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Facebook's Asian Net Neutrality Flap May Not Be Hurting It as Much as People Think

By Andrew Tonner – Mar 20, 2016 at 11:45AM

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Despite a recent surge of bad press, especially in India, Facebook's business is booming in what will eventually become the firm's most important geographic region.

Internet.org logo. Image source: Facebook.

Facebook  (META 7.89%) has a problem in Asia -- or at least that's how the media has portrayed the situation in recent months.

The world's largest social media network has weathered negative commentary from users, regulators, and the media, who claim Facebook's free Internet.org service violates the principles of net neutrality -- a policy the firm has championed in developed countries in recent years.

However, the reality of the situation appears more nuanced than originally imagined, as Facebook's head of Asian operations recently demonstrated.

Impressive growth in Asia
In a recent interview with The Wall Street Journal, Facebook vice president for Asia Pacific Dan Neary debunked the idea that his firm is having growth issues in Asia with a healthy dose of cold, hard data. According to Neary, roughly 540 million of Facebook's 1.6 billion monthly active users (MAUs) live in Asia. What's more, its user base in Asia has expanded nicely over the past year, rising about 20% from 449 million. While that's not fast-paced by Facebook's previous growth standards, it's sharply higher than the social media platform's overall user growth pace, which tallied 14% globally over the past year.

What's more, Facebook's growth in the region appears widely dispersed across a range of countries -- though China, which has blocked the service, remains noticeably absent. India is home to 130 million MAUs, making it Facebook's second-largest country in terms of subscribers. Moreover, Indonesia, Thailand, Vietnam, and the Philippines are each home to user bases that number in the tens of millions.

Image source: Facebook

Facebook has faced heightened scrutiny and criticism -- especially in India -- over its Free Basics service, which provides complimentary access to a limited number of websites, including its core social media service. However, the scant options offered by Free Basics have rankled many in the country, and Indian regulators effectively banned the service through a ruling last month. Viewed through the lens of its actual user data, though, Facebook's Asian growth appears demonstrably healthy, and its overall prospects there brighter than ever. That should be welcome news for shareholders.

All-important region
As Facebook sketches its plans for the next decade, the Asia Pacific region stands without question as the most important one. Among the company's internal goals is to grow the number of total Facebook users to 5 billion by 2030 -- an ambitious goal considering that in 2015, the global population of Internet users was just 3.2 billion. Bridging that gap is one reason companies have launched initiatives like Internet.org or Alphabet's Project Loon.

Certainly the Asia Pacific region offers the greatest growth opportunity for Facebook. Take India for example. As mentioned above, the country is already home to 130 million Facebook users. And though this figure is certainly significant for the company, it still falls well short of the 1.25 billion citizens in the world's largest democracy. Even after subtracting out China's 1.36 billion people, Facebook's 540 million users in the region represent less than 18% of the region's remaining population.  That's an absolutely massive opportunity for the company, and one that it must address in order to justify its admittedly lofty valuation.

To sum up, Facebook's progress in the Asia Pacific region is better than many have assumed, especially in light of recent negative press. However, the larger truth also remains that Facebook must find new solutions and methods of tapping into the world's most populous region to continue to deliver on its mission to make the world more connected and to deliver returns for shareholders in kind.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Andrew Tonner has no position in any stocks mentioned. The Motley Fool owns shares of and recommends GOOG, GOOGL, and FB. 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.

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