Could an
alliance with Xiaomi help Facebook finally fulfill its grand designs for a Chinese invasion?
While the thought might have occurred to Mark Zuckerberg, the pairing apparently wasn’t meant
to be. As Reuters reports, Facebook was ready to participate in the Chinese hardware company’s recent fund-raising round, but failed to agree on investment terms.
Regarding an
investment in Xiaomi, Facebook did not return requests for comment by press time.
Without Facebook, Xiaomi finally raised about $1.1 billion last month. The Chinese
company — best known for its low-cost smartphones — is expected to use the capital to increase sales of its smartphones in its key growth markets of India, Southeast
Asia, Brazil and Mexico.
Xiaomi has recently experienced remarkable growth. In 2013, the company said it sold about 19 million phones — a figure it hoped would grow to 40 million by the
end of 2014. As a result, the company is now valued at about $45 billion.
Star investor Fred Wilson recently predicted that Xiaomi would be a big winner, this year, by challenging Apple and
Google for a share of the U.S. mobile market. Likewise, Roberta Cozza, research director at Gartner, recently said Xiaomi and other Chinese smartphone vendors were well positioned to take on U.S. tech
giants like Apple and Google.
“With the ability to undercut cost and offer top specs, Chinese brands are well positioned to expand in the premium phone market and address the needs of
upgrade users that aspire to premium phones, but cannot afford Apple or Samsung high-end products,” Cozza noted.
Banned in China since 2009, Facebook has pursued international growth by
other means. For example, the social giant — which has historically pioneered connectivity strategies (for example, their Internet.org initiative in 2013) — recently made strides in targeting mobile consumers in developing nations
through a new, experimental ad strategy.
Still, with a massive consumer marketplace on the line, Zuckerberg continues his flirtation with China. Late last year, for instance, the young mogul
made headlines after showing off his fluent Mandarin during a question-and-answer session at Tsinghua University in Beijing.
With or without China, mobile is increasingly key to
Facebook’s future. The social giant's share of the $36.5 billion worldwide mobile ad spending is expected to reach 20.4% this year — up from 16.5% in 2013, according to eMarketer.
Despite concerns of a slowing economy, China’s growing middle-class is enough to make any company salivate. In 2013 alone, Chinese e-commerce amounted to $865 billion dollars, according to
McKinsey & Co.