Google’s announcement that it is re-directing Chinese users to uncensored Chinese-language results at Google Hong Kong is an historic turning point when one ’empire’ sees its apparently unassailable position as no longer certain. In China it is hugely important to maintain ‘face’ and not to embarass another party. Google’s move could either be a convenient way for China to get itself off the political hook – essentially what Google is gambling – however, the Chinese goverment is just a likely to see this as a loss of face and to begin rapidly blocking Google’s Hong Kong results.
The primary Chinese language in Hong Kong is actually Canonese which uses the traditional Chinese alphabet – not the simplified version used by mainland China Mandarin speakers. Note that these are different languages NOT simply different alphabets – though Mandarin is also recognised in Hong Kong as a language. What this means is that running Mandarin results via the Google.com.hk page is clearly a ‘workaround’ and not what you would normally expect to see there.
Politically, you have to sympathise with Google’s predicament – see Google in China – a Timeline – but it leaves a hole in Google’s claims to be global and in its ability to achieve leadership in all markets. Strategically, it also leaves Google with more limited scope for development in Asia – unless of course, the Chinese government decides not to block Google Hong Kong at all.
Google’s inability to come to terms with the Chinese Government means that it may have gifted the world’s largest internet market to a search engine which ranks alongside the Microsoft/Yahoo partnership as its greatest global threat – namely Baidu and potentially at the same time to the Microsoft-Yahoo partnership. According to the China Internet Network Information Center (CNNIC), by the end of December the number of Chinese internet users had reached some 384 million or 28.9% of the Chinese population and the growth rate during 2009 was 28.9%. In January 2009, Comscore released data showing that China had overtaken the US in size of internet population with China representing 17.8% of the total internet population – that percentage will almost certainly be signficantly higher at the end of 2009. All of these figures combined mean that:
“In the worst case scenario where all of Google China’s users switch, or are forced to switch to Baidu, Google has gifted up to 2.25% of the global search market to Baidu.”
2.25%, which is my estimate of the potential share of the global population affected, isn’t the end of the world. Nonetheless, as the following charts show, it would raise Baidu’s global share from Comscore’s 6.54% to 8.79% and give Baidu second place globally ahead of Yahoo in Comscore’s league table of share of searches globally. Baidu drops back to third place if Microsoft and Yahoo are combined.
How damaging is this for Google?
Whilst the numbers don’t seem to suggest that much of an impact – this development is damaging for Google in a number of ways; firstly, for the first time it has had to admit defeat in a major global market and accept that, for some considerable time, it is not going to achieve the top spot everywhere. That may well have an impact in markets where Google is competing with other local engines to achieve the top position – such as Russia.
No doubt Google will redouble its efforts in Russia with the China debacle behind it investing more time and resources to ensure it doesn’t let this other major global market, which has been stalling its global progress, escape from its clutches. Even though the censorship issue is not at stake in Russia, the events in China may also bring forth further investment in Yandex, the Russian number one, because investment is about confidence and psychology and it will no longer seem inevitable that Google must be number one everywhere.
The second reason is much more practical in that Baidu will pretty much have the Chinese market to itself and will be able to develop in the knowledge that Google has complied with a safety net which the Chinese government have thrown around it, even if that wasn’t the prime motivation. It will be able to focus its attentions on markets other than China – or potentially to other alliances.
The biggest threat of all for Google is that Baidu signs up to an alliance with Microsoft. We’ve heard comments from Microsoft CEO Steve Ballmer that Microsoft will continue to work in China within Chinese laws and regulations. There are some very good reasons for that including the fact that much of the work for Bing was completed by developers in China – many of whom previously worked for Baidu. There has already been a minor alliance between Microsoft and Baidu whereby Baidu sells advertising on Microsoft sites in China. This alliance is inconsequential – but a broader alliance across more markets could be potentially very attractive to both Microsoft and Baidu.
“An alliance between Baidu and Microsoft’s Bing would pose a considerable threat to Google and is far from inconceivable.”
Why would Google withdraw search from China?
The public rationale for Google taking this step is a moral and political stance. It also plays well to audiences in the US and outside China who can see Google as standing up to the Chinese government and putting freedom of speech first. But there are other factors at play here – you might call them “conveniences”.
Firstly, China consumes considerable resources in both time and personnel. But it doesn’t pay fantastic returns because the prices per click can be compared to Baidu which has higher volumes and sometimes lower cost per click prices. So, whilst Google hasn’t publicly said that that effort simply isn’t worth it in China (since it’s about freedom of speech right!) it may actually be losing money in China. Closing Google China most probably will only help the Google bottom line.
It’s also true that Google has had a pretty chequered history of chasing Baidu with moments of increased share – and then drops in share. It certainly cannot be said that it was close on the heels of the market leader as at no point has that been the case. The chances are the it would have taken years for Google to follow its current path and win. In fact, it couldn’t really win. So the Google executive team may well be taking a calculated gamble that by pulling out of China, they will win greater success in other markets, gain significant public support and appeal and turn themselves into a desirable to the Chinese public who may go to any lengths to gain access to an uncensored source of information.
“Google becomes defender of the free against the Chinese oppressers, no longer Google the evil doer privacy invader.”
How will Baidu react?
Of course, Baidu will work to capture the share given up by Google. It will indeed be a measure of Baidu’s strength to see if it can gain the majority of that share and strengthen its position – if it should fail to do so then will not be good for Baidu going forwards. Furthermore Baidu has aspirations internationally. It has already opened operations in Japan early last year where it has some connections with local player Rakuten and has made noises in the past threatening to move to Europe. Realistically, however, with the growth in the Asian market – it is most likely to develop successfully in Asia based on its strong Chinese base. An alliance with Microsoft, however, could be very attractive to increase its importance rapidly in the western world.
Where does Google not achieve number one spot ?
The markets where Google is currently not first include:
- Czech Republic
- Hong Kong
Putting this all in perspective
It’s worth noting that Google is not the only western organisation to have had difficulties in China. Amazon has only 8% market share in its field, Ebay has already left the country and Facebook has been blocked there.
What should Google China advertisers do?
Firstly, stay calm since there are always ways to deal with this. WebCertain is currently contacting its affected paid search advertisers to discuss moving their Google China budget to Baidu should the Chinese government block access to Google Hong Kong. Many are not hugely affected as their budgets in China are already largely spent with Baidu in the first instance.
If Baidu isn’t the centrepiece of your strategy, then it makes sense to think about making this change now. Baidu can be targeted using both paid search – with a pay per click programme increasingly similar to Google’s. Equally, Baidu has high volume traffic and, if the far east is in your targeting, then you should consider investing into SEO for Baidu.
If you’re using Google China’s self-service facilities – then you may not be able to make the move to Baidu and these type of facilities are not available yet in a comparable way. You would need to contact an agency in China or to work with a multinational global agency to get you moving.
If you’ve been thinking about moving into China – this shouldn’t make any difference to you unless you’re thinking of launching a search engine there! You just won’t be able to do it directly alongside your Google activity.