, the world's biggest online population.

Access to Facebook and Twitter has been blocked in China since 2009, but will be lifted by the government in the Shanghai Free Trade Zone (FTZ) which is due to launch this weekend, the South China Morning Post reported on Tuesday - a move that has been popularly dubbed the "Internet Concession".

But it may be too late for them to repeat their success elsewhere in one of the world's most promising, yet most restricted, Internet markets - where online advertising revenues soared almost 47 percent last year to $12.3 billion.

"The Chinese social media landscape is among the most developed, sophisticated landscapes out there," said Sam Flemming, chief executive of China-based social media intelligence firm CIC. "These aren't just niche social networks, these are a major part of the Internet in China."

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CHINA'S WATER-COOLER

Tencent's popular messaging app WeChat has 236 million active users, more than half of all China's smartphone users, and micro-blogging service Sina Weibo had more than 500 million registered accounts last year.

Tencent, whose market value topped $100 billion this month, stole the march on rivals with its WeChat social messaging app that lets users talk privately and in groups, play games, update friends on recent events, send voice messages and make online payments.

Facebook, valued at $118 billion, said in its IPO prospectus last year that its China market share was almost zero, and recent studies say Twitter has no more than 50,000 active users in China. Access to both is limited to people with Virtual Private Networks (VPNs) that can bypass China's Great Firewall - the colloquial term for Beijing's Internet blocking mechanism.

"Weibo has similar features to Twitter, but its role in China for the dissemination of news, information and entertainment, that's what's critical," said CIC's Flemming.

"Weibo is the zeitgeist of China, the water cooler of China."

CRACKDOWN ON RUMOURS

A major challenge for the likes of Facebook and Twitter on entering the Chinese Internet would be how to address the issue of official censorship, which has a stranglehold on domestic online media. Chinese authorities are cracking down on anyone posting "online rumours" and have arrested influential celebrities on Weibo, known as "Big Vs", and even jailed a 16-year old boy for spreading rumours online.

"Facebook would make extensive compromises it's not willing to make in other parts of the world in order to facilitate its introduction in China," said David Kirkpatrick, author of 'The Facebook Effect', adding that a Chinese fondness for brands, and a desire to interact globally, would draw users to the social network, which has 1.15 billion monthly active users worldwide. Renren, its nearest Chinese equivalent, has 54 million users as of June, and a market value of less than $1.3 billion.

While Twitter - which has 200 million active users and has been valued at around $15 billion ahead of a likely IPO - can offer information and content from outside China, little of it is in Chinese.

Overall, the effect of China unblocking these social networks, even on a scale larger than just the Shanghai FTZ, is likely to be limited.

"The impact is primarily on people who have a global point of view and need to communicate globally. Most Chinese people are not pining for an alternative to Weibo and WeChat," said Kirkpatrick. (Editing by Ian Geoghegan)

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