Despite being banned from operating in China, Meta, formerly known as Facebook, is experiencing significant growth from Chinese advertisers. In its third-quarter earnings report, Meta revealed a 23% increase in sales compared to the previous year, demonstrating its resilience in a challenging digital advertising market. The company’s finance chief, Susan Li, highlighted the crucial role played by Chinese companies in driving this growth, particularly in the online commerce and gaming sectors.
Although Meta remains inaccessible in China due to the country’s Great Firewall, Chinese advertisers are leveraging Meta’s platforms, such as Facebook and Instagram, to target users worldwide. This article explores how Meta is capitalizing on Chinese advertisers and the potential challenges it may face in the future.
Chinese Advertisers Drive Growth:
Despite the ban on Meta’s operations in China, the company has witnessed a consistent trend of growth from the Chinese market. Susan Li emphasized the importance of Chinese advertisers in Meta’s third-quarter performance, with online commerce and gaming benefiting significantly from their spending. Chinese companies are investing heavily in Meta’s platforms to reach the company’s vast user base across the globe. This strategy allows Chinese advertisers to target customers in other markets effectively, contributing to Meta’s overall growth.
Regional Growth Breakdown:
Among Meta’s geographic regions, the rest of the world category exhibited the strongest growth, with a remarkable 36% increase. Europe followed closely at 35%, while Asia-Pacific experienced a 19% growth rate, and North America saw a 17% rise. Susan Li attributed the rapid expansion in the rest of the world category, which includes South America, to the influence of Chinese advertisers. Brazil, in particular, contributed significantly to the region’s acceleration, driven by increased demand from Chinese advertisers targeting users in Brazil.
Overcoming Operational Restrictions:
Since 2009, Facebook and its affiliated apps have been inaccessible in China due to the country’s Great Firewall. However, Meta has managed to navigate this challenge by leveraging its platforms to attract Chinese advertisers. Despite occasional periods of volatility, Meta has observed a consistent long-term growth trend from the Chinese market.
The past two years were marked by higher shipping costs and strict lockdown rules in China due to the Covid-19 pandemic, impacting Meta’s operations. However, as China gradually opens up and global supply chain issues ease, Chinese companies are increasingly looking to expand their businesses worldwide, with Meta serving as a vital tool for their advertising efforts.
Future Volatility and Uncertainties:
Susan Li acknowledged the potential for future volatility, citing numerous macro factors that are challenging to predict. She specifically mentioned the unpredictability stemming from the Israel-Hamas war in the Middle East, which prompted Meta to widen its revenue guidance range. Li noted that the conflict’s onset coincided with softer ads at the beginning of the fourth quarter, impacting Meta’s Q4 revenue outlook. However, she emphasized the difficulty of directly attributing demand softness to specific geopolitical events.
Despite being banned from operating in China, Meta continues to experience growth by capitalizing on Chinese advertisers. The company’s ability to weather a tough digital advertising market sets it apart from smaller rivals like Snap and Twitter. Chinese companies are leveraging Meta’s platforms to reach customers globally, driving growth in online commerce and gaming. While uncertainties and potential volatility persist, Meta remains optimistic about its long-term growth prospects. As China opens up and global supply chain challenges ease, Meta’s partnership with Chinese advertisers is expected to play a pivotal role in the company’s future success.