Google censored search app in China costs and benefits –

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Google CEO Sundar Pichai speaks on stage during the annual Google I/O developers conference in Mountain View, California, May 8, 2018.

Google would face a boatload of hurdles in its reported plan to launch a censored search app in China.

A Chinese official told Reuters that the project does not currently have approval from local authorities, and the strained relationship between China and the United States on trade makes a short-term launch seem unlikely.

However, anonymous sources told The Intercept, which first reported the plans, that the search giant maintains its launch ambitions.

Following the news, US politicians, human rights activists, and some of Google’s own employees swiftly condemned the move as being a slap in the face of internet freedom and a hypocritical reversal from when Google withdrew its service in 2010 due to increased concerns about censorship and cyber attacks.

So, given all of the challenges, why would Google relaunch in China? Simple: the Chinese market is enormous. There are 772 million internet users in China, and more than half a billion people on mobile.

By that metric alone, it’s a hard market to stay away from. However, overall market size is not the only metric that matters, and some experts believe that even if Google did successfully launch a search app in China, it would be too little too late/

Room for Google?

In the monopolistic Chinese search market, Google would likely have a terribly hard time gaining users unless its product was dramatically better than the competition.

In 2009, before Google retreated from China, local search giant Baidu was trouncing it with 76 percent market share, according to the firm iResearch. Microsoft-owned Bing has had a censored search product in China for years, but it too has failed to gain traction. Baidu still has 73.8 percent market share in China, according to Statista.

“Google got its butt kicked by Baidu once,” says Shawn Rein, managing director at the China Market Research Group. “When we interviewed consumers at the time, 90 percent of them said that they used Baidu for Chinese language search, and only used Google for English search, because the results in Chinese just paled in comparison to Baidu’s. In the last decade, Baidu has just gotten better, while Google still doesn’t have the trust of knowing the Chinese language.”

Since news of a potential search relaunch broke, Rein says that the reaction of Chinese internet users has been tepid, due to doubt that a censored Google would be significantly different, much the less better, than a censored Baidu.

The Intercept: Google plans censored search engine in China

Like Baidu, a censored Google search app would completely block results for sensitive queries, including “human rights” and “peaceful protest,” according to The Intercept, while suppressing results to other queries off of the first page.

If Google did launch its app, he expects that Baidu, in the face of renewed competition, would use nationalism to keep users from straying, similar to its tactics in the early 2000s.

Google engineers work in the company's office.

Market share struggles aside, launching a search app in China today would be less attractive from a financial viewpoint than it used to be.

Already, Google hasn’t had major success wooing advertisers for its display ads business in China — it’s a distant fourth behind Tencent, Alibaba, and Baidu, says James Lee, managing director of research at Mizuho Securities.

Not only would Google need to significantly increase its investment in its sales team, but it would be doing so for a business that’s becoming less important.

“The China search market has grown slowly over the past few years as users are moving to social media apps like Wechat,” Lee says.

Overall, search engine share of Chinese advertising dollars have been falling, as video and e-commerce ads increasingly dominate.

“Newsfeed has been cannibalizing search ads market share,” agrees Shawn Yang, China-based executive director of Blue Lotus Capital Advisors. In the second quarter of 2018, one-sixth of Baidu’s mobile traffic came from video, he says.

He estimates that if Google did launch in censored search in China, it could reach around 10 percent of Baidu’s search revenue. Baidu doesn’t break out its search revenue but Blue Lotus estimates that it’s 2018 yearly search revenue will be 61 billion Chinese yuan. By that estimate, Google would stand to make between $800 million and $1 billion at current numbers.

Less controversial ways in

While it makes sense for Google to refocus on China given the economy there, search carries the risk of low financial returns while simultaneously being most sensitive area.

Google never actually left China completely. It maintained office space and employees and still sells display advertisements there. It released translation and file organizing apps, and has more recently increased its presence by opening an artificial intelligence lab in Beijing and investing in several companies, including online retailer

Relatively speaking, none of those moves have been controversial.

The company is also in talks with Chinese internet giant Tencent to bring its cloud business to China, according to a report in Bloomberg. Cloud players Amazon and Microsoft currently have similar deals in place and that, too, would be much less controversial than launching search, which requires Google to be complicit with authoritarian censorship regime.

China blocks access to Google's Gmail

There have been multiple reports over the years that Google planned to relaunch a censored version of its app store, Play. Not only would that, too, be less controversial, but it would probably make more sense for Google financially.

“With the Play Store, the consumer is the customer, but with search, you might have user market share, but still not have the advertising revenue,” he says. “I’d say it would probably be easier to break into a consumer-centric market with Play.”

While the fate of a censored search app is uncertain, even best case scenario seems dim, according to CMRG’s Rein.

“China is a very different landscape than it used to be: Is there really a spot for Google any more?” he asks. “I’m not convinced.”


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