Bloomberg News

LinkedIn Expands in China With Local Site Limiting Content (2)

February 25, 2014

LinkedIn Homepage

The LinkedIn Corp. homepage and logo are displayed on laptop computers arranged for a photograph in Washington, D.C. Photographer: Andrew Harrer/Bloomberg

LinkedIn Corp. (LNKD:US) is introducing a Chinese-language website that will restrict some content to adhere to state censorship rules, expanding in a country where U.S. technology companies have clashed with the government.

The Mountain View, California-based professional social-networking company is offering a new version to provide a more localized service after more than a decade of having an English-language site there, Derek Shen, LinkedIn’s China president, said in a blog post yesterday. LinkedIn is also creating a joint venture with Sequoia China and China Broadband Capital to connect more than 140 million Chinese professionals, he wrote. LinkedIn said it has more than four million members in China, which is one of the company’s fastest-growing user bases.

The new website puts LinkedIn deeper into a country where social-media peers such as Twitter Inc. and Facebook Inc. are blocked after they balked at government censorship rules. Facebook hasn’t built up operations in China beyond hiring contractors to help advertisers reach people outside of the country, spokeswoman Debbie Frost has said. Google ran afoul of Chinese authorities in 2010 for refusing to abide by local censorship requirements, leading to the company shutting its unfiltered search tools there and redirecting users to pages in Hong Kong.

The shares of LinkedIn rose 5.1 percent to $209.84 at the close in New York, leaving them up 31 percent in the past 12 months, compared with a 22 percent climb in the Standard & Poor’s 500 index.

Being Transparent

LinkedIn Chief Executive Officer Jeff Weiner vowed to be transparent about how the company conducts business in China and said he will “undertake extensive measures” to protect member data.

“LinkedIn strongly supports freedom of expression and fundamentally disagrees with government censorship,” Weiner said in a LinkedIn post. “At the same time, we also believe that LinkedIn’s absence in China would deny Chinese professionals a means to connect with others on our global platform, thereby limiting the ability of individual Chinese citizens to pursue and realize the economic opportunities, dreams and rights most important to them.”

China is a key piece of LinkedIn’s growth strategy, Weiner said on a conference call with investors this month, after announcing a first-quarter sales forecast that missed analysts’ estimates. China has a population of 1.35 billion, more than quadruple that of the U.S., where Internet penetration is already deep.

LinkedIn makes money through advertising, software for recruiters and premium accounts. The company received $36.2 million in revenue, or 8.1 percent of the total, from the Asia Pacific region in the fourth quarter, up from $22.8 million in the year-earlier period.

Expansion Opportunity

The absence of U.S. social media companies in China has spurred a boom in copycat competition. Sina Corp.’s Weibo, a Chinese service that works like Twitter, has 60.2 million daily users in the country and is pursuing an initial public offering.

There is so far no major professional networking site in China, leaving LinkedIn room for expansion, according to Erin Ennis, vice president of the U.S.-China Business Council.

“They’ve got the beginnings of a client base for what their product does,” Ennis said. When it comes to censorship, “the realities of doing business in China are that you have to comply with the rules of doing business there.”

Yet the move could set the wrong precedent, according to Richard Fontaine, president of the Center for a New American Security, a Washington-based research organization focused on global security issues such as the emergence of China’s economic power.

“They should enter the market with the aim of a net expansion of free online expression rather than a diminishment of it,” Fontaine wrote in an e-mail.

LinkedIn owns 93 percent of the China joint venture with Sequoia Capital and CBC. The other partners put in $5 million in cash for a 7 percent stake, according to a filing (LNKD:US) earlier this month with the U.S. Securities and Exchange Commission. The partners have the option to contribute $20 million more for preferred shares, the filing said.

To contact the reporter on this story: Sarah Frier in San Francisco at sfrier1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


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