How to Boost U.S. Exports? Recipe: Social Networks and Online Ads

October 23, 2010 § Leave a comment

Background noises from Bloomberg TV: exports from private sectors is the momentum of U.S. economy.

U.S. trade deficit is a hot issue now. Statistics from the Department of Commerce shows that the goods and services deficit of America for August is $46.3 billion, up from $42.6 billion in July. Although both imports and exports are growing, with exports numerous steps ahead, it’s not easy to pump up exports, even with quantitative easing (China is pegging its currency on U.S. dollars).

Just think what would really put America at advantage when it comes to exports?

Facebook, Twitter and Youtube, three major social networks that are blocked from Chinese users, are the strongest exports U.S. could offer. For some reason, possibly concerns over domestic security, the Chinese government thought it’s the best that these networks are screened and establish its own version them, i.e. Renren, Sina microblog, and Youku, which are easy to control and, to a lesser degree, manipulate.

To lure China open its door to Facebook requires intensive PR work. Self-censorship is most likely a pre-requisite. Also it has to beat its Chinese version competitors of high market share, and deal with other problems due to late entry. But it worths the effort.

Feasibility issues aside, suppose people have free access to Facebook, Twitter and Youtube in China, what is it going to like? An avalanche of advertising revenue would flow in.

Here are some facts:

Renren. com, the Facebook in China has a domestic user base of 150 million. Facebook has 500 million active user globally, of which about 70% are outside the United States.

According to Bloomberg, Facebook’s advertising sales may rise to at least $1.4 billion in 2010. That’s $350 million per quarter. Ad revenue of Renren surges to $15 million for the first two months of the third quarter.

According to estimates of iresearch, social networks’ ad revenue in China will grow 79.3% to about $230 million in 2011, compared with 46% growth and $166 million in 2010.

According to eMarketer, social network ad spending is going to hit $2.09 billion in 2011, with a growth rate of about 24%. It estimates US advertisers will spend $1.68 billion on social networking sites this year, a 20% increase over 2009.

Conclusion: it is hard for China to compete with the volume and scale of advertising on social networks. However, it is a growing market with enormous potential. (Think about how much work would be put to persuade an American customer to buy another smartphone, compared with the effort needed to lure a Chinese people that has never owned one before. Or a Facebook account. For Christ’s sake, there are 1.3 billion people in China.)

“China is now the No.2 market in the world, and will be the No.1 market within the next year or two, for smartphones, PCs, etc. And I think it’s really important,” said Microsoft CEO Steve Ballmer on his trip to LSE.

If Facebook, Twitter and Youtube were to “re-enter” China (they were not blocked in the very beginning), “exporting” their services, collecting easy money from advertisers, it would help to get some dollars earned from U.S. customers back to the U.S.. Although it’s far from enough to strike a trade balance between China and the U.S., it has to help a little bit in boosting U.S. “exports”.

Some rumors about Facebook entering China through joint venture, or cooperation and acquisition.

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