Facebook Progress Report, Goals, and China Activities at SVIEF Annual Conference

November 5, 2013
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Background: #

The Silicon Valley Technology Innovation and Entrepreneurship Forum (SVIEF) is an international conference designed to foster innovation and promote business partnerships between the U.S. and China.

The SVIEF third annual conference -held on Saturday, November 2, 2013 in Santa Clara, CA- brought engineers, politicians, business leaders and startup entrepreneurs together to foster innovation and promote business partnerships between the two countries. Famous U.S. speakers included Al Gore and Steve Wozniak, Congressman Mike Honda and Congresswoman Judy Chu, among others.

We focus this article on the keynote speech by Vaughan Smith, PhD EE, Facebook’s VP of Corporate Development and Mobile Partnerships. The reason is that if Facebook is to significantly expand its mobile user base, it must enter the world’s largest mobile market- China!

Mr. Smith talked up a storm about the tremendous potential Facebook has in China, which is home to more than 600 million Internet users. However, he did not once mention that the company is banned there. Not only are there no Facebook members in China, but visitors traveling to China cannot access Facebook there. China’s government blocked Facebook in 2009 following riots in Xinjiang and it is still blocked, despite a rumor from the South China Morning Post that China plans to permit Facebook access within a 17-square mile, “free trade zone” in Shanghai.

Facebook CEO Mark Zuckerberg has visited China, but the site remains blocked there except to people who use tools (such as proxy servers) to bypass government censors.

Vaughan Smith, Facebook Keynote: #

Mr. Smith is responsible for (worldwide) mobile partnerships at Facebook. He gave an opening welcome in Mandarin, which was applauded by the mostly Chinese audience attending SVIEF.

Facebook is noted for three things, Vaughan said:

  1. Creating a great user experience
  2. Facilitating commercial opportunities (presumably by Facebook app developers and advertisers)
  3. Helping developers build apps and games on top of the Facebook platform- for both Apple iOS and Google Android

Facebook’s objective is to make the world a more open and connected place (Haven’t we heard exactly those words from Google?).

Smith said Facebook is in the center of the big tech migration to social, mobile, and cloud. He then ran off several quick-take commercial sound bites:

  • Facebook is one of the prime reasons people go online
  • 1.2B Facebook users worldwide, including 874M mobile users
  • Worldwide mobile users are growing at 45% Y-o-Y
  • Mobile users spend 1 in 5 minutes on their devices using Facebook
  • 41% of Facebook’s revenues are from mobile users
  • Facebook users have stored over 350B photos in “the cloud”
  • 85% of Facebook users reside outside the U.S.
  • APAC is Facebook’s largest market with mobile growing 52% annually
  • Mobile apps for Facebook are for both Apple and Android users
  • Facebook has 225K users per employee vs 4K users per China Mobile employee
  • Facebook has retained 49 of 50 CEOs with the start-up companies that were acquired

Vaughan Smith: “Facebook strives to take advantage of opporunities that are in front of us.” For example, Vaughan sited the shift from desktop/notebook PCs to mobile (smart phones and tablets) Internet access. “Today, Facebook has more mobile users than desktop users.” he said.

While Facebook accessed on a desktop PC was all about advertising and games, it’s a “value added distribution” system for mobile users, according to Smith. For example, Facebook helps people find on-line games they can play on their mobile devices. “Facebook is the best play for developers to drive more traffic to their apps or websites,” Smith added.

“Instagram (which Facebook acquired in April 2012 for $1B) now has 115M users and things are going well. Instagram was acquired just before Facebook’s IPO, yet it only took three days to complete the deal,” Smith said. While that might be true, the acquisition didn’t close until six months later.

“China is a great opportunity to reach 1.2B people,” according to Smith. Facebook has held game developer workshops in China, which were “great experences for game players around the world,” he added.

–>Please see the panel below the article for comment and  analysis of this topic.

Facebook is also promoting tourism in China,” Smith said.

We find that astonishing, since Facebook cannot be accessed from China. Therefore, Facebook users who travel there are locked out from using the social media site on their mobile devices.

Working together with Samsung, Nokia, and Ericsson, Qualcomm and other companies, Facebook is participating in internet.org – a global organization with the goal of making Internet access available to the next 5 billion people (mostly in developing countries). And to bring the benefits of the Internet to the two-thirds of the world that aren’t on-line now.

In conclusion, Smith said that “Facebook wants to be a catalyst for the knowledge based economy.  We’re at the start of a multi-decade transition to give people much more information.”


Panel:  Facebook and On-line Gaming in China: #

China has overtaken the US to become the world’s largest smartphone market. Online games are by far the most popular type of application among Chinese users. According to a recent report from Asian market-analysis firm Niko Partners, China’s booming mobile games market is expected to generate more than $1.2 billion in 2013 revenue, up from $750 million in 2012.

Facebook recently held a conference entitled Game On in Chengdu, capital of Sichuan province in China.  Apparently, it was an effort to attract local mobile game developers by offering distribution through mobile ads, according to Chengdu Commercial Daily.

A few months ago, Facebook launched a publishing platform for mobile game developers, calling it a “pilot program to help small- and medium-sized developers take their mobile games global.”

The social networking company claimed that it makes sure its partners’ games are introduced to its more than 800 million monthly mobile users with promotional support.

“Chengdu has more than 400-500 mobile game companies, which is among the highest in China, including some world-class products,” Chengdu Commercial Daily quoted a person who went to the Facebook Chengdu conference as saying, “Facebook chose Chengdu because of the city’s emerging mobile games market. The company hopes to collaborate with Chinese developers in order to boost its advertising revenue by also taking a cut of sales.”

“We are invested in the success of these games, and in exchange for a revenue share, we will be collaborating deeply with developers in our program by helping them attract high-quality, long-term players for their games,” Facebook said on its website when it first launched its Mobile Games Publishing effort.

The competition in China’s domestic mobile game market will not be easy for Facebook in light of the country’s intensified gaming market. Tencent Holdings Ltd, China’s largest Internet enterprise, launched a mobile game platform earlier this year on WeChat, the popular app that has more than 400 million users in its domestic market.


Closing Comment: #

Smith did not take questions from the audience after his talk. Instead, he was escorted off the stage and out of the building. When this author asked if we could correspond by email, Smith curtly replied, “I’m not the right person for that.” Hence, it was not possible to get him to review this article. In particular, to address, what Facebook is doing to try to get the China ban lifted and penetrate the China market.

2 Responses to Facebook Progress Report, Goals, and China Activities at SVIEF Annual Conference

  1. November 8, 2013 at 10:58 am

    Another company that has some parallels with Facebook is Automattic. Automattic’s founder is the same age as Mark Zuckerberg and is also very influential regarding the direction of the online world with the open source software his company champions powering 20% of the world’s web sites (with a purported goal to power the majority of the web sites).

    Unlike Facebook, Automattic has remained private and managed to keep a lower profile in the consumer facing world. Having said that, like Facebook, Automattic has acquired multiple companies (12). Still, its workforce remains quite small (approximately 200), but extremely efficient.

    http://techcrunch.com/2013/09/25/automattic-acquires-file-sharing-service-cloudup-to-build-faster-media-library-and-enable-co-editing/

    Zuckerberg and Mullengweg could be likened to this generation’s Gates and Jobs.

  2. November 5, 2013 at 8:30 pm

    Thanks Alan for reporting on Smith’s keynote and for bringing in the other perspectives. Reading this reminds me of the comment about the parallels between Facebook and AOL.

    I think both AOL and Facebook realized that there needed to be, to paraphrase Gertrude Stein, more there, there; and, both entities diversified accordingly. In the case of AOL, it was the acquisition of a traditional media company.

    Facebook has also used its stock as currency. Instead of taking over a behemoth, it has looked to evolve through the acquisition of the 50 start-ups mentioned in your article. That they are keeping the CEOs is a testament to the vision and management at Facebook.

    What may evolve from these acquisitions is something altogether different than the fad-driven social network that Facebook appeared to be.

    And, this approach of courting Chinese developers may be a back door way to create an offering that could operate under the conditions of the Chinese government. It will be interesting to see where it goes.

    At the time of their IPO, I certainly never would have thought Facebook would be knee-deep in the design of, “A new disaggregated, rack-scale server architecture,” with Intel,” so anything is possible.

    http://wp.me/pS6FA-2uR

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