By Star Chang, posted Jan 16, 2012 at 8:03 PM, 491 views,

Return of the Jedi, Google Eyes a New Start in China

After its confrontation with the Chinese government over censorship, search engine giant Google has reignited its effort to expand in the world’s largest internet market. The company is stepping up its pace in China by providing new services and hiring more engineers, sales personnel and product managers in the country. The goal is to boost the development of its Android operating system for mobile devices, online advertising and product search services in this booming region, where the number of internet users had just passed 500 million …

The censorship clash began in 2010 after Google claimed a cyber attack was launched by Chinese hackers who allegedly stole the company’s proprietary source code and attempted to spy on the Gmail accounts of Chinese human rights activists. The incident implied a connection with the Chinese government’s policies on internet control, but it was always denied by the authorities. According to analysys, Google only held a 17.2% share of China’s internet search market in the third quarter of 2011, a significant decrease compared with 36% during 2009.

Although a loss of the market share, Google’s revenue in China has increased last year compared with 2010. Many Chinese companies still use Google’s advertising services to reach their customers around the world. Last year, Google has brought its ‘Creative Sandbox’ event to Shanghai, showing its latest technology for advertising. The very fact that such an event is happening in China points towards the rising importance of online advertising market for Google. Google believes that the revenue of online advertising in China will reach $200 billion in the next three years.

About 60% of smartphones in China use the Android system, and budget Android tablet will rise this year. Google views this as its most profitable business product in the world’s second-largest economy. The barrier which Google is facing now might be their online app store. It still remains accessible in China but Google is not getting benefit of it. Android phones shipped officially in China have application stores from handset makers or third parties pre-installed instead of Google’s official Android market, and this might affect Google’s online advertising.

Just as the entire Android system is largely open, the method of getting apps onto Google’s mobile OS is also unfettered in China. There are many issues concerning the 3rd party Android markets. Those apps were mostly translated into Chinese language, repackaged and likely submitted by some Chinese programmer rather than the original developer. By inject their own ad code, the advertising dollars will flow to the person who repackaged the app, not the original app maker. And we have not yet mention the injection of malware.

Google own Android Market is not well-known in China. The caused of this is due to the brand awareness where most Google online services were blocked in China. Google has not been able to implement paid apps support in China, which leaves a large market open to cater to the needs of free mobile apps. Google needs to restructure their apps store for the Chinese market, in order to capture the booming online advertising market in China.

Source: WSJ