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Now that Meta has set its sights on introducing its virtual reality headsets to the Chinese market, Mark Zuckerberg’s controversial comments about Beijing in the past could be a major obstacle to his Chinese dream.
According to a recent report from the Wall Street Journal, Meta is preparing to re-enter China by selling the Oculus Quest VR headset in China. If Tesla can sell cars and Apple can sell phones in China, why isn’t Meta there? Zuckerberg asked at a recent internal meeting.
But some observers are quick to point out that Zuckerberg has a history of criticizing the Chinese government, a position likely to be reinforced in the current climate of heightened tensions between the US and China.
Caught in the tensions between the US and China
In a 2019 speech, Zuckerberg criticized TikTok for its censorship practices.
While our services, like WhatsApp, are used by protesters and activists everywhere due to strong encryption and privacy protections, mentions of these protests on TikTok, the Chinese app that is growing rapidly around the world, are censored, even in the US.
Zuckerberg was not content with just criticizing Facebook, but went on to criticize China.
It’s one of the reasons why we don’t offer Facebook, Instagram or our other services in China. I wanted our services in China because I believe in connecting the whole world and I thought we could help create a more open society. I’ve worked hard to get this done. But we could never agree on what it would take to operate there, and they never let us in. And now we have more freedom to speak up and stand up for the values we believe in and fight for free speech around the world.
And he added:
China is building its own internet focused on very different values and is now exporting its vision of the internet to other countries. Until recently, the internet in almost every country outside of China has been defined by American platforms with strong free speech values. There is no guarantee that these values will win.
In the current tenuous relationship between the US and China, companies doing business between the two countries must remain vigilant about what they say publicly or risk falling out of favor with local authorities.
Indeed, sources told the Wall Street Journal that Chinese officials’ views on Zuckerberg could create some uncertainty for Meta as it seeks approval for its products and services in China.
Even if Quest is given the green light to enter China, Meta will still face significant political pressure at home. The challenge for Meta is how to balance China’s censorship demands with the expectations of homeland politicians, especially given that Meta was banned from China in 2009.
Like other US companies operating in China, Meta will be caught up in the escalating tensions between the two superpowers. At home, Zuckerberg is likely to be questioned by Congress about Quest’s censorship practices in China, just as Tim Cook was called out by lawmakers over Apple’s removal of apps deemed sensitive by the Chinese government.
The reverse is also true. TikTok CEO Shou Zi Chew clashed when Congress blasted him with a series of thorny questions about Beijing’s alleged access to the app’s US user data.
Tencent CEO Pony Ma has given the go-ahead for negotiations with Meta, according to the Wall Street Journal report, but it’s unlikely to be an easy road if his potential U.S. partner has to testify before Congress about a company that it carries in China.
But who knows what charm offensive Zuckerberg is planning for China again? Some of you may recall that the Facebook boss was famous for running around Tiananmen Square in smoggy Beijing without a mask.
A rough path to China
Recent examples of US tech giants’ attempts to tap into the Chinese market may provide some clues to what lies ahead for Quest in China.
In 2019, California gaming platform Roblox partnered with Tencent to enter China. The partners formed a joint venture owned 51% by Roblox and 49% by Tencent, a rare equity structure that allows the foreign investor to hold a majority stake in a Chinese entity.
The partnership initially looked promising, especially given Roblox’s seemingly welcoming focus on educational content. But it wasn’t long before China’s sudden crackdown on the online education sector surprised many.
In January 2022, Roblox abruptly shut down its China service due to “important temporary actions”, acknowledging that it “always knew that building an attractive platform in China is an iterative process”. Since then, there have been no public updates on the progress of Roblox China.
The other example that Meta could draw from is the Nintendo Switch, which also entered China in 2019 through a partnership with Tencent. However, the number of games available on the Chinese version is limited due to the country’s strict content approval process, which has somewhat dampened the appeal of the console platform for gamers who want the full range of Nintendo games.
At this stage, VR headsets need engaging content, especially games, to drive mass adoption. The good news is that Quest’s potential partner, Tencent, as the world’s largest gaming publisher, has a wealth of gaming IP at its disposal. Nevertheless, China’s content rules will ultimately dictate what games users get.
In addition to navigating political pressure domestically and in China, Meta also faces stiff competition in the Chinese mixed reality market, which includes both virtual and augmented reality devices. According to market research firm Counterpoint, China’s XR industry is still relatively small compared to the mobile phone market. Just over 1 million units shipped last year due to a lack of mass adoption and accessible pricing.
Currently, the industry is largely dominated by Pico, the VR company that was acquired by ByteDance in 2021. The VR company had a 43% share of China’s XR market and introduced a product last September that clearly focused on Meta’s Quest.
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