Internet: Google Seeks Partner For China Return

Google, NetEase talk China Play Store JV

The glacial return to China for Internet titan Google (NASDAQ:GOOG) (NASDAQ:GOOGL) is making its debut in the 2017 headlines, with a word that the company is in talks to open a Chinese version of its app store with online game giant NetEase (NASDAQ:NTES). That tidbit nicely sets the stage for what’s likely to be a banner year for Google and possibly US Internet rival Facebook (NASDAQ:FB) in their race to see who can be first to plant a tent pole in China.

I’ll start this discussion with my frank admission that I’ve mis-called this race quite a few times before, predicting almost every year that one or both of these companies would get permission to operate in China that year. But in this instance, it really does look like Google is nearing the finish line, since it presumably wouldn’t enter talks for a joint venture Chinese version of its Google Play store unless it felt it had Beijing’s blessing.

The latest headlines on the matter are fairly straightforward and lacking in detail, but basically say that NetEase has approached Google about opening a joint venture app store. (English article) The reports point out that any such store would have to censor its offerings and weed out sensitive apps, which is fairly par for the course in China.

It’s probably somewhat significant that NetEase reportedly approached Google and not the other way around, which indicates that Chinese companies may be jockeying to become the U.S. search giant’s China partner. It’s also worth noting that the initial report of these talks is coming from some well-connected Silicon Valley reporters, which means the news was probably leaked by someone at Google and not at NetEase. That would indicate that Google wants the world to know that this is happening, and that China’s second largest game operator is perhaps its preferred choice of partner.

Talk about a Google homecoming has been swirling for more than a year now, though Google is often quick to point out that it never completely left China after shuttering its mainland-based search service in 2010 after a dispute with Beijing over censorship. Google maintains a major unspoken presence in China through the dominant position of its Android operating system, which powers most of the country’s hundreds of millions of smartphones.

Developing Community

Google has also made a point of telling all of us that it supports a thriving community of China-based developers making apps for Android. It even has a public account on the WeChat mobile messaging service to that effect, and held a developers forum in China back in December. (Previous post) It has also gained a big volume of behind-the-scenes goodwill with the huge popularity of its AlphaGo computer, which has wowed average Chinese with its high performance playing the classic Chinese board game called Go.

Now that I’ve summarized all the positive things that point to a Google return in the near term, I should also point out a similar case that ended up being a red herring. That occurred back in 2012, when local media reported that Facebook was meeting with potential local partners, including search leader Baidu (NASDAQ:BIDU), about setting up a China version of the its service in the run-up to its IPO. (Previous post) Fast forward to the present, where obviously none of those talks ever went anywhere and Facebook continues to pursue its China ambitions without any clear indication of if or when it will succeed.

Of course, Beijing is probably quite pleased with the efforts of both of these global giants, as their courtship provides plenty of face to show how important China is in the global Internet community. The Google case carries even extra face, since the search giant is effectively having to eat crow by groveling with the very same Beijing that it snubbed six years ago.

But even Beijing realizes that it can’t string along these two global giants forever, and it needs to be just slightly careful or risk getting left off the global Internet roadmap by one or both for another decade. Not that Beijing cares all that much about being left off such a roadmap. But it does realize that both companies possess cutting-edge technology that could benefit China, and thus probably doesn’t want to get left behind.

Accordingly, I’m going to put my neck on the line once again and venture that Google will finally be let back into China sometime later this year, most likely in a NetEase joint venture or possibly one with that company’s chief rival, Tencent (OTCPK:TCEHY). The case looks less certain for Facebook, though I do expect that company will also eventually be allowed into China in the next 2-3 years, also in conjunction with a joint venture.

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