The FAANGs are starting to muscle into BAT territory. But their presence in China will probably come at a price. On Tuesday, Facebook announced it would create an “innovation hub” after rolling out a subsidiary in the world’s second-largest economy, where social media sites remain heavily censored.
“We are interested in setting up [in the southern China city of Hangzhou] in Zhejiang [province] to support Chinese developers, innovators and startups,” a representative of the company told Reuters.
Facebook is part of the Goliath FAANG grouping, which also includes Apple, Amazon, Netflix and Google. In the West, they tend to dominate the online landscape, but they have been blocked from making serious inroads into China’s market.
Baidu, Apple and Tencent, or the BAT trinity, rule the roost there. Worth more than US$1 trillion, the ‘Big Three’ have monthly audience figures hovering over the 2.5 billion mark while adhering to the Great Firewall policy of the Chinese government.
During the past two years, censorship controls have hardened under President Xi Jinping’s administration and this has left the Silicon Valley internet behemoths looking for new ways to enter the sector without being wrapped up in regulatory red tape.
Significantly, Google has several hundred staff in China and recently launched an artificial intelligence, or AI, lab, while Apple has modified its app stores in line with the country’s draconian restrictions.
Still, Netflix has been frozen out by iQiyi, which is backed by Baidu, while Amazon faces fierce competition from Alibaba, Tencent and, in particular, JD.com, the sprawling logistics company.
Trade war fears between Washington and Beijing have also clouded the picture, although “innovation hubs” fit nicely into Xi’s “Made in China 2025” policy. Facebook’s latest decision, though, is unlikely bring a cheer in President Donald Trump’s White House.