When it comes to Google in China, there is no rest for the weary.
Just after winning its content licence in China, and getting praise from the Chinese government, Baidu, China’s leading domestic search engine, leaks out word that it intends to dominate the mobile search market, and is using a group of former Google engineers to develop a new mobile platform based on Android, which Google helped to develop.
During Google’s censorship dispute with the Chinese government, Baidu’s management showed the presence of mind to keep quiet. As I have previously mentioned, mobile search in a green field opportunity.
Steve Jobs, Apple’s CEO, has cheerfully proclaimed that mobile users don’t use search, they use apps. (“Take that, Eric!”) Compared to Apple’s iPhone platform, where there are more than 100,000 apps fighting for attention and downloads, Chinese language apps for both the Android and iPhone platforms are at an early stage of development. A few VCs, such as Kai-Fu Lee, former president of Google China, have started new VC funds to fund development of the nascent mobile apps market.
Obviously, Baidu wants to stake out the mobile search market and become the default before too many apps flood the market, so that Baidu’s search becomes a habit for most Chinese mobile users. Because Baidu has been relatively unsuccessful in expanding outside China, it has no choice except to deepen China market penetration.
The growth of the Android platform will be helped by the fact that MediaTek, one of Taiwan’s leading low-cost chip makers for wireless, has committed to launching a low-cost chipset for Android later this year. This will dramatically lower the price point for Android smartphones in the China market.
In addition, Baidu has leaked out word that it intends to seek a mainland China listing for the company. It will be very interesting how the Chinese government handles this, since most companies which are approved for listing need to have strategic government ties, and mainland listings are not readily handed out. In fact, this has become a point of concern for private-sector Chinese companies, which have complained that they have been treated as second-rate citizens when it comes to listings in China.
The Chinese government has reacted defensively to these charges, insisting that there is no discrimination. While Baidu is generally treated as China’s native son, an image which the company deliberately fosters in its communications and advertising, it is by no means a certain thing that Baidu will get everything it wants. Baidu is considered to be a private-sector company.
If the Chinese government gives Baidu everything it wants, the Chinese government could come under criticism from western companies and governments for showing favoritism to a native Chinese company, and small Chinese companies would criticise the government for showing favoritism for an industry giant, at the expense of smaller companies. As I mentioned in a previous article, the Chinese government, more often than not, seeks to find a balance.
For this reason, Baidu’s land grab is by no means a sure thing. Conceivably, the Chinese government could hand out more mobile service licenses to Google China to prevent Baidu from becoming the sole player, reversing its former position to Google.
If this happened, it would mark a dramatic change of fortune for Google in China. But stranger things have happened.