For Facebook, Instagram might be its Trojan Horse into the Chinese market

By James Robinson , written on June 12, 2014

From The News Desk

For giant American Internet companies, the Chinese market is a frustrating, forbidden fruit.

With 700 million smartphone and tablet users, for a company like Facebook looking for new avenues to grow even larger, China is the puzzle you can’t stop yourself from trying to solve. Its Hong Kong office does a lot of business with Chinese advertisers already and as Bloomberg reported in May, it has explored opening an office in Beijing. Sheryl Sandberg visited last September and the company has spoken broadly about ongoing conversations with the Chinese Government.

Except we all know how this story has played out (so far). Google shut down its Chinese search page when it wouldn’t censor results. Twitter is blocked. LinkedIn is expanding its Chinese website, but had to agree to censor some content first.

And then along came Instagram. As AppFlood’s Francis Bea wrote at CNET yesterday, Instagram is picking up heat in China. That's because the social photo sharing/beautification app is non-threatening. There are fewer avenues for link sharing and editorializing. It didn’t start as a Facebook-branded thing, either.

At TechCrunch Disrupt Beijing in late 2011, Instagram’s Kevin Systrom said that the app was gaining momentum to the tune of 100,000 Chinese users each week. At the time, according to research from App Annie cited by CNET, it was ranked 312th in Apple’s App Store. Today it is ranked 66th.

A lot of this lift has come from Instagram working with Facebook's Chinese-equivalent Weibo to enable photo sharing on iOS. Weibo, which has 129 million monthly active users, has no photo filters of its own. The partnership was in the works well before Facebook acquired Instagram and has proven to be a win-win. A recent Ogilvy report showed that between November 2013 and January mentions of Instagram grew by 43 percent. As a result, several Chinese ad agencies are starting to consider it part of the social media marketing roster there.

As Trojan Horses go, Instagram isn't terribly sinister. It's a simple, easily scalable way for Facebook to demonstrate its good behavior, which has the added virtue of being extremely addictive. But its tentacles could slowly grow outwards. Facebook is becoming a money making machine, but the walls of how big it can get are approaching. Video advertising, Facebook Audience Network, and Instagram ads will allow it some rapid expansion still. But when those treasure chests have been unlocked, it will be left with the slow slog of improving its data analytics and signing up new users to boost its already sizable profits.

A launch into China isn't a guaranteed win for Facebook. eBay and Yahoo have largely struck out there. But for Facebook to bring that many new users into play and best Google and Twitter in getting a successful operation off the ground there, it would be quite something. Facebook just needs to find a way to slowly creep in behind Instagram.

[image adapted via Uncyclopedia]