Some time ago I listed some of Facebook’s potential use of funds if it were to raise $500M or so in a $10-15B valuation round. The company subsequently sold 1.6% to MSFT for $240M at the targeted $15B value.
What is Facebook about to spend it dough on?
China. The Times is reporting that Facebook CEO Mark Zuckerberg and Jack Zhang, Zhanzuo’s chief executive met recently to discuss n $85M deal. Given the $240M deal, this suggests that Facebook is willing to part with over 35% of its recent funding on a site with less than 10M uniques in China. Facebook has a lot of users in China and will have many more over time:
Facebook already boasts more than 100,000 users of its English-language network in China and rumours of its local-language entry were fuelled with the company’s recent registration in China of the domain facebook.cn.
Of course, this has a lot more to do with future competition than current threats. After all, MySpace was much larger than Facebook last year but today Facebook is growing faster. I don’t doubt that Facebook will grow considerably in China over the next 12 months but let’s face it, Zhanzuo will too.
Moreover, given local Chinese players’ ability to trounce US competitors, I don’t care what people say, Zuckerberg and Facebook are smart to align themselves quickly, especially as MySpace China gets ready to launch on the mainland… with Rupert Murdoch’s wife Wendi being Chinese, I suspect MySpace will have a government edge.
Of course, if I were Zuckerberg, I’d consider acquiring 50%+ of Zhanzuo so that the owners and managers remain motivated. What I suspect will happen in a full sale is many of the brains behind the site will leave to launch new and potentially competitive startups… and in social networking and student-related communities, that could be a major blow to Zuckerberg’s red ambitions. And that’s half the problem, with China, economic freedom is a misstep away.
For an interesting take on China’s hybrid model of economic freedom vs. political repression, check out this piece from a new magazine called the American. Yes, apparently they still launch magazines in America.
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