Look Out China, Here Comes Facebook Inc

Despite being blocked to Chinese citizens, the social media king isn't letting that stop them from setting up shop.

Jul 8, 2014 at 2:05PM

The continual growth of Facebook (NASDAQ:FB), from both a user's perspective as well as virtually every financial measure, is nothing short of incredible. With nearly 1.3 billion monthly average users, or MAUs, and over 800 million that access it on a daily basis, Facebook has been instrumental in changing the way the world communicates. That's pretty heady stuff for a 10-year-old up-start.

Despite opening down on Tuesday, it's not likely too many Facebook shareholders are complaining as they enjoy its 154% jump in share price in the past year. Part of what makes Facebook's stellar stock run-up impressive is that it's not based on rumors or momentum -- like social media wannabe Twitter (NYSE:TWTR) -- but rather on-going, sound financial performance, along with aggressive growth initiatives. Now, imagine the opportunity a market like China offers, with its 1.3 billion non-Facebook using citizens. Chief Executive Officer Mark Zuckerberg can imagine it, and is taking steps to make it a reality.

What's the deal with China?
It was five years ago this month internal strife in the world's most populous country put an end to Facebook in China. Riots in China's Xinjiang Province were to blame. The Chinese government determined that activists seeking independence were using Facebook to bolster support for its cause. So, rather than just monitor its usage, like the U.S. government does, China simply pulled the Facebook plug. Twitter suffered the same fate, a situation that if remedied, would almost certainly allay slowing user growth fears plaguing the tweet-master.

There are relatively easy workarounds for visitors and Chinese citizens to access the likes of Facebook and Twitter using virtual private networks, or VPNs, but that's not what Zuckerberg had in mind when he said Facebook's goal was to connect the next five billion users via its Internet.org initiative. As big a user base as Facebook has, it's only a fraction of the world's population. Though opening the doors to China wouldn't solve the Internet.org objective, it would sure be a big step in the right direction.

Why Facebook needs China
There's a reason over 80% of Facebook's 1.28 billion MAUs are outside the U.S., there simply aren't that many folks here. Clearly, user growth and the additional advertising and supplemental revenues that come as a result, is a key objective for Facebook, and even more so for sputtering Twitter. Riding Facebook's coattails into China would dovetail nicely with Twitter's strong Asia-Pacific presence. The region is currently Twitter's number one market, making up about 30% of its user base.

Connecting the rest of the world via its new solar-powered Internet drones is certainly one means of continuing Facebook's user growth. But with a population the size of Facebook's impressive 1.28 billion users, opening the door to China brings with it the possibility of nearly doubling its MAUs, virtually overnight.

China, here we come
If the infamous "unnamed sources" are to be believed, Facebook has already signed a three-year lease on 8,600 square feet of office space in China's Fortune Financial Center. Why would it go through the trouble of renting all that space if the government remains anti-Facebook? A couple of reasons. One, despite its being blocked to the vast majority of Chinese citizens, that hasn't prevented Facebook from generating ad revenue from local companies interested in selling internationally. Last quarter alone, Facebook generated over $350 million in revenue from Asia. Facebook also has a contingent of app developers in China, and a significant presence will bolster its already strong dev community.

Final Foolish thoughts
As seems to be the case since its initial public offering, Twitter is almost certainly rooting for Facebook, this time in China. Lifting the moratorium on social media sites for 1.3 billion potential users would immediately address Twitter analysts and investors concerns surrounding slowing user growth. Many expect Twitter's user growth problems to continue far into the future, too. China could fix that, in one fell swoop.

For Facebook, establishing a Far East presence now not only supports its existing ad sales and app development efforts, it lays the groundwork for what would be the impetus for an explosive growth phase. The fact that Facebook has grown as it has without the world's largest population is stunning, just imagine what'll happen when China finally lowers its firewall?

Your cable company is scared, but you can get rich
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

 

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Facebook and Twitter. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers