LinkedIn goes boldly to China, where Google, Facebook and Twitter have failed

LinkedIn — the Mountain View-based business-networking site –- announced on Feb. 25 the launch of its beta site in simple Chinese.

The simplified Chinese language site is the 22nd local language site for LinkedIn.

(Logo courtesy of LinkedIn)
(Logo courtesy of LinkedIn)

On the company’s Feb. 6 earnings call with analysts, LinkedIn pointed to expansion into China as a primary growth strategy. The company currently has four million members in China using the International English version of the site.

In LinkedIn’s 10-K annual report also filed on Feb. 25, the company discussed its Fiscal 2013 Joint Venture with Dragon Networking, an affiliate of China Broadband Capital, and SCCV IV Success HoldCo, Ltd., an affiliate of venture firm Sequoia Capital. The joint venture agreement is to engage in the investment, organization, management and operation of LinkedIn CN Limited, a professional social network in the People’s Republic of China.

In a blog post on Feb. 25, LinkedIn Chief Executive Officer Jeff Weiner explained that the goal of the beta site in simple Chinese and the joint venture projects is to reach “the country’s more than 140 million professionals who currently represent roughly one in five of the world’s knowledge workers. Our goal is to connect these Chinese professionals with each other and with the rest of LinkedIn’s 277 million members,” he said.

Analysts have questioned whether LinkedIn can succeed in China given the very different hiring culture and the failure of other American Internet companies to succeed due to censorship and high regulation by the Chinese government.

An analyst report by GlobalData released on Jan. 30 of this year stated, “LinkedIn was blocked by the Chinese government after a user’s comments related to prospective Jasmine Revolution in China.”

Socio-political risks continue to be named by analysts as one of the largest potential threats to LinkedIn, which now operates in over 200 countries and territories.

With over 100 million users in the U.S., LinkedIn has nearly saturated the market for American knowledge workers — who account for about a third of the workforce in the United States, according to an article by Thomas Davenport in the Harvard Business School Press.

In order to continue its steady growth trajectory, LinkedIn has to focus on expansion abroad, the article said.

With more than 618 million users, China has the world’s largest online community, attractive to many Internet giants, including LinkedIn. But the so-called “Great Firewall” blocks any online forums or content deemed sensitive by the government, posing challenges for many American companies.

Google, for example, ceased its mainland China search engine service in 2010 after resolving not to censor search results.

Facebook and Twitter were banned from the country after their sites were used by protestors in the Middle East and North Africa to organize uprisings in late 2010, as part of the Arab Spring that overthrew longstanding regimes.

Earlier this month, Microsoft’s Bing search engine came under scrutiny. Microsoft has typically complied with censorship rules within China.

In another recent blog post, Weiner said, “Given the rapid acceleration and development of China’s economy, the expansion of our offering in China marks a significant step forward in our mission to connect the world’s professionals to make them more productive and successful.” But, given the need to find growth outside the U.S., one must wonder if this expansion is truly the right decision.

In deciding to enter China, LinkedIn has agreed to abide by the country’s censorship laws.

Weiner’s blog post stated that, “LinkedIn strongly supports freedom of expression and fundamentally disagrees with government censorship.”

He acknowledged in the same post that censorship is a requirement for Internet platforms in China but emphasized that, “Government restrictions on content will be implemented only when and to the extent required. LinkedIn will be transparent about how it conducts business in China … [and] the company will undertake extensive measures to protect the rights and data of our members.”

Beyond the question of censorship, there is also the question of hiring culture and policies in China, which greatly vary from those of the United States. This is especially true when it comes to openness about salaries.

Weiner said in his influencer post that the objective of the Chinese site is to build a talent marketplace: one that would be attractive both to multinational companies looking to expand their presence in China, and to Chinese companies looking for a stronger foreign presence.

The emphasis on the multinational and foreign marketplaces reflects similarities among youth and entrepreneurial workers in China, LinkedIn has found.

Derek Shen, recently hired as president of LinkedIn China, said in a statement that LinkedIn has already integrated popular Chinese services such as Sina and Tencent into its China service, making it easier for members to import their contacts.

Shen has worked previously in China for Google, Nuomi and Renren Inc. and brings experience in navigating China’s many censorship laws.

Homepage composite image: China photo courtesy of Microsoft Office Clip Art and Media; logo courtesy of LinkedIn.

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