Alibaba and Facebook seek new markets

15 September 2014

TIANJIN/NEW YORK: As Chinese ecommerce leader Alibaba readies for a record IPO on Wall Street, Facebook, the world's largest social networking site, is still looking to establish a significant presence in China.

The contrasting fortunes of the two titans of the digital world were highlighted when Vaughan Smith, Facebook vice president, told a conference in Tianjin that consumers in China were keen to access the site. "When I'm in China, I often get asked," he said. "They all come to me and say, 'Hey, when is Facebook going to come to China?'"

The answer is not any time soon, as was made clear to local media at the same conference by Lu Wei, minister of China's Cyberspace Administration, Bloomberg reported.

Facebook's presence in China is currently limited to a sales operation helping Chinese companies to tap into overseas audiences, although it has also bought mobile messaging app WhatsApp, which faces no restrictions. Other US-based social media sites are also blocked, including Google, YouTube and Twitter.

Alibaba, meanwhile, faces no such limitations in the US where its IPO is expected to raise in excess of $21bn and value the business at around $160bn, roughly on a par with Amazon.

The South China Morning Post noted that Alibaba is using its Chinese heritage to accelerate its global expansion, by appealing to the millions of people of Chinese descent spread around the world.

"If Alibaba's strategy is to follow the Chinese diaspora, it's a smart strategy because you don't have to build a brand from scratch," said Niraj Dawar, a professor of marketing at the Ivey Business School in Canada.

But to be a global player, he added, it would eventually have to serve non-Chinese markets. One way it might achieve this is by developing its customer review system, in the way its rival eBay has done.

"A consumer in Iowa is wary of buying products from some smaller mom and pop store in Wuhan, so how do you connect those two directly?" asked Dawar. "The question is can Alibaba fill that gap … through a reputation score system and monitoring of suppliers."

Data sourced from Bloomberg, South China Morning Post; additional content by Warc staff