Google In China 2.0: New Strategy Avoids Censorship Showdown

Some 18 months after clashing with Beijing authorities, Google seems to have found a major new way to break through in China. Not only does it avoid web censorship dilemma, its new strategy opens an opportunity for Google to capture the booming online advertising market.

Google HQ, Beijing (Cory M. Grenier)

By Yang Yang
经济观察报E.O 

BEIJING - Last month, John Liu, Google’s vice-president, showed up at a high-profile press conference after an 18-month phase of both tremendous public pressure and behind-the-scenes legwork. He vigorously promoted Google’s advertising business and emphasized specifically that Google has passed its “ICP” licensing annual review that allows the U.S. search giant to operate in China. 

What does all this mean? 

A company insider says that basic Internet search functions will no longer be the core business of Google China. Instead, the Mountain View-based company will focus on building DoubleClick – an online “ad exchange” and a subsidiary of Google. And he predicts that DoubleClick will bring an even larger market than that of its search engine.

Google seems to have found its breakthrough China strategy.  Not only does it avoid the Chinese web censorship, it opens an opportunity for Google to achieve explosive growth in the online advertising market.

For months rumors have circulated around the idea that “Google wants to return to China.” Liu refutes this: “Google has never left China….It has continued to provide music and translation services all through the past year… Our related business has also had significant progress.” 

In 2010, Google China’s top 50 advertisers doubled their display advertising spending, and 97% of the top 100 advertisers placed display advertising, says Liu, adding that Google’s revenue from the Chinese market is rising every quarter.

Liu believes that over the next two to three years display advertising revenue will reach $200 billion, and its potential to generate revenue is greater than the search engine.

He is very optimistic about the advertising mainly coming from text ads, mobiles, rich media and video. The faith is founded on the fact that ad display currently generates 6 billion hits per day and covers 96% of Chinese internet users and counts some 100,000 partners.

As new technologies and new products arrive, the development of display advertising may find new traction.

Current display ads are already precise, traceable, measurable and interactive. In addition to the amounts of clicks and displays, other indicators include the level of interactivity and the length of viewing.

In 2008, Google paid $3.24 billion for DoubleClick, which it viewed as a “platform-level product.”

Zhou Jie, the founder and CEO of Lang Tao Jin Co., a web ad agency, reckons that Google China should focus in the future on promoting the DoubleClick business.

The ad platform’s success in the United States is its ability to allow advertisers to find the appropriate media for their products, and more accurately target their public. To a Chinese online market that is still finding its way, the DoubleClick platform is ever more strategic. And as long as the platform complies with China’s advertising laws, it doesn’t risk getting tied up with “content review” censorship.

John Liu pointed out that Google continues to provide search service in China for PC users. However, because of competition from other search engines, growth is gradually slowing down.

Still, it is the mobile Internet where growth is accelerating. Liu announced that Google China will incorporate the AdMob mobile terminal advertising system into its new unified system. That means an even greater market for Google is bound to be in mobile. Currently in the Chinese market, apart from Apple’s iPad, almost anything referred to as “pad” or “tablet” uses Google’s Android software. In addition to iPhone, the majority of smart phones are equipped with Android’s 2.2 version.

The Baidu factor

For Google, the choice to cut into the world’s biggest Internet market from a new entry point was also a reaction to market realities. In the face of its chief Chinese competitor, Baidu, which has absolute dominance among PC users, Liu pointed out that “Web ads cannot count merely on the traffic, but must focus more and more on the product’s technology. It won’t be enough to measure Google’s Chinese market in the future merely by looking at its market share and revenue, but by how much influence it has on the Chinese market.”

The last memory many have of Google in China is when the search giant pulled out of the Chinese market on the March 23, 2010 with a message from the U.S. company’s blog announcing it would stop the self-censorship of its search service. All users visiting that site were redirected to Google.com.hk from then on. This provided uncensored simplified Chinese search results.

The traffic on Google China has gone down significantly since then. According to the data of Analysis International, Google’s search engine share in China has declined from 24.2% a year ago to 18.9% for the second quarter of this year. Baidu continues to grow even further.

In addition, there were also the conflicts between Google and its Chinese agencies. Seven of which sued Google because it unilaterally broke their proxies. But Chiu says that’s all in the past, “Google’s dealer’s team is now very steady."

Wang Ying, the director of Google’s Online Partnerships Group of Greater China and Korea Region, said that Google is creating a unified advertising platform that incorporates the management systems of AdMob mobile and AdSense and DoubleClick for PC terminals.  

Read the original article in Chinese

photo - Cory M. Grenier