[Editor’s note: This is an Op-Ed piece written by David Nordfors, director of the Innovation Journalism program at Stanford University]

As social networks like Facebook try to expand into China, they will face the same decisions as Google and Yahoo before them — do they let the government access their data or do they refuse and risk being banned? Facebook will most certainly be leaned upon by governments, because of its profligate data on users. Facebook’s response will be key for the future of social networking. What will they have to do in order to stay in China?

For social networking companies, the stakes are exceptionally high. Social networking companies potentially know about every member of a leaderless organization and how they are connected to each other within it. They have maps of far-flung relationships between friends and friends of friends and they record users’ actions within their sites.

Experts have written about the “unstoppable power of leaderless organizations.” Killing or jailing a leader of an anti-government movement will no longer kill the movement, as the US has learned as it has taken out Al Quaeda leader after Al Quaeda leader. Fighting asymmetric threats – finding the needle in the haystack – requires pinpointing and isolating individuals and networks. The alternative is treating all hay as if it was needles, as practiced for example by the TSA at airports (a.k.a. “Take off Shoes Administration”). That does not work – the needle ultimately wins as the whole haystack becomes alienated and the big power runs out of resources.

The tough thing is, social network mapping can used for fighting Al Qaeda and pro-democracy movements alike. A government could use this information to track down entire networks of terrorists or dissidents, that might not be easily discoverable within, say, Yahoo’s mail service.
Facebook has already started moving into the Chinese market. It has recently taken $60 million in funding from Hong Kong billionaire Li Ka-shing, although it’s not clear how this will shape the company’s plans in China. Here’s a clue. Another Ka-shing investment is popular Chinese web portal Tom.com, which has business relationships with many US companies — and a track record of following Chinese censorship rules. As part of a deal last year with eBay-owned Skype, it forced the internet calling and messaging service to filter out text message with the words “Dalai Lama” and “Falun Gong” (see this Business Week article for more).

Meanwhile, rumors have been pouring out of the Chinese media over the last month that Facebook is trying to directly acquire or invest in Chinese social networks (VentureBeat’s previous coverage here and here). Facebook has denied earlier rumors, but this week another one trickled out — that Facebook chief financial officer Gideon Yu visited China on December 4, and offered slightly more than $2 million to purchase Fenbei.com, a Chinese music-centered social network.

How to move forward:
China is so big, and so is the emerging Facebook, there’s no way to avoid each other. Facebook has to enter China to remain competitive. And China can’t shut of the Internet. The two sides have to engage.

In this age of Web 2.0 and social networking, it is a good idea for all companies mapping networks and behaviors of individuals to equip themselves with teams of experts on privacy, public policy and international relations.

These companies need solid core values and thought-through strategies on privacy management. They are becoming the bankers of individuals’ private information. The challenges ahead will not be easy. There will be necessary compromises, and it will be difficult to draw the line that defines where doing good turns to doing evil. This is a case where enlightened journalism – newsrooms and bloggers – and public debate will be very important.

These tech companies are responding to the public debate. Google recently put together a group of a dozen experts to represent Google’s public policy around the world. I know one of them and sympathize strongly with his views and morals. I know he represents Internet culture.

The challenge for Internet companies is that they can easily turn into what they are fighting against. Remember: Apple’s Steve Jobs took in Pepsi Cola boss John Sculley to help Apple make a stand against the IBM-compatible corporate culture. Sculley knew corporate culture. Shortly thereafter, Jobs was out, and Apple under Sculley’s helm was doing its best to become like other PC companies.