What China's Internet Landscape Might Look Like if Google Leaves

Sure, Baidu Will Get Stronger, But Tencent, Yahoo, Bing and iPhone Could Benefit Too

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HONG KONG (AdAge.com) -- China's internet landscape -- search, digital marketing, mobile media, services like e-mail and even e-commerce -- could shift dramatically if Google does pull out of the market.

The biggest changes will be in China's search market. Baidu, already the leading search engine site in the mainland, is Google's chief rival and will almost certainly soak up more traffic if Google.cn is no longer an option. In fact, Baidu may become too strong, with less incentive to innovate. And Chinese sites like Tencent's QQ may also muscle in.

Baidu won't get all of Google's Chinese fans, however, and the bump it does get in a post-Google environment in China could be short-lived.

Google's absence "leaves a lot more room than people think," said Quinn Taw, a Beijing-based venture partner at Mustang Ventures who has held senior positions at Mindshare and Zenith Media in China.

"People assume it will all go to Baidu, but Chinese using Google.cn are high-value users. They are sophisticated white-collar workers who want a good experience, particularly if they are searching in English. They won't go back to Baidu if they can't use Google. They will want to try out other search engines," Mr. Taw said.

Bing could be the dark horse winner
Two sites that could see a surge in traffic are Yahoo and Microsoft Corp., which launched a Chinese version of Bing last year. Yahoo's Chinese site is operated by Alibaba Group, a powerful e-commerce provider.

Alibaba has moved Yahoo out of the search business in the mainland, but if Google pulls out, "it may consider restarting [Yahoo's search engine] in China," said T.R. Harrington, co-founder and CEO of Darwin Marketing in Shanghai.

Bing arguably has the most to win, since it is starting out in China just as users may start looking for Google alternatives. According to comScore data, Microsoft had a 5% share of China's search market in November 2009, compared with Google's 14% share and Baidu's 62%.

Bing is "the dark horse that would benefit if Google isn't in China," Mr. Taw said.

Unlike Google, which had some name recognition when it entered China, Microsoft's Bing platform is largely unknown. But the Seattle-based company has already demonstrated a strong interest in marketing in China. That's something Google didn't do, and local experts insist stunted the U.S. company's growth.

Dick Wei, VP of equity research at J.P. Morgan in Hong Kong, believes QQ is "the most likely to become a competitor to Baidu in the future."

Chinese portals will fight for search traffic
Tencent's QQ.com is already China's most popular site, attracting 133.8 million unique visitors in August 2009, according to eMarketer, slightly more than Baidu's 130.9 million.

Tencent is also the darling of China's advertising community. Marketers of everything from cars to candy have partnered with Tencent to build digital campaigns attracting tens of millions of Chinese consumers. Paying Tencent for search ads could be a logical next step.

Other portals like Sina.com, Sohu.com and NetEase (163.com) are expected to focus on search as well.

"There will surely be an aggressive fight by each of the portals for the Google share of the search user market and hopefully some increased innovation that is born out of the need for differentiation among them," Mr. Harrington said.

Opportunities exist in other areas including mobile, e-mail and e-commerce, another online expert said. "Google is not just search, it's e-mail and everything else, so Google leaving China turns into a gigantic opening in all directions."

Google delays launch of Android phones
Google has already delayed plans to launch its Android handset in China, the world's largest mobile phone market with over 738 million subscribers in November 2009. Motorola Corp. and Samsung both planned to launch Google-powered phones through China Unicom on Jan. 20. Dell has also said it plans to introduce an Android-based mobile phone in China.

Smart phone sales are gaining speed in China following the launch of 3G services by three Chinese telecom providers last year. Nokia is rolling out 3G models , Blackberry has China distribution now, and Apple's iPhone went on sale last year after years of robust gray market imports.

The Asia-based employees of foreign internet and mobile companies eyeing Google's market share are staying quiet right now about their plans for China, not wanting to get pulled into the dispute still brewing between Google and the Chinese government.

"Microsoft is fully committed to our investments in China and will continue with our announced plans around Bing," said a spokeswoman for that company in Singapore,. She declined to elaborate.

Foreign companies aren't saying anything now about the new opportunities that will appear in the wake of a Google withdrawal, but there's no question they exist.

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