Market Overview

Why The Chinese Market Is Attractive To Google

Why The Chinese Market Is Attractive To Google

Google parent Alphabet Inc (NASDAQ: GOOGL)(NASDAQ: GOOGL)'s CEO Sundar Pichai vehemently denied any imminent plans to re-enter China in his testimony before the House Judiciary Committee this week.

Veiled Ambitions

The company did embark on a project codenamed "Dragonfly," which explored the possibility of launching a censored search engine in China, the Intercept revealed in August, citing internal Google documents and people familiar with the plans.

The project was said to have kickstarted in the spring of 2017, but gained momentum after a secret meeting between Pichai and Chinese foreign policy advisor Wang Huning in December.

Opposition sprang from within, as a few Google employees released an open letter in November urging the company to drop the project that envisages creating a search engine app that enables state surveillance.

In his testimony, Pichai said the project is only exploratory and the search giant currently has no plans to foray into China. His statement did not rule out the possibility of a potential launch in the future.

In And Out

Google quit the Chinese market in 2010, ending a four-year sojourn in the country via its search engine. The exit came after a cyberattack from within China that targeted the company and a few others.

Upon investigation, the company found that the Gmail accounts of a large number of Chinese human right activists were hacked. Subsequently, Google directed its Chinese traffic to the uncensored Hong Kong version of its search engine.

The China Opportunity 

Chinese internet users numbered 771.98 million by the end of 2017, Statista reported, citing CNNIN and Intercept. This represents a 464-percent increase from 137 million Chinese Internet users in 2006, when Google first entered China.

Infographic: Chinese Internet Use Quintupled Since Google Entered China | Statista

Source: Statista

This number has swelled further to 802 million by June 2018, with the penetration rate at 57.7 percent, CNNIN said in the 42nd "Statistical Report on the Development of China's Internet Network." This is more than double the 300 million Internet users in the U.S.

Mobile internet users in China total 788 million.

Risky Ambition

Google's attempt to take advantage of the opportunity presented by the Chinese internet market is dicey.

First, Google would have to lock horns with Baidu Inc (NASDAQ: BIDU), which boasts a 68.4-percent share of the market. Google has a lot of catching up to do. 

Second, the company may face the wrath of politicians, human rights groups and employees alike, given the strong sentiment against China's human rights violations.

More importantly, a re-entry into China would mean Google is compromising on some of its core values. 

Google's steps in this direction are likely to be closely watched in the coming days, as it wrestles with its Chinese ambitions.

Related Links:

How Google Is Driving Apple Services Revenue Growth

Apple Announces $1B Austin Campus, Investments In Cities Nationwide

Photo by keso/Wikimedia. 

Posted-In: dragonflyNews Emerging Markets Politics Markets Tech Media General Best of Benzinga


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