Chinese Facebook clone Xiaonei raises more funding than Facebook

Masayoshi Son is the kingmaker of the Asian Internet. His latest coronation: Xiaonei, a Chinese social network whose name translates to "on campus" and whose look and feel closely mirrors Facebook's. Son's Softbank and other investors have put $430 million into Xiaonei's parent, Oak Pacific Interactive, in a deal which values OPI at more than $1 billion. This has to worry executives at Facebook, which has raised less money — albeit while selling far less of the company to investors than Xiaonei has.

No, the problem for Facebook is the appearance of a well-funded competitor in a market Facebook has yet to crack. Entering the China market is a key reason why Facebook took money from Hong Kong telecom mogul Li Ka-Shing. (Ironically, Accel Partners, an early backer of Facebook, also invested in Oak Pacific.)

It would be foolish for Facebook to go out and raise more money simply to match Xiaonei's bankroll; equally foolish to entertain thoughts of buying the company at such a high valuation. No, Facebook's only reasonable choice here is to redouble its efforts to expand into the Chinese market. Engineers who speak Mandarin but have been rebuffed on previous attempts to get into Facebook might find its recruiters more hospitable now.