Google’s potential return to China with a censored search app, after almost a decade since it left the country, could mark the strongest challenge yet to domestic online search market leader Baidu.
US-based Google has been developing a censored mobile search app that would comply with Chinese regulations, though whether that would be rolled out still depends on approval from the government, a person familiar with the plans told the South China Morning Post. The plan for a search app was first reported by The Intercept, while The Information reported Google also had plans for a news-aggregation app for China.
“Baidu could lose significant search traffic and sales share if Google returns to China in six to nine months,” wrote Bloomberg Intelligence analyst Ling Vey-sern in a research note.
Google had some 14 per cent of China’s search traffic and 33 per cent revenue share before the company’s exit from the market in 2010, according to the note. Baidu’s search engine had 79 per cent of traffic and 63 per cent of search-related sales at that time.
Google’s change of approach in dealing with China’s rigid censorship laws further highlights how important the mainland Chinese market is perceived by major hi-tech companies in the US.
Since Google’s exit from China, the internet landscape has changed rapidly. There were an estimated 303 million mobile internet users in China in 2010, according to data from the China Internet Network Information Centre.
That number has since more than doubled. China is now home to 753 mobile internet users, the biggest online community in the world, according to the China Internet Report co-authored by the Post, its tech news site Abacus and the San Francisco-based venture capital firm 500 Startups.
Major foreign internet services providers like Google, Facebook, Instagram and Twitter find themselves shut out from the world’s largest mobile internet market by the country’s Great Firewall.
That has helped Chinese internet giants, led by Baidu, Alibaba Group Holding and Tencent Holdings, to thrive and serve a vast population of smartphone-savvy consumers with a range of popular online-to-offline services. Alibaba is the parent company of the Post.
Even so, internet users who are looking for alternative services see the entry of Google as a welcome development, according to Kitty Fok, managing director at IDC China.
“If Google is playing by the rules of the game [of Chinese government], it still has a lot of opportunity to gain some market share in China,” Fok said. “As China becomes more affluent, there may be groups of users who would prefer to use foreign services to obtain more international information.”
She said Google’s return to China’s online search market would enable it to start collecting fresh data that could help the company develop other domestic internet services.
“Chinese players like Baidu already have the advantage of having a lot of data on its users, so if Google hopes to expand its business in China search is a good first step to gather data and understand consumer preferences in the country,” she said.
Beijing-based Baidu, which offers search and a personalised news feed, had 148 million daily active users as of June 2018, according to its latest quarterly report. About 80 per cent of its revenue comes from online marketing services, which includes advertising.
Both Google and Baidu declined to comment.
Baidu could lose significant search traffic and sales share if Google returns to China in six to nine months
Ling Vey-sern, Bloomberg Intelligence analyst
Google’s return could pave the way for the company to bring its own online app store in the world’s biggest market for smartphones, said Neil Wang, Greater China president of at consulting firm Frost & Sullivan.
“The Android app market in China is lucrative, so there might be tremendous opportunities for Google to explore,” Wang said, referring to the apps used on smartphones than run on Google’s Android operating system.
That would be a blow to Baidu, which has branched out into developing artificial intelligence technology for autonomous driving and announced the introduction of mini-programs that would allow it to create a super app that would help expand its ecosystem of services.
Those initiatives by Baidu intensified after the company found itself in the crosshairs of regulators in 2016, when it became embroiled in a medical advertising scandal that led to a backlash from consumers.
Although the introduction of another major search engine in China could result in online traffic being further diluted to the disadvantage of Baidu, advertisers are unlikely to solely shift their spending from one search engine to another, according to Connie Gu, an analyst with Bank of Communication International Holdings.
“Advertisers have a widespread budget across channels and advertisers won’t suddenly all shift to advertise on Google only,” Gu said.
Google, which entered China’s online search market in 2000 and left in 2010 over Beijing’s strict censorship rules, has reportedly created a modified search app, which will blacklist sites on human rights, democracy, religion and other issues deemed sensitive by the Chinese government.
While Google could end up being a minor challenger to Baidu, China’s population of nearly 1.4 billion would make it a worthwhile return for the US firm, according to IDC’s Fok.
“If Google manages to win even a small share in China, that is still massive in the world’s largest internet market.”
Additional reporting by Celia Chen