Facebook’s website has been blocked for over a decade in China, while its CEO Mark Zuckerberg has gone from would-be friend of Beijing to one of its leading critics in Silicon Valley. Even so, the social media giant has discovered a highly lucrative way to make money from Chinese advertisers.
Facebook now generates more than $5 billion a year in revenue from China, according to an estimate from Brian Wieser, an analyst at equity research firm Pivotal Research — all with apparent Chinese government approval.
Its strategy involves targeting the country’s most ambitious advertisers, such as game designers, e-commerce giants, app creators and government entities. The result is mutually beneficial: Facebook gets some access to the Chinese market, while Chinese companies can reach international audiences.
The company, though, is still tight-lipped about its business in China — perhaps because this apparent “win-win” cooperation has meant Facebook doing business with Chinese companies that are deemed national security threats by the U.S. government, and state-backed media organization that have been accused of spreading misinformation.
This week, The Wire looks into how Facebook earns money in China, even though its platform is banned from operating in the country.
FACEBOOK’S PROFITABLE RESELLER NETWORK
Facebook’s business in China involves partnering with 11 local “ad resellers” and 11 “quality partners” who sell advertising space on the website to Chinese customers that have previously included TikTok parent company ByteDance, Air China and Global Times, the state-backed newspaper known for its nationalistic commentary. The resellers run advertising campaigns on behalf of their customers, keeping a percentage of the fee for themselves.
One such reseller, Shenzhen-based MeetSocial says it posted about 20,000 ads per day from Chinese companies on Facebook in 2019, generating an estimated $1 billion to $2 billion in revenue, according to an interview with its chief executive Charles Shen in The New York Times.
Facebook’s partnerships with MeetSocial and other firms in China can be viewed on a website called ReachtheworldonFacebook.com, which was set up in 2017 as a near-mirror of the company’s “Facebook Business” website. The site is unusual in that it is not hosted on the facebook.com domain, which is unavailable in China. Instead it is hosted on a separate domain that is not blocked by China’s Great Firewall, the powerful internet censor, thus enabling Facebook to offer a highly limited version of its product inside the country.
Through ReachtheworldonFacebook.com, Chinese advertisers can connect to Facebook’s advertising tools and its network of ad-resellers like MeetSocial inside China. The site also has resources for companies, such as tutorials, case studies and demonstrations of Facebook’s various ad formats.
Facebook discloses little about its business in China in official documents. In its 2020 annual report, Facebook the said, “We generate meaningful revenue from a limited number of resellers representing advertisers based in China,” even as “our consumer-facing products may be blocked or restricted.” Without naming any particular countries, Facebook also said that it “outsources certain operational functions to third-party vendors globally.” In each of its annual reports since 2018, the company has used the same language.
Although Facebook does not break out revenue earned by its resellers in China, Pivotal’s Brian Wieser attempted to create estimates based on Facebook’s used the company’s annual reports. This can be broken down by partner using available information, as set out in the following table:
THE CHINESE GOVERNMENT’S PREFERENCE FOR FACEBOOK
Facebook’s partnerships in China don’t just allow it to connect with Chinese corporate clients. The Chinese government itself has become a keen user of the platform.
All manner of Chinese government offices — from municipal governments to central agencies — contract private companies to conduct publicity campaigns for them on overseas social media platforms, according to an analysis of 553 Chinese government procurement documents from the period 2014 to 2020.
Government entities name specific social media platforms with which they want their advertising partners to engage in roughly a quarter of the documents. Among this subset, more than three-quarters of the contracts specified Facebook as a desired platform. The analysis also shows that government agencies use Facebook for publicity campaigns at almost twice the rate of any other foreign social media platform, including Twitter, Instagram (owned by Facebook), and YouTube (owned by Google) — all of which are also banned in China.
HOW FACEBOOK’S CHINESE PARTNERS USE THE PLATFORM
Chinese government agencies and state-owned enterprises often hire Facebook’s official partners in China to access the platform and advertise on it effectively.
One official partner, Papaya Advertising, lists China’s state broadcaster, China Central Television (CCTV) as a client. The television network — which operates an English language channel called CGTN — has come under fire overseas for, among other things, promoting false narratives surrounding Uyghur concentration camps in China’s Xinjiang region. Facebook’s own employees have raised concerns internally about the way the platform is being used as a “conduit for state propaganda,” according to an article last April in The Wall Street Journal.
MeetSocial has also run campaigns for a range of government-linked clients, including state-owned telecoms giant China Mobile, which both the U.S. Treasury and the Federal Communications Commission have listed as a national security threat and a part of the Chinese military industrial complex. According to an executive order issued by the Trump administration in November 2020, companies such as China Mobile “directly support the People’s Republic of China’s military, intelligence, and security apparatuses and aid in their development and modernization.”
Many of the campaigns that run on Facebook’s website are related to tourism. PandaMobo, another Facebook partner, has worked with dozens of Chinese government tourism bureaus to expand their international influence, according to procurement documents. Facebook boasts that such campaigns resulted in engagements with millions of followers over the course of a year.
In one tourism campaign from 2017, Shandong province used Facebook’s refined audience targeting tools to tailor its message to particular audiences, such as “adventurous Australian beer drinkers” who they hoped to “encourage to appreciate the beauty of China with a fresh perspective.”
Tourism advertising can, though, become political in nature. In one contract between the Fujian Provincial Party Committee Propaganda Department and the state-run media outlet China Daily (which, like other state owned media outlets, is not a Facebook partner, but designs numerous campaigns on Facebook on behalf of government clients in cooperation with resellers), the department requests campaigns that display its “political, economic, social, cultural, ecological development,” while “dispelling misunderstanding, refuting malicious hate speech, and providing information services to foreign audiences.” Such language is typical of other similar contracts.
Facebook has in the past flagged advertisements on Chinese government tourism pages that violate its terms of use — usually by failing to disclose that they relate to political or social issues. In a statement provided to The Wire, a company spokesman said that Facebook removes items that violate its advertising policies “as soon as we become aware of it,” adding that it last year started to label media outlets that are under the control of governments, including from China, and that it fact-checks claims from state-controlled media outlets.
Margaret (Maggie) Baughman is a data and language intelligence analyst at SOS International’s Center for Intelligence Research and Analysis (CIRA). She researches Asia-Pacific security, Chinese influence tactics, and computational propaganda. @BaughmanMM
