Google upbeat on China

09 December 2010

BEIJING: Google, the online giant, believes China will play a central role in the future internet "revolution", despite the challenges the company has faced in the country.

Speaking at Google's Innovation Forum in Beijing, Alan Eustace, its svp, engineering and research, suggested the web "can be a huge force for good in the world."

"I feel like we are in a special place, we have a brand new technology and we've taken a few steps of a very long journey," he said.

While Google shut down its Chinese site due to concerns over censorship, diverting users to a Hong Kong-based alternative, it is optimistic about the country's contribution to the net's development going forward.

"I feel like we are at the very beginning and China, in my opinion, will lead much of that revolution," Eustace said. "[China is] the heart of the future of the internet."

Research group Analysys International recently reported that Google's share of the Chinese search category dipped to 21.6% during Q3 2010, compared with a 35.9% peak in Q4 2009.

As such, Google is now considerably behind main rival Baidu, which takes 73% of the market.

"Search is only one piece of our business," Eustace added. "There are lots of areas we can innovate. It's not a narrow slice."

Indeed, Google argues the display sector is actually the more lucrative prospect in China at present.

Consultancy eMarketer has supported this assertion, predicting display expenditure should hit $1.8bn (€1.4bn; £1.1bn) in 2010, measured against the total of $1.4bn delivered by search.

"We still have good traffic, and revenues are growing quarter on quarter," John Liu, Google's vp, Greater China, told the Financial Times.

"Over the last 12 months, China has been one of Google's largest display markets in the world, and it continues to grow rapidly."

"Export" ads, placed by Chinese brand owners on websites from outside their home nation, typically via Google's AdWords programme, are also seeing strong demand.

"[This] accounts for a very substantial part of our China revenues," Liu revealed, with analyst estimates pegging this figure at between 33% and 50% of Google's sales in China.

Although the US multinational has encountered significant obstacles, positivity endures regarding the possibilities afforded by China.

"The team is committed; the team is enthusiastic," said Liu. "People love Google. You can hear them crying, 'Google, we want you to stay'."

"Sometimes they face difficulty in accessing the site, but they find all kinds of ways around it."

Another area attracting scrutiny is Google's Maps service, with the Chinese government now requiring every firms undertaking this sort of activity apply for a licence, potentially a forerunner of greater censorship.

The authorities have shifted the deadline for requesting such permission from the end of this year until March 2011 for both Google and Microsoft's Bing.

Having once threatened to leave China altogether, however, Google appears set to remain highly involved in the country.

"The last 12 months have convinced us about the revenue opportunities the Chinese market holds for us," Daniel Alegre, Google's vp, Asia Pacific, said. "Display advertising is a large opportunity.

"Not only are we in China, but we are investing heavily in China."

Data sourced from Financial Times, Bloomberg, PC World; additional content by Warc staff