Twitter CEO's China Trip: Reconsidering the Market?

Word that Twitter (NYSE: TWTR  ) CEO Dick Costolo would travel to China just four months after his company's IPO will almost certainly set the world to tweeting about whether the social networking giant could be considering a play for the world's largest Internet market.

Such a move seems just a tad unlikely in the very near future, as Costolo has previously said China isn't a place where Twitter can operate due to the country's tough self-censorship laws. But much has happened in the last four months that might cause Costolo to rethink his position, including the recent entry to China by corporate networking giant LinkedIn and the upcoming $500 million New York IPO for Sina (NASDAQ: SINA  ) Weibo, often called the Twitter of China.

According to my sources, Costolo will be in Shanghai later this week, where his agenda includes a stop at one of China's top journalism departments, which happens to be where I teach. There's no topic given for his speech, though I do plan to attend to see what he has to say about his company's latest thoughts on the China market.

China was only tangentially mentioned in the prospectus for Twitter's IPO back in November.  Most of the discussion centered on China as an example of political risk the company could face in places where governments closely monitor social networking sites such as Twitter and rival Facebook. Twitter was more focused on talking about its existing businesses at the time, and ended up raising $1.8 billion in the high-profile offering. Since then, its share price has roughly doubled from its IPO price of $26.

The rapid jump in value has undoubtedly put pressure on Twitter to consider its global expansion options, which brings us back to China. The country has more than 600 million Web surfers, making it hard to ignore. Both Twitter and Facebook have been blocked in China since 2009, presumably because their sites contain sensitive content that would have to be deleted under China's strict censorship rules if they were to formally operate in the market.

Eyes on Sina Weibo, LinkedIn
Facebook founder and CEO Mark Zuckerberg has previously said that he wants to bring his company to China and has even made several exploratory trips to the country. But those trips have yet to yield any results, despite earlier talk that the company might set up a joint venture with Chinese online search leader Baidu.

Twitter must certainly be casting an envious eye on Sina Weibo, which now has some 600 million registered users, even though its number of active daily users is about a tenth that amount. Weibo last week made its first public filing for a New York IPO to raise up to $500 million, and is likely to get a valuation in the $4 billion-$6 billion range. Just a few weeks earlier, LinkedIn announced its own formal entry to China, and is staffing up its main operation in Beijing.

So what are the chances that Twitter could enter China anytime soon? My guess is that Costolo's visit is probably just exploratory, though the fact that he's coming indicates clear interest in the market. If Twitter chose to enter China, it would face formidable rivals in Sina Weibo and the popular Tencent WeChat mobile messaging service. Still, Chinese users could be attracted by Twitter's international ownership and reputation, which would carry fewer fears of having their conversations monitored. Accordingly, and there's a very strong possibility that the company could change its position on the market in the next two years.

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  • Report this Comment On March 18, 2014, at 5:21 PM, aghanay wrote:

    Twitter should consider a partial entry into the Chinese market with a licensing agreement with Bejing. Imagine a system where people in a certain district, city or part of city "follow" that a Geographic region and that region's twitter account tweets information about emergencies, people movement/traffic during major holidays/etc with a goal of managing population movement in real time when necessary. When not being used for civil matters, the licened twitter product could then be used for a variety of local annoucements and advertisments and so on. Its not perfect but its an entry that allows Twitter to test the water, generate some revenue yet not compromise their censorship concerns because its a licensing agreement with the government or its designate. How the government allows individuals to use it can be worked out down the road. Its a win-win for both Twitter and China. Look for TWTR to trade at 75 or better if this works out!

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