Why China & Google Will Benefit From The Search Engine’s Departure?

Will Google shut its website in China? The answer is probably a “Yes”. A recent news report revealed that Google advertisers in China are being advised to switch to rivals such as Baidu while business partners are exploring alternatives, as speculations grows that the American company will shut its website in the country.

In other signs, Chinese regulators have told some of Google’s biggest partners that they should plan for the company’s retreat from the country. The authorities also told local news websites that Google’s Chinese site is likely to close and that, if it does, the news sites will be required to use only official accounts of the situation, rather than publish stories from anywhere else, according to a person familiar with the matter.

“When we talk to clients, we have been pushing them in the direction of Baidu,” said Mr Vincent Kobler, managing director at EmporioAsia Leo Burnett in Shanghai, which buys advertising space from Google and Baidu on behalf of customers.

The Chinese government has taken a firm stance, and Google, it has its own principles and is going to shut down.

I personally think that China’s Internet Ecosystem and Google will both benefit from the search engine’s departure from the country, and have listed three benefits of why both parties will not lose out.

Baseline: It Doesn’t Harm

The Chinese Market does contribute to Google’s global revenue every year. However, the portion is only 2%! Such a transnational corporation can definitely ignore such market if it has problems in localization. It’s extremely difficult for Google to enjoy a steady growth in mainland China because its arch-rival Baidu sees its market share growing at an exponential rate every year. Google has about 36 per cent of China’s search revenue, compared with 58 per cent for Baidu, the home-grown market leader.

Meanwhile, Google does benefit Chinese people for the past few years. Chinese internet users can get “fair-ranked” search results, and receive abundant and useful international resources/information, which are not provided by Baidu. One quintessential example would be the importance of Google for Chinese scientists. The survey found out that a significant number of Chinese scientists think their research would be largely hampered if they lost access to Google, after the search engine juggernaut threatened to cease its operations in mainland China earlier this year. (You can read more in our previous post:
Chinese Scientists Say Google Exit Would Hurt Research). However, if Google were to cease its operations in one the world’s prosperous economies, people can still bypass ‘The Great Firewall Of China’ and continue to use the mighty search engine.

Till now, I still don’t find Google.cn valuable at all.

I began using Google back in 2003 (before that, I used some old Chinese Search Engines), and the first impression was pretty good because the quality of search results was much higher than any other Search Engines. However, when Google.com started forcing redirection to Google.cn in 2006, I wasn’t really satisfied with the extremely slow speeds and poor features.

Even in 2007, I still didn’t think Google.cn should exist as many features like iGoogle were still not available in Google.cn at that time. At one time, I really mocked at Google’s capabilities in localization. In contrast, its competitor Baidu launched a series of web products related to search, which attracts even more people to use Baidu rather than Google.

Till now, Google’s two major advertising solutions AdWords and AdSense are still struggling in China. AdWords does have some big customers, but most of the small and medium enterprises choose to go for Baidu for one clear reason — it’s much cheaper. AdSense, on the other hand, isn’t really popular among Chinese website owners or bloggers because of the extremely high minimum payout ($100) and CPC price (Cost-Per-Click in China is only about 10% of the global average).

Benefit 1: Encourage Fair Competition

2009Q2 Chinese Search Engine Market Share

Without Google, there are still fierce competitions going on in the Chinese Search Engine Market. Websites like Baidu, Sogou, Youdao, Yahoo.cn and Soso are fighting vigorously for market share, and the five Chinese search engine mammoths will control 99 per cent of the market if Google were to leave mainland China. Google’s market share can be easily divided to any of them without any much hassle. However, most of Google.cn users don’t really like to use Baidu (and that’s why they use Google instead), so Google’s departure will help smaller search engines to emerge as big brothers. Innovative search engines like Youdao and Soso (which are the two I love most) will then stand a higher chance to garner more users because of their own special features.

Benefit 2: Baidu Will Be More Responsible

If you take a look at the situation closely for the past years, the Chinese government always pushes the blame to Google whenever there’s an issue regarding search engines. Why? Well, it’s the only foreign company that takes up a significant percentage of market share (much higher than Yahoo.cn). It’s understandable that all authorities require more from foreign companies. But if the competition is being only fought between local companies, then the story would be different. All requirements will go to Baidu first because it’s the largest one.

Baidu will then have no way to pass the buck and hence it will have to exhibit a higher responsibility for its users. Other Search Engine companies will also follow suit and behave well. That’s a huge benefit for the whole Chinese Internet Ecosystem.

Benefit 3: Google Can Focus on Its Values

"Don't be Evil" T-Shirt Edition

Google’s company mission “Don’t be evil” is indeed a famous and meaningful slogan. However, in the China Market, the value is facing some challenges. Standing in the shoes of the MII (Ministry of Industry and Information), Google is evil because sometimes it doesn’t follow the rules and regulations set by the authorities. They are asked to abide content restrictions and filter search results but yet they choose not to at times.

Google’s departure can resolve this controversy issue so that it can focus on its values to benefit the whole world. Chinese people will have the final choice — take the risk to bypass GFW and get fair search results or use an alternative local Search Engine.

Solution: Google to Invest in Baidu?

This question may surprise you all, but it’s possible that Google will pump in money to invest in Baidu and share the revenue from Chinese Market without any worries or problems in localization. If both parties agree, Google and Baidu will become partners instead of competitors. To Google, it might be the best investment ever because the NASDAQ-listed Chinese company has a good revenue stream and its shares are skyrocketing.

Google actually had co-operated with Soso, a Search Engine of Tencent, and the co-operation is successful because Google had helped Soso to gain market share even before it developed its own Search Engine technology. Google can initiate a similar co-operation agreement with Baidu to provide international search results to help Baidu expand globally. In return, Google will make loads of money without having to face up to the Chinese government over content restrictions and strong competition from local search engines.