China Needs Google More, Or The Other Way Around?

摘要: There is no such thing as a completely perfect business environment in the world, or a company that is indispensable. It’s Google’s own decision whether to re-enter China or not, but the bold truth is that China seems to have the upper hand in this gamble.

(Chinese Version)

Six years ago, when Google left China, it must have never expected that it would be left in such an awkward situation today. Last December, a fake invitation letter to Google’s press conference was widely-circulated on the Chinese WeChat friends circle. Quite soon, some media revealed that Google was recruiting 60 employees in Beijing and Shanghai via LinkedIn. Rumors over Google’s re-entry into China rose one after another here on China’s Internet.

However, Google did nothing except for dispelling these rumors.

Today’s Chinese Internet market, however, differed significantly from six years ago. At that time, Google was the dominant search engine in China; today, however, the Chinese Internet market has grown quite mature and developed. If Google decided to re-enter China, it had to be aware that it is Google that needs China, not the other way around.

Yet, it might be too late for Google to realize this inconvenient fact.

Mainstream services

Since the end of 2014, there has been hints that Google would re-enter China. It later turned out, however, that Google Play, instead of Google’s core search service returned China.

“Google’s main businesses are actually new media services such as search service and navigation service, while 90% of Google’s revenue is from advertising business. The real problem Google has in China is that when its new media services are blocked, it could no longer make profit there,” Roland Berger Strategy Consultants’ executive director Raymond once told Economy & Nation Weekly.

Six years has already passed since Google left China. Today, Google is trapped in a very passive state, since it’s more like an advertising company, instead of an Internet company for both Chinese enterprises who want to go abroad and foreign companies who want to enter China.

According to eMarketer’s prediction, the total expenditure on advertising around the world is expected to rise from 578 billion USD to 615 billion USD, among which 198 billion USD is expected to be used to advertise on digital platforms. In addition, eMarketer predicts that the total expenditure on advertising in China is expected to rise by 14% compared to that of 2015, among which the total expenditure of advertising on digital platforms in China is expected to rise by 28, much higher than that in the US, Japan, Germany and the UK.

However, none of Google’s revenue in advertising business is made in China. So Google is a little bit uncertain in face of so huge a market in China.

But times change, and it’s no easy thing for Google to return to China today. This is why Google tested the waters by launching one of its non-mainstream services Google Play first.

Non-mainstream services

Last November, Washington Post revealed that Google was planning to launch Google Play in mainland China.

When Google left China, Android wasn’t the dominant OS yet; today, however, different smartphone manufacturers have already built their own Android-based App Store.

In addition, the Chinese app store market is dominated by Baidu , Tencent and Qihoo 360, whose market share is 42.2%, 22.2% and 19.5% respectively, according to Analysys International

According to BigData-Research, 80% of Android-based app stores are provided by third parties, among which 25% are smartphone makers.

Although Apple and Google are both founders of mainstream smartphone OS, iPhone’s users can only download apps via Apple’s own App Store, while users of Android-based smartphones can download apps from various platforms. Worse still, these Chinese Android-based app stores have already pre-installed their own apps in place of Google’s, so it’s almost impossible for Google to make a role.

Competition from other foreign counterparts

Last March, Yandex, the biggest online search service provider in Russia, was said to have established a branch in Shanghai and plan to test the waters in the Chinese market. An insider from Yandex revealed that the company would seek to compete with Baidu, instead, it would focus more attention on advertising business, just like most other foreign search giants.

Yandex, whose total asset hit 10 billion USD as early as 2013, was commonly referred to as the “Russia’s Google”. As a matter of fact, it is the 4th biggest search engine and the second biggest non-English search engine in the world.

Admittedly, Yandex, which grabbed a market share of 59.9% already in Russia, must have caused great pressure on Google by taking the lead and entering the Chinese market.

The Chinese Internet market isn’t short of potent players, so it could pretty hard for Google to re-enter China when the die is cast sooner or later.

Raymond predicted that even if Google could go through all these obstacles, re-enter China and provide search service for Chinese Internet users, it no longer could achieve the same market status when it left six years ago.

As far as I’m concerned, since this market is still expanding, Google might go beyond its business volume six years ago, but it would take at least 3 more years.

What is left for Google to do?

From today’s perspective, Google was too impulsive to leave China six years ago.

On the one hand, China is less and less dependent on Google, and the importance of Google is also declining for the Chinese government; on the other hand, the Chinese market is rapidly expanding, and Google is increasingly drooling over the Chinese market.

As a "new" entrant in China, Google needs to first establish its ecosystem. Only when it has an adequate number of business partners can it increase its POI, expand its O2O service and start to make profit.

Fortunately, Google has accumulated much experience in business operation and advertising, and it can make sure that advertising on Google’s platform is more effective than that on its counterparts. If Google can adapt to the Chinese market and make necessary changes, it might find a place here in China.

To do so, Google has to first treat its business partners equally.

In addition, Google has to open its platform and adopts a business model that best caters to the needs of the Chinese market. After all, when BAT’s business and partnership model is so popular in China, Google will be pretty much stubborn if it refuses to adapt and adopt such models.

Moreover, Google needs to build a localized R&D team to adjust its technologies to the Chinese market.

Last but not least, Google might have to make necessary sacrifices in order to re-enter the Chinese market. For example, it has to strictly obey relevant laws on information security, block some politically sensitive keywords and put its server here in China, etc.

“It’s like a gamble. When the Chinese market could mean a great deal for Google, it has to give up some of its interests,” said Raymond.

There is no such thing as a completely perfect business environment in the world, or a company that is indispensable. It’s Google’s own decision whether to re-enter China or not, but the bold truth is that China seems to have the upper hand in this gamble. Still, it could be a good thing for both Chinese consumers and Google’s Chinese counterparts if the global giant Google re-enters the Chinese market.

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[The article is published and edited with authorization from the author @Li Yundie, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.

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