LNKD: The One Social Media Stock China Won’t Censor

Microblogging is down on government concerns, but this business model is immune

   

LinkedIn (LNKD) might find itself in the most enviable position among social media companies vying for China’s hearts — namely, the company least likely to piss off China.

LinkedIn185 LNKD: The One Social Media Stock China Won’t CensorThe biggest weapon in the fight against tyranny isn’t guns or armies or allies — it’s the free exchange of ideas.

Chinese Communist Party officials are fully aware of this weapon, and it’s why they’ve stepped up efforts to crack down on what’s known as “online rumors.” This is the euphemism the Chinese government uses to describe the speech and social interaction taking place on so-called “microblog” sites such as the Twitter (TWTR)-style Sina Corp. (SINA) Weibo platform.

Hey, if you’re a collectivist government, the last thing you want is people using a platform that functions as a virtual town square for citizens to speak out about things they don’t like about the government, the economy, the social system, state corruption — and whatever else they find fault with. You see, criticism of the state is a threat to the state, and the state doesn’t do threats.

A Social Media Minefield

While the crackdown on online rumors has singled out the Sina Weibo microblog platform, the government isn’t likely to stop there. In fact, Chinese officials have already telegraphed their intentions to put tighter controls on social media, including mobile messaging applications like Tencent Holdings’ (TCEHY) WeChat service — a recent beneficiary of Chinese migration from Weibo.

Already, there’s been a decided decline in the number of microblog users due in part to the increased government censorship efforts. According to a report released last Thursday from the official China Internet Network Information Center, the number of microblog users in China fell to 280.8 million from 308.6 million a year earlier. That’s a 9% decrease year over year, and it’s a number not commensurate with the continued growth of China’s total Internet users.

In fact, the very same report said China’s total number of Internet users continued to expand in 2013, with the country adding 54 million users, meaning China now has 618 million Internet users.

To give you a sense of size here, by comparison, China’s Internet population is almost double the entire population of the United States.

Revelations of the decline in Sina’s microblogging population caused SINA stock to drop hard Friday, while shares of Tencent spiked on the news. Still, if I were a TCEHY shareholder, I wouldn’t shrug off the possibility that the government will come for me next.

Indeed, wherever there’s a free exchange of ideas (i.e., wherever the government perceives a threat), they will likely move to protect their power. We’ve seen this move already in the prime example of Google (GOOG). The Internet search engine has been censored in the country, and over the years there’s been an ongoing struggle between Google and the Chinese government. That battle is one reason why China’s Google, Baidu.com (BIDU), has remained the most popular search engine in the country.

Another high-profile example of censorship came in 2009, when China blocked Facebook (FB) and Twitter following deadly riots in the western province of Xinjiang, believing the social networks helped fan the flames. While in September, Chinese officials relaxed the ban on Facebook and Twitter, they did so only for those living in a 17-square-mile radius of a new free-trade zone in Shanghai.

Given the “thought police” elements in the Chinese government, the question that came to my mind is: “Is there a social media-type company that Chinese officials wouldn’t be quick to censor?”

LinkedIn (LNKD): Friend of the State?

Here I think the best social media candidate for immunity from control is LinkedIn. Although LNKD is considered a social media company, its platform isn’t used as a communication tool to spread what the government would consider malignant ideas. It’s actually more of a site that would foster the “proper” behavior from Chinese citizens.

In other words, comb your hair, compliment the party, work for the collective and don’t say anything objectionable.

Already, LNKD realizes its platform might fit well into the Chinese matrix. That’s probably why the company now has hired its first president of China operations. Interestingly, the announcement came via LinkedIn, as new China president Derek Shen revealed he has held the new position for a month now, and he did it on his LinkedIn page.

While LinkedIn’s presence in China is still relatively small, with a reported 3 million members as of April, LNKD appears to see the growth potential of its product in this user-rich online environment, and hence its steps to expand its presence in the country.

Given that LinkedIn’s product isn’t likely represent a threat to the regime, LNKD is the most likely company to be immune from the trolling eyes of the China’s thought police — and that means it’s probably safe from a Sina-like crackdown.

At least for now.

As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2014/01/lnkd-sina-weibo-china/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.