Chinese press reports yesterday said Facebook has reached a deal with Chinese search engine Baidu to build a social network joint venture in China, but Facebook is indirectly denying it to the US press.Who’s right? And who’s full of it?
Here’s what we know:
- Several Chinese press reports are saying there is such a deal. The reports are naming three different sources: two at Chinese regulators who said they are reviewing the necessary joint venture application, and one at Baidu.
- Facebook isn’t denying it on the record. They’re just issuing a non-denial denial that “Facebook is currently studying and learning about China, as part of evaluating any possible approaches that could benefit our users, developers and advertisers.”
- Baidu isn’t commenting at all.
- Several US outlets, including Reuters, Bloomberg and this publication, which was the first US outlet to report the story, have been told by “sources”, most likely Facebook PR people speaking on background, that there is no such deal.
What’s going on?
It’s pretty binary.
Either the deal IS happening. Maybe Facebook can deny it because of some technicality around “signing.” Maybe no legal document has been signed, and there’s only a verbal accord. Maybe a contract has been signed, but no joint venture agreement, which would leave some leeway to be technically correct and highly misleading because a deal is totally happening. And anyway speaking on background as a “source close to the situation” leaves plenty of room for plausible deniability.
In such a scenario, Chinese regulators would still be aware of the deal even if not “signed” because they would have been approached informally, which would make sense given how tricky the politics of a social network entering China is. Baidu, which is protected by the Chinese government, wouldn’t go forward without at least a yellow light from regulators.
Bill Bishop, editor of DigiCha and Sinocism, speculates that the companies are denying it and/or could have an agreement in all but writing so that if the joint venture application is rejected no one is embarrassed.
Either the deal ISN’T happening. The Chinese press’s three sources are wrong and the US press’s one source is right. One thing that might lend credence to this argument is the fact that options volumes went crazy before the Chinese press story went live, and when the report made it to the US Baidu’s stock understandably popped. In this scenario, the story could have been planted to the Chinese press by traders to move the stock, which is something that happens in China. Or the stories could just be wrong, be based on second-hand information that’s wrong, etc. But insider trading in China also happens before real news breaks.
But in that case, why are there several reports citing several sources at several places?
Which is it?
What are we missing?