China After Google

How happy should Microsoft chief Steve Ballmer be after hearing about Google’s face-off in China?

Google’s forthcoming exit from China (it’s hard to imagine an alternative, given the provocative and public ultimatum presented to the government), looks set to leave a rather sizable chunk of the search market for everyone else to fight over – in a market that Ballmer made top priority for his new search engine Bing (apparently easier to pronounce in Chinese than Google – or should that be Bi-ying?).

Whoever is charged with launching Bing in China, where it is still in beta with only a sliver of the search market, must be salivating at the thought. Google’s Chinese users tend to have more money than average, and its share of search revenue in China is far greater than its share of actual searches.

With so many reports dwelling on Google’s inability to close the gap on Baidu, China’s dominant search engine, it’s easy to forget that the company with the difficult-to-say (and type) name did rather well in the PRC. While Google failed to make a significant indent on Baidu’s market share, it still managed to grow by taking share from everybody else. All this in a search market that continues to expand at a dizzying pace.

No shoo-in for Baidu
All that hard work will be up for grabs soon – but easier said than done. While Baidu no doubt anticipates welcoming Google’s soon-to-be orphaned users with open arms, many local internet companies will also take up this once-in-a-lifetime opportunity.

These include two that Baidu may regard as much bigger rivals than Google ever was: China’s largest portal Tencent, which has been aggressively pushing its own search engine, Soso, after severing ties with Google in September; and e-commerce titan Alibaba, which – despite controlling Yahoo in China – is pushing its own search engine aligned to its retail site, Taobao. (Yahoo’s share of China’s search market is now negligible, much like Bing’s).

There are other domestic search engines too, with the ambition and deep-enough pockets to engage in the intensive marketing campaigns that will follow Google’s departure, including Sogou and possibly Youdao from two other large portals, Sohu and NetEase respectively. Also worth keeping an eye on is Sina, another major portal, which still uses Google’s search technology.

In being an effective challenger to Baidu and winning all that share, Google may have sowed the seeds of its downfall – good for Baidu by providing a competitive spur for innovation, but helping inhibit the rest of China’s domestic search industry in the process.

That role of challenger brand will soon be vacant – but it seems likely the Chinese government would like a Chinese company to fill it. Perhaps Steve Ballmer may have preferred it if Google kept quiet about its difficulties in China after all.

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